ANALYSIS OF AUTOPLAST LTD.

1.Introduction

The AutoPlast Ltd. is a 25 years old tyres manufacturing company. The company is located at a prime location inside the industrial park of Blumac town and alongside the Cruze River. AutoPlast Ltd. is also gives employment opportunity to the local community, therefore this company has been considered as an asset from the local community in the Blumac town.  Recent incident in the factory due to the outbreak of chemical leakages has generated several problems for the local community and natural habitat.

2.PESTLEC Risk Profile

2.1Political Risk

Political risk is defined as the risk associated with the political decisions and conditions that can affect the businesses (Woods and Joyce, 2003). As Goffin and Mitchell, (2005) argues that political risk has greater magnitude to effect the business operations, investors decisions and the market. However, investors critically analyse this factor in any economy before investing in it. As in business perspective this risk can have direct or indirect impact such as its direct implications through the pursuit of earnings in the form of taxes and indirectly through opportunity cost forgone (Busse and Hefeker, 2007).

2.2Economic Risk

Risk associated with the macroeconomic and microeconomic conditions of any country which can affect the businesses are known as economic risk (Freeman, 2010). Woods and Joyce, (2003) defines economic risk as a likelihood that an investment can be effected through government regulations and exchange rates. In the AutoPlast Ltd. case the company can face economic risk as from its investors that may feel reluctant in investing in the company because of the recent incident.

2.3Social Risk

Social risk is known as the risk associated with the business operations that can impact the communities and other stakeholders (Mares, 2003). The conceptual framework of the social risk lies behind the social protection of the communities from any business operations that can have adverse effect on them (Holzmann and Jørgensen, 2001). The AutoPlast Ltd. entail social risk from their community as it can affect the company’s reputation amongst their competitors, shareholders which further affect the profit margin of the company.

2.4Technological Risk

With the advent of new and advance technology recites a technological risk (Phimister et al., 2004). As AutoPlast Ltd. is a tyre manufacturing company and it possess a great threat from its competitors. Many tyre manufacturing companies are now using more comprehensive technology in their manufacturing processes and also investing in their resource and development department. In such Instances these advances put greater pressure to AutoPlast Ltd. to upgrade their technology by investing more in the company and any such instances however affect the company overall shares and thus reduce its market share.

2.5Legal Risk

According to Lyon and Maher (2005), legal risk is defined as any risk that can affect the business financial or the reputational aspect that are generated due to any legal and regulatory actions. Due to globalisations companies are now operating in different countries and each country has its own legal matters which includes export duties, tariffs and environmental laws.  The AutoPlast Ltd. has to comply with the legal matters as with the recent incident in the company needs to be justified and compensated through regulatory channel of the country.

2.6Environmental Risk

The increased business operations have affected the natural environment much adversely (Zsidisin et al., 2004). The environmental risk is defined as any organisational activity that can have negative or adversely effect on the living organisms or the environment through the emission of effluents or any other hazardous wastes (Dangelico and Pujari, 2010). Amongst other industries tyres manufacturers put greater stress on the environment through emulsion of hazardous wastes and toxic gas emissions (Wiesner et al., 2006). AutoPlast Ltd. also confronts issues regarding the environment damaging the natural habitat of the Cruze river, air pollution, water pollution and thus contributes to the global warming issue.

2.7Competitive Risk

As the world population increase the demand of different products are increasing with much a higher rate. Therefore, many companies around the world are opened in order to meet the demand and thus the competition between the companies also originated. Due to heavy competition in the tyre industry AutoPlast Ltd. has a higher competitive risk. As, Mares, (2003) defines competitive risk as the probability of loss from increasing business operations from the competitors product, promotional, price or distribution actions.

3.Risk Register

Risk ID

Task

Risk with  AutoPlast Ltd

Probability

P=1-3

Impact/ severity

 S=1-3

Risk

score

P×S

Mitigation action

Action By

PR

1

Political Risk involves

Government

Tax policy

Terrorism

local Groups/community

2

3

6

AutoPlast Ltd. needs to discuss this issue with the government agencies in order to solve the present issue

The company also bring the government in to its confidence through the company policy reforms.

