Case 7-4: Aloha Products Jane McTague- 200904755 March 26, 2013 The executives of Aloha Products manage sales policies; assume advertising responsibility and promotion; and oversee the roasting, grinding, and packaging of Aloha coffees. Executives have left little control to plant managers because, although executives have control of inputs, each of the plants it still responsible with its profits and losses. Plant manger’s bonuses are also based on the percentage of his or her plant’s gross margin. This is the reason Lisa Anderson, plant manager, states her rustration at the beginning of the case.
Plant managers more likely have a better idea of the way the production schedule for the plant than executives. It would be better that executives and plant managers met to devise a strategy; rather, the specific strategy the company would like to pursue. The plant managers would better be able to manage costs if they had more control over the inputs, and as a result, more positive gross margins for the managers and the company overall. Aloha Products’ profitability may rise because of its advantage in big volume urchases.
However, the policy to make purchase commitments based on maximum potential plant requirements and sell surplus on the spot market is likely not to be benefiting the company as management desires. This is due to the fact that was pointed out above; i. e. the unbalanced structure of Aloha Products. A further analysis of purchase costs and previous market exchange rate trends by Aloha products management could help their profitability rise and allow the company to maintain its competitive advantage over suppliers.