The considerations of the new general manager are largely agreeable and in line with the trends of the market and economy, potentially providing Matexin the opportunities for long-term growth. The suggestions brought forward by Pau are aimed at creating innovation, specifically through process and management innovation as well as establishing supply chains for sustainable, flexible, and competitive advantage. However, the change management process is difficult to implement and there may be resistance within the company as well as external barriers. The proposed plan should not be implemented simultaneously. For example, internal management and operational changes should be implemented and finalized first to ensure effective and efficient production before seeking expansion or outsourcing. Furthermore, efficiency and cost-cutting are counterproductive when it comes to expansion which requires significant investment to ramp up performance. Nevertheless, the comprehensive consideration for innovation in multiple areas of the company is a sound approach to promote greater sales and resilience to future crises of the company.
Main Line of Strategy
Operations management must meet the requirements of the market in key indicators of quality, time, reliability, flexibility, and costs. Matexin meets the standards of quality and reliability, could use improvement in costs but struggles with time and flexibility. The key to reaching the highest standards in all categories is efficiency, with the ability to produce quality products quickly at low costs and maintain the same customer service level. This is done through daily operation functions of consistent productions and no disruptions to the supply chain, thus increasing the company’s position in the market. Therefore, the key is to optimize the operations and supply chain processes by removing redundancies and creating effectiveness. However, this must be done in consideration of providing value to the consumer at an appropriate price.
The mainline strategy for Matexin should focus on international expansion to acquire entry into new markets, thus increasing profitability. Foreign expansion strategies allow for growth to occur in a structured and sustainable manner. With a competent approach, the strategy can mitigate expansion risk and encourage efficient use of resources and capital (Globalization Partners, 2019). Globalization is beneficial for a company such as Matexin that is focused on innovation-driven by technical improvements while retaining similar global consumer preferences (since the company creates machinery, not consumer products) with fairly limited regulation as it is a niche manufacturing product. This allows it to be globally consistent in its operations, with a centralized command at its headquarters in Spain. However, before considering expansion, Matexin alongside its top management should define its operational model clearly in the context of innovations. It is necessary to ensure a strong centralized operational model that functions effectively locally before expanding which will create a much different pressure, stress, and potentially changes in the workflow of the company.
To maintain and improve its position in the Spanish market, Matexin should strive to build upon its established brand in the country of prestige quality and innovation. Simultaneously, the company should improve its weaknesses such as strengthening customer relationships and smart hiring practices targeting its aging workforce population. Quality and innovation are areas where Matexin continues to excel and the company can continue to invest in various elements such as research and development as well as training for new professionals to ensure mastery of the product. However, strengthening customer relationships is the primary means for the company to protect and gain market share. Particularly in the industry in which Matexin operates, where the company has relationships with various businesses or brands to deliver expensive quality equipment, the customer relationship is vital. It provides some protection that the consumer will not immediately switch to cheaper or perhaps more innovative alternative equipment, as well as ensure a possibility of repeat orders in the future (Kramer, 2019). Positive experiences in terms of timely delivery, reliability, and the appropriate cost is a consistent approach to increasing the market share position.
Efficiency is oftentimes determined by the operational model of an organization. One of the key elements of operations management seeks to improve products costs of goods to increase the efficiency of production. Optimizing complex manufacturing operations can be challenging while cutting costs but increasing output/time efficiency. Improving production processes through the use of ERP systems software is the standard option for modernizing companies in the current environment. This allows manufacturing companies to automate multiple performance and business functions, ranging from the production process to managing the customer lifecycle. Furthermore, ERP helps to collect and monitor data which can be leveraged to improve quality and reduce redundancies that are costly (Humphlett, 2014).
The complexity of operations is a challenge that many manufacturing executives face and it is critical to address it and have control. Methodical thinking helps to produce results and measurably improve performance through various frameworks. Some suggestions to minimize cost and maximize production include evaluation of materials and inputs used, prioritization of manufacturing projects which balances available resources with the best financial benefit, coordination among departments, and strategy development. The whole process of efficiency optimization is a cost-benefit analysis of the manufacturing process from start to finish, which then leads to companies selecting appropriate means of production, such as lean manufacturing, flow production, or others.
