Internaland external constraints on management.

Internal and External Constraints on Management

Cadbury Schweppes External Constraints:

One major problem that CS faces outside of their business is their competitors who have become very strong. There main competitors Mars Inc are more dominant than CS growth because of the strategies that Mars Inc have brought up to increase their Market and Sales, which they have succeeded in. Mars Inc are held the largest share internationally with approximately 13 percent, which can be backed up with Table 3 and 5.

Table 3 – this shows that Mars Inc are much stronger than CS in the US, but that might have changed over the years because Table 3 is bit out of date. However this table shows the domination that Mars Inc has over CS

Table 5 – even in the Europe there is a slight domination over CS by $1billion, which shows that Mars Inc is growing larger and faster than CS in them main countries that are large consumers of confectionary and beverages.

So, as you can see CS is not competing enough to keep up with the rate that mars Inc are going at. There can be a numeral of reasons for the rate that CS growth is going at:

Rapid and unexpected growth can lead to a host of problems for CS. Probably the most common problem is the effect that the growth has on the company’s finances - specifically upon the liquidity and gearing of the company.

Extra expenses and increased long-term liabilities (such as loans and mortgages) may reduce the liquidity and increase the gearing levels of CS and leave it dangerously close to insolvency.

It is also possible that CS may become inefficient and it may experience diseconomies of scale (rising average costs). This could lead to a significant fall in profits, which in turn could persuade shareholders to sell their shares – this would result in a falling share price.

A major problem that a PLC can experience as it grows is the divorce of ownership and control. This refers to the fact that the owners of a PLC (shareholders) are usually interested in maximising the company’s profits and, therefore, their own dividend payments. However, the control of the company is in the hands of the management and the Directors. They too want the company to be profitable, but would also like some of the company’s resources and money to be invested into new products and new markets.

This, clearly, reduces the short-term profits of the company and, therefore, also reduces the dividend payments to shareholders.

As you can see above there still many improvements for CS to make, so that they can gain to be the main rivals at the top. This constrain affects whole of the managements in CS, especially the top level of managements because it is their responsibility to remain competitive and response to any attacks that their rivals produce. However CS, over the years has become more competitive and now is competing with the top companies in the confectionary market. The way that the top level of managements placed CS back into a competitive market was to add more variety of products to their company. One problem that CS faced against Mars was that Mars had more variety of products compared to CS. The top level of managements also produced healthier products for customers because more people are becoming healthy conscious, which increased CS sales and they entered a new market for healthier products, which Mars didn’t do. Another method that the CS top level of managements helped themselves back into a competitive position was by advertising and promotion. During the years when their competitors were growing faster, CS launched many advertisements on magazines and televisions on the new range of products and present products, which attracted customers to the business and helped CS to achieve an increase in profits. Also CS sponsored many TV shows and events, which again helped CS to expand the business and remain competitive.

Another problem that I have described earlier on was that CS was receiving problems form pressure groups because they were saying that CS were selling products that gain weight and not healthy. This gave CS a poor image and reputation because the pressure groups and customer’s felts that CS healthy product were unhealthy. To solve the problem, the research and development department in CS produced and tested healthier products that will not let consumers to gain weight. When the research and development finally produced a range of healthy products, CS launched their health products to the customers and took ...

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A problem that CS faced many years ago was that it wasn’t following the laws for the environment. CS was badly affecting the environment with their factories that was wasting material, which affected the environment. As the laws for the environment kicked in, CS was facing many problems with governments and pressure groups to reduce harm to the environment. This is when the top level of management and especially the chief legal officer had to solve the problem that the law was giving them. To prevent this problem they produced environment policies, which every production department around the world had to follow so that they will minimize the affect on the environment. Here is CS policy on the environment (look at to find source):

“We are committed to sound and responsible environmental management in everything we do. This is a natural extension of the importance we place on protecting the world in which we live - in our own interests and in the interests of generations to come. It is also an integral part of achieving our objective to grow shareowner value over the long term. When the long term is taken into account, what's good for the environment is also good for consumers and good for business.

Environmental Policy

We will:

Conduct our business in compliance with environmental laws and with our guidelines, which set global standards for our operations
Maintain systems to manage our environmental responsibilities
Set clear targets for continuous improvement and monitor these targets to ensure that they are met
Establish and enable employee accountability for our environmental performance
Strive to prevent pollution and to minimise the environmental costs and impacts of our global operations
Assess the impact of new operations and products and seek ways to contribute positively to their environmental performance
Train and motivate our employees to understand their environmental responsibilities and to actively support our environmental programmes
Work with our supply chain and business partners to improve our collective environmental performance, to protect the ecosystems that provide our raw materials and to minimise the impacts from transportation
Communicate openly with our shareowners, employees, customers and other interested parties by regularly reporting on our commitments and our progress towards meeting them
Review and update this policy regularly”

City Shoes External Constraints:

When city shoes was in debt with customers (£3 million) and their construction of new premises was being produced, their financial budgets were in debt. They had to pay customers back and had the problem of financing the construction of their new headquarters. The company director solved this problem by getting a loan from a bank, which helped city shoes to pay back their debts and finance the construction of the new premises. The company director had to have good political and communication skills to show to the bank manager that city shoes have the abilities to pay back the loan and what reason they need the bank loan for.