These decisions are of executive level, company board of directors needs to take action and work on policy reform to mitigate political risks

ER

2

Economic Risk AutoPlast Ltd.

Interest and exchange rates

Governmental policies

Competitive risk

Shareholders interest

3

3

9

AutoPlast Ltd. faces serious issues such as the relocation of the company it incurs a huge amount

They also have to satisfy their investors that company will revive back from the current situation

AutoPlast Ltd. financial manger needs to estimate all the financial matters and take into the CEO of the company to take any constructive step.

SR

5

Social Risk

Local communities

Non-government organisations

Natural habitat

3

3

9

AutoPlast Ltd. needs to bring the local communities in to their confidence that such incidents will not happen again

They should demonstrate their concerns towards the preservation of the bio-diversity

They should council the local communities that the jobs that the company is providing

The Human resource manager of the company needs to estimate all the social risk and suggest actions accordingly

TR

6

Technological Risk

Installation of highly sophisticated technology

 

3

9

In order to be back in the competition the AutoPlast Ltd. needs to get rid of their obsolete technology and have to install new and more advance technology.

In order to mitigate the technological risk the company’s top level management has to take action

LR

7

Legal Risk

Local laws

Taxation policies

Regulatory obligations

2

3

6

The company should demonstrate their concern by announcing giving compensation to those who have been affected.

The company should also fill all suits.

Company legal compliances are matter of the legal advisor of the AutoPlast Ltd. they can give action plans to solve the legal issues of the company.

EVR

8

Environmental Risk

Damaging the natural environment

Water and air pollution

Bio diversity

 

 

 

3

3

9

Involvement of the company in different environment protection programs will help the company to minimise the effect.

Use advance technology as to minimise the waste through recycling the company’s waste

Company should properly design it corporate social responsibility profile.

The Human resource managers are responsible for solving issues regarding the environmental risk problems of the company

CR

9

Competitive Risk

High competition Reduction in the market share

3

2

6

With the increasing competition the AutoPlast Ltd. should focus on its product quality and design and also the cost.

 

4.Disaster Recovery Plan to Environmental and Technological Hazards

4.1Environmental Hazards

  • Spread of toxic fumes

The fire outbreak in the storage area of the company has spread toxic fumes in the environment. These fumes has on one hand effected the human’s health on the other hand polluted the air. The harm full gases have generated respiratory problems to the local community. However, many of the interest groups are still concerned that such incidents are about to happen in the future as well.

  • Contingency Plan and Disaster Response

The AutoPlast Ltd. needs to establish hazardous waste management plan and comprehensive environmental response system in order to meet such emergencies in the future. The management plan include emergency command unit and environment specialist to lead this unit.  The specialist should quickly evaluate the impact on the environment resulting caused from any disaster, emergency or hazardous chemical spill and take constructive steps to stop it.

  • Chemical leakage Hazard

Millions of tires are produced and used every year, thus these tires during manufacturing creates a huge amount of water waste, air pollutants and solid waste. Incident in the AutoPlast Ltd. factory has damaged the natural habitat of the living organism in the river and also created air pollution causing various health issues to the people living in nearby villages such as respiratory disease, allergies and eye irritations.

  • Contingency Plan and Disaster Response

The AutoPlast Ltd. factory incident has raised many issues; the company in order to re-enter in the market needs to specify their management plans in case of such incidents. The company needs to improve its disaster management authorities by recruiting more experienced and well informed personnel in this department. The new staff should also train the employees in order to handle such situation and minimise the adverse effect.

4.2Technological Hazards

  • Toxin Release

Disposing of the tyres is one of the greatest concerns of environmentalists. The recent outbreak in the factory has released chemicals and toxic fumes in to the air where number of tyres were burned and they released toxic pollutants in to the year.

