Harvard Case - Finning International Inc.: Management Systems in 2009
"Finning International Inc.: Management Systems in 2009" Harvard business case study is written by Murray J. Bryant, Ken Mark. It deals with the challenges in the field of Accounting. The case study is 15 page(s) long and it was first published on : Jan 6, 2010
This case study solution recommends that Finning International Inc. implement a comprehensive strategy to improve its management systems, focusing on enhancing financial performance measurement, cost accounting, asset management, and organizational structure and design. This strategy should be implemented across all regions and business units to ensure consistency and effectiveness.
2. Background
Finning International Inc. is a leading distributor of Caterpillar equipment and related parts, services, and financing. In 2009, the company faced significant challenges due to the global economic downturn, which resulted in decreased demand for heavy equipment and a decline in profitability. The case study highlights the need for Finning to improve its management systems to navigate these challenges and achieve sustainable growth.
The main protagonists of the case study are:
- Mike Renz: CEO of Finning International Inc.
- The Board of Directors: Responsible for overseeing the company's overall strategy and performance.
- Senior Management: Responsible for implementing the company's strategy and managing day-to-day operations.
3. Analysis of the Case Study
The case study presents several key issues that Finning needs to address:
- Financial Performance Measurement: The company lacked a robust system for tracking and analyzing financial performance across its various business units and regions. This made it difficult to identify areas for improvement and make informed decisions.
- Cost Accounting: Finning's cost accounting system was outdated and did not accurately reflect the true cost of providing services. This led to inaccurate pricing decisions and reduced profitability.
- Asset Management: The company's asset management practices were inefficient, leading to high maintenance costs and low utilization rates.
- Organizational Structure and Design: The company's organizational structure was decentralized, which created challenges in coordinating activities and sharing best practices across different regions.
To analyze these issues further, we can apply the following frameworks:
- Porter's Five Forces: This framework helps to understand the competitive landscape and identify opportunities for differentiation.
- Value Chain Analysis: This framework helps to identify key activities that contribute to the company's value proposition and identify areas for improvement.
- Balanced Scorecard: This framework provides a comprehensive view of the company's performance by considering financial, customer, internal process, and learning and growth perspectives.
4. Recommendations
To address the identified issues, Finning should implement the following recommendations:
1. Enhance Financial Performance Measurement:
- Implement a standardized system for tracking and analyzing financial performance across all regions and business units. This system should include key performance indicators (KPIs) such as revenue, profitability, return on assets, and customer satisfaction.
- Utilize financial statement analysis and ratio analysis to identify trends and areas for improvement.
- Implement a variance analysis system to track deviations from budgets and identify the root causes of these deviations.
- Develop a comprehensive management accounting system that provides timely and accurate financial information to support decision-making.
2. Improve Cost Accounting:
- Implement activity-based costing (ABC) to accurately allocate costs to products and services.
- Develop a robust cost analysis system that identifies cost drivers and opportunities for cost reduction.
- Implement a costing system that aligns with the company's pricing strategy and ensures profitability.
3. Optimize Asset Management:
- Implement a centralized asset management system that tracks the location, condition, and utilization of all assets.
- Develop a comprehensive asset management strategy that includes policies for acquisition, maintenance, and disposal of assets.
- Utilize technology to improve asset tracking and optimize utilization rates.
4. Re-evaluate Organizational Structure and Design:
- Consider centralizing certain functions, such as finance, IT, and human resources, to improve efficiency and coordination.
- Implement a cross-functional management approach to encourage collaboration and knowledge sharing across different departments.
- Develop a clear organizational culture that emphasizes accountability, teamwork, and continuous improvement.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Finning's core competencies in equipment distribution, service, and financing. They also support the company's mission of providing value to customers and achieving sustainable growth.
- External customers and internal clients: The recommendations aim to improve customer satisfaction by providing better service and more competitive pricing. They also aim to improve employee morale and productivity by providing a more supportive and efficient work environment.
- Competitors: The recommendations help Finning to remain competitive by improving its efficiency, profitability, and customer service.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to generate positive returns on investment (ROI) by improving operational efficiency, reducing costs, and increasing revenue.
6. Conclusion
By implementing these recommendations, Finning International Inc. can improve its management systems, enhance its financial performance, and achieve sustainable growth. The company needs to embrace a culture of continuous improvement, actively seek opportunities to optimize its operations, and leverage technology to enhance efficiency and effectiveness.
7. Discussion
Other alternatives not selected include:
- Merging with a competitor: This could provide access to new markets and economies of scale, but it also carries significant risks, such as integration challenges and potential cultural clashes.
- Divesting non-core businesses: This could focus the company's resources on its core competencies, but it could also reduce revenue and market share.
Key assumptions of the recommendations include:
- The global economy will recover in the coming years.
- Finning's customers will continue to demand Caterpillar equipment and services.
- The company will be able to implement the recommendations effectively and efficiently.
8. Next Steps
To implement these recommendations, Finning should:
- Develop a detailed implementation plan with clear timelines, milestones, and responsibilities.
- Allocate sufficient resources to support the implementation process.
- Communicate the changes to all stakeholders, including employees, customers, and investors.
- Monitor progress regularly and make adjustments as needed.
By taking these steps, Finning can transform its management systems and emerge as a stronger and more competitive company in the years to come.
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Case Description
A stock analyst is reviewing information about Finning International Inc. He wonders how strategy at Finning's business unit-level is translated into financial and individual performance metrics at the line of business level. The case study describes Finning's internal management systems and shows how the metrics at the various levels are in alignment with the company's overall objectives.
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