City shoes have to follow the laws for hours of work. This was a problem when city shoes privately transported customer goods with their own transportation. The driver can only drive for 10 hours in a day and sometimes the journeys were much longer than 10 hours. To solve this problem, the distribution manager placed two drivers in the lorry so that the drivers can swap around after 10 hours. This saved city shoes time and money because having one driver would meant that city shoes would have to pay the driver even if he was sleeping over the knight in the lorry. Also transportation was quicker because one driver drove to the destination and one driver drove back to city shoes.

Another problem that city shoes have faced is new technology that needs to enter their business. The manufacturing department uses computers to design new styles. The old computers that city shoes manufacturing department uses, has received many complains from customers because they see a problem with the quality of the shoes. This was giving city shoes a poor image because they were producing poor quality shoes, which un-attracted potential customers away from city shoes. To overcome this problem, the company director and manufacturing manager discussed to enter new technology in the business, which will enhance the quality of the shoes. The two managers bought the idea of buying new computers which will improve the quality of the shoes. They considered buying eleven new computers, which will mean designing the shoe will be faster, efficient, reliable and improve the quality of the shoes, but the problem that they received was that the computers were to expensive. This is were the company director uses his skills to get a loan from a bank to pay for the computers. The introduction of the new computers at city shoes has enabled them to produce better high quality shoes, which has increased sales and profits. This has helped city shoes to pay back the loan easily as they have received a large increase in profits.

Cadbury Schweppes Internal Constraints:

When CS are looking for recruits inside the business there is the problem with using internal recruitment. Firstly there will be limited range of applicants and there will be a reduced potential of finding new talent and less input of new ideas and methods of working. Also as one person is promoted then another vacancy is created, which will mean that CS have to spend more time and money to look for recruitment. However, this problem can be solved by the human resource manager. The human resource manager uses an external recruitment method were there is a more chance of recruiting skilled and professional workers. Also the human resource manager can use appropriate recruitment agencies that are specialised in finding specific workers for specific tasks, which will make it easier for the human resource manager to look for the right person for the job. Instead of recruiting internally within CS and recruiting externally, it will bring new ideas, can allow leaps forward in thinking, which helps CS avoiding getting' stuck in a problem. Also by using the external method of recruiting, CS will have a more wide range of applicants, which gives more choice to the human resource manager.

The other constraint that CS has faced from outside of the business are health and safety act laws. When this law come into power, CS had to follow by providing their employees with a safe and healthy environment to work in. For example, before the health and safety law came in power, CS factories was a quite un-safe working place for the employees because of potential dangers from the machines. The top level managers had to follow the laws and make the factories a safer place for the employees. This was done by upgrading their machines so that they are safer to work with and some employees were specially trained to operate with the machines safely. But knower days CS have modern technology and machinery, which make it completely safe for employees to work. However the problem that CS might face is that the machinery is costly to run. This again can be resolved because CS is able to afford the running cost of machinery due to their increasing sales and profits.

Another law that CS must follow is the disability discrimination act, which came into power in the year 1995. The constraint that CS faced was that they didn’t have disability accesses, facilities, equipment and etc for employees, customers or the public. For example, some employees who were on wheelchairs would have found it difficult to access CS working areas. But as the law came into power, CS had to follow the law by producing disability accesses, facilities, equipment and etc for employees. This satisfied the employees who had disability problems and it also had given CS a good image because it shows that they employ people with disabilities and take consideration in those who have disabilities.

City Shoes Internal Constraints:

The one major problem that city shoes have faced while the business keeps expanding, is that the new recruits that they employ have limited management skills and some can have behavior problems. When the employees have a limited management skill, it affects city shoes in many ways. For example, some employees will find it hard to complete a task because they don’t understand it or are ‘lazy’ at their work. This shows that the employees have poor communication skills and are not committed in achieving city shoes objectives. This will mean that city shoes have wasted time and money on recruiting a new employee and will waste more money to look for someone else if the employee’s behavior towards his works doesn’t improve. However, management in city shoes can solve this problem will help city shoes to achieve more out of the employee e.g. if the finance clerk was a very unskillful and uncommitted, the company director will motivate the employee so that he will become more committed to achieving city shoes objectives. This de-motivated employee who had limited skills, the finance manager would motivate him to achieve the departments goals. The finance clerk would then complete invoice in time and make sure there are no mistakes on them, handle any queries from customers efficiently. Also the company director can improve the training that the new employee would get so that he / she would understand his tasks more clearly and achieve the goals for city shoes. The management must have good communication, technical and interaction skills so that the new employee would be able to do his tasks effectively.

Sometimes city shoes have faced finance problems especially as the business started out. For example, when city shoes were transporting customer goods with their own method of transportation (lorries), it was costing them too much to run their own transportation, which was bringing down city shoes profits down. However the finance and distribution manager used their technical, political and communication skills to solve this constraint. The new approach that they would take was to get a transportation company (e.g. TNT) to send goods to customers and of the customers want private transportation (e.g. city shoes transportation) then they would have to pay for deliveries, which was £2 per carton that they had. This saved city shoes time and less wastage of money.

Another problem that city shoes have faced is that the employees have complained many times about the canteen they eat in, which is in poor condition. The health and safety act law says that the business have to provide employees with a good working and eating environment. This law has to be followed by city shoes or they can be heavily fined by the government. To solve this constraint, the company director took the considerations of the employees and produced a better quality canteen when city shoes moved to their new premises, which the employees were pleased with the conditions. However the problem of financing the new canteen was another problem that city shoes faced because it was too expensive. To solve this problem, the company director got a loan from the bank and used retained profits to build a canteen that will give the employees a high quality environment to eat in.