  • Contingency Plan and Disaster Response

The recycling of the waste is the best option to reduce the waste and generate energy for further operations. Many tyre manufacturing companies such as Nokia in Finland using an advance approach for recycling waste which is known as tyre pyrolysis (Gupta et al., 2013). In this processes rubber polymers are break down in smaller molecules and reactor vessel is used to generate power and also the gas is condensed and its liquid form is used as a fuel in the factory. The AutoPlast Ltd. should also work in in its R & D department for reducing wastes by using such advance technology.

  • Obsolete Technology

With the increase in business operations now companies are incorporating more advance technologies in order to do their business. The AutoPlast Ltd. needs to replace its technology so that their storage tanks be more safer from any incidents.

  • Contingency Plan and Disaster Response

The company needs to ascertain that they need to be more systematically equipped in future. They need heavy investment in order to ensure that their operations will not further leads to any devastating conditions. The AutoPlast needs to install advance soft wares such as Chemical Safety Software which is used to update about the safety and disposal information of chemicals stored in tanks. Similarly, Hazardous Waste Profile Data (HWPD) Sheet also helps in givinging detail information about the chemicals.

5.Value Chain Analysis

Value chain analysis is a strategic tool which is used by the firms to analyse their activities and to improve them in order to gain competitive advantage (Kaplinsky, 2000, Olson and Dash, 2010). To conduct the analysis each step needs to be more comprehensively scrutinised and identified that what steps needs to be eliminated and where there is a room of improvements. As, Barnes, (2002) contended that the process of value chain analysis at one hand helps in improving the production capacity and on the other hand a greater measure of cost saving. The end result is the customer drives the benefit from better quality at the lowest possible price.

With the increase in global competition now companies are taking strenuous efforts to attract and then retain their customers by delivering better product through its quality and cost (Barnes, 2002, Prahalad and Ramaswamy, 2004). The value chain analysis will help to strategies business activities so that it can help in gaining competitive advantage (Donaldson, 2006).

5.1Value Chain Analysis of AutoPlast Ltd

Auto Plast Ltd also uses a series of steps in developing the AutoPlast tyres which the company is producing from last 25 years. It involves from the inbound logistics to the services in the value chain.

In the inbound logistics it involves with the assembling of all the raw material require in manufacturing a tyre which includes carbon black, rubber and other chemicals. The AutoPlast needs to contact their supplies for obtaining better quality raw material and in timely manner. After obtaining the raw material it’s the operation stage which involves in developing a product from the raw material. In the tyre manufacturing this is a very crucial stage as it requires well experienced employees to maintain the temperature and quantity of chemicals in producing more durable tyre. After the manufacturing process it’s the out bound logistics which involves in transporting the final goods to the sellers or contractors. The AutoPlast has been in this industry for 2 decades thus it has many well established relationships with their contractors which will help them in delivering their product at timelier manner.

The marketing is also an important aspect to deliver the product in the market as it ensures in targeting the best consumer group (Wilson et al., 2010, Vargo and Lusch, 2004). Finally the service, it is the after sell activities companies in order to sustain their customer helps them in solving their problem even after the product sell. This shows the company’s loyalty to their consumer and helps in sustaining customer for longer run.

5.2Non-value-adding process

Non value adding is the process that adds no value to the process during the entire process (Gereffi and Fernandez-Stark, 2011). The AutoPlast needs to modify their complete process and remove non value adding process. The company needs to train their employees in order to reduce the number of human errors.

5.3Suggestion for Value Adding Improvements

The AutoPlast needs to work on gaining its reputation back. The company needs to work on solving all their legal issues and also satisfy all the interest groups concern. The company needs to bring better technology and trained employees for their better operations and revising the company’s policy regarding environmental concerns. They also have to demonstrate their contribution towards the society and the natural environment preservation.

6.Conclusion

The AutoPlast is has been in the tyre manufacturing business from past 25 years. The company needs to revise all its policy in order to enter in the market again. Because of increasing competition in the European market the AutoPlast needs to carefully develop strategies for their better operations and also gaining the company’s reputation back. The company needs to focus on advance technological uplifts and also assuring that the company will enable all polices regarding the sustainable business development.

 

 

References

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