Outsourcing/Operations in Foreign Countries
Outsourcing in the traditional sense is likely not a good option for Matexin due to the nature of its business. It manufactures highly technical equipment, not commercial products. This equipment needs specialized manufacturing and expertise to maintain a high level of quality which is the standard for the company. Outsourcing operations in an acceptable manner is highly unlikely for Matexin. One potential outsourcing element can be for generic or easy-to-produce parts (if those exist) en masse that are currently made at the Spanish facilities. This would be a cost-cutting measure as it would likely be cheaper to outsource as well as free up more resources and time for the Spanish factories to focus on the complex elements of the machinery. Outsourcing mass production of non-specialized parts can be taken to mass manufacturing in China or Southeast Asia as well as Mexico – countries that are well-connected to global supply chains and offer cheap prices due to the availability of labor and resources.
However, the element of outsourcing can be combined with foreign expansion. FDI is a highly beneficial option for the company for multiple reasons. First, it allows for lower production costs if expanding to appropriate countries, with this motive being the primary motive for FDI by manufacturing firms due to labor market indicators (Bayraktar-Sağlam & Sayek Böke, 2017). The case presents that there has been some interest from representatives in the US, Mexico, and Brazil – becoming evident that Matexin seeks to enter the Western market of the Americas. Mexico has both the foundation for manufacturing due to decades of outsourcing from the US and an abundance of cheap labor. By placing production there, Matexin can both cut production and expansion costs as well as have relatively easy access to lucrative North American markets or production markets in Mexico and Brazil. That is the second benefit to expansion, the direct access to these foreign markets. While globalization and technology have allowed for much greater flexibility in working with international partners, a physical presence in the region typically has many benefits including influence and reputation, regulation, economic benefits (such as lack of tariffs), and reliability (faster delivery times). A Matexin team on the ground in the region will be able to effectively work in the market and acquire new contracts and sales, customized to the needs and demands of the local consumers, an element much more difficult to gauge remotely.
When discussing foreign expansion, it may be viable and safer to take the route of acquisition when it comes to the first entry of Matexin on a new continent and market. Potentially, it is possible to even form a manufacturing partnership with a firm that has the necessary resources and space but is not in direct competition. Nevertheless, in this case, an acquisition will be better for several reasons. It is much less costly than any new operation, particularly since Matexin only has to buy a controlling share. It holds significantly less risk, as it allows the company to test out the new market and evaluate its success, before deciding whether to pour additional resources in. If the enterprise fails, Matexin can simply sell the acquired shares and minority assets and leave the market with minimum losses. Finally, the acquisition has the benefits of the company having existing cash flow, functional business model and infrastructure, and potentially an established customer base, connections, and brand identity that Matexin can capitalize on when entering the new markets (Entrepreneur Media Inc., 2015).
Coordination of Supply Chain
Due to the nature of the business, a centralized organization for the supply chain would be optimal for Matexin. Since there are fewer locations, it makes the standardization of systems and processes much easier, allowing to upkeep the high quality, as well as foster and maintain the company culture that the new management is concerned about. Furthermore, in a centralized supply chain, management can maintain greater quality control due to the localization. Once foreign expansion occurs, it may be viable to introduce a hybrid system, where there is a blending of centralized and decentralized methodologies, with the locations in another region having some autonomy in terms of tuning to the demands of the geographical areas to best serve the customer base while continuing to maintain high standards. Collaborative leadership is also the best approach to supply chain management because it consists of multiple diverse teams and departments across an organization. It is the most effective style when working with a large number of teams, vital to the functioning of a supply chain, where the collaboration of technology, organization, and flexibility is necessary.
A wide variety of SCM software exists targeted specifically at improving the efficiency of the supply chain. The benefits of the software are aimed at making the development of information sharing, resource allocation, and customer responsiveness much simpler. The flow of information significantly reduced production times in various supply chain activities since each process is inherently synchronized and decision-making is optimized. The e-SCM allows supply chain designs to be highly adaptable and flexible to changing trends, consumer preferences, competition, or general environmental disruptions. This complex system of information flow is not benefited by cloud technologies which allow for rapid, secure, and efficient flow of data between supply chain points such as sales, warehouse, shipping, and distribution. It eliminates multiple redundancies and ensures that the optimal amount of resources is used to deliver the final product to the consumer.
Bayraktar-Sağlam, B., & Sayek Böke, S. (2017). Labor costs and foreign direct investment: A Panel VAR approach. Economies, 5(4), 36. Web.
Enterpreneur Media Inc. (2015). Should you start a business from scratch or buy an existing business? Entrepreneur. Web.
Humphlett, M. (2014). Five factors in optimizing complex manufacturing operations. Web.
Kramer, L. (2019). What strategies do companies employ to increase market share? Web.
Globalization Partners. (2019). Tips for developing an international expansion strategy. Web.