The Causes of Magna PC Companys Failure and Their Management

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Table of Contents

Introduction
Main body
Conclusion
Reference

Introduction

The case of Magna PC provides a valuable illustration of the importance that the companys strategy has for its success and financial efficiency. Magna PC specializes in manufacturing and designing private label PC for large electronic retailers, who sell the PCs under their own branding. The company faced difficulties when the actual net sales data showed significant differences from the budget. This study will focus on defining the causes of Magnas failure by exploring which strategical aspects the company can implement to be more successful.

Main body

Firstly, considering the nature of the companys activity, the main goal of the companys strategy is to achieve a competitive advantage through lower prices for customers. Thus, most of the companys repeat customers are large retail companies primarily interested in finding a supplier with lower prices to increase their profits from the computers sales. Furthermore, as a manufacturer, Magna PC is also responsible for the products quality to final buyers and users. Thus, the company is interested in maintaining a low percentage of faulty PCs returned by consumers and increasing the level of consumers satisfaction with manufactured products.

Furthermore, the Magna PCs competitor company DataMax PC uses similar techniques and processes in production, but DataMax PCs profits are proportionally higher than Magna PCs. The significant difference between the two companies is that DataMax PC has one manufacturing plant, while Magna PC has four PC factories of similar size (Sheehan & Kobussen, 2020). The information suggested that each factory has its own quality assurance departments, and the level of goods rejected and returned to the supplier is 4,5% compared to 3% in the budget. It can be that for the competitor company being in one factory saves additional costs for parts testing.

Next, Magna PC experiences significant difficulties in managing the high turnover rate. The companys employees are trained primarily to perform a simple chain of sequential actions. Semiskilled work negatively influences employees morality and motivation to work as it seems that the company utilizes talents for machine-like labor. Increasing the level of employees skills and reviewing the organizational culture in favor of a more friendly approach can result in employees increased involvement in work. Furthermore, as replacing an employee causes additional expenses, managing a low turnover rate will positively influence the companys financial results.

Creating a balanced scorecard can significantly improve the process of assessing the companys performance. The table combines the collected information in an accessible visual system form (Figure 1). The companys new strategy measures should focus on four primary fields, inducing relationships with customers, financial statements, employees learning and growth, and optimization of the companys internal processes. Thus, most of the companys obstacles are sourced in the complex strategy of selling high-quality products at lower prices for further reselling by retail companies.

Conclusion

In conclusion, Magna PC targets clients who resell the production; creating custom PCs for large business companies will improve the financial efficiency through increased sales without significant additional investments. Improving the employee training programs to get more high-skilled employees for the company will reduce the turnover rates and save on hiring expenses. Lastly, reviewing the quality assurance terms can save on additional expenses across all four factories. For example, the company can outsource the quality check of suppliers parts to third parties to ensure that its quality assurance departments do not carry out unnecessary work other than testing Magna PCs products.

Reference

Sheehan, N T., & Kobussen, G. P. (2020). Using the balanced scorecard to assess and enhance Magna PCs performance. IMA Educational Case Journal, 13(2), 1-2.

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The Causes of Magna PC Companys Failure and Their Management

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