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INTRODUCTION

 

Background

Purpose

Significance

Strategic audit report goes a long way in providing a good understanding
of strategy formulation and implementation issues of a real organization. It
also help making some guidelines for solving strategic problems that an
organization can face not only in present but also in future.

Scope & Limitation:

The report will illustrate and analyze the facts that fall under matters
of strategy formulation and strategy implementation. It will consciously try
not to go beyond strategic management issues. Also the report will only
concentrate on an SBU called RahimAfrooz Service Centre of RahimAfrooz Company.
Time constraint was a major limitation in preparing this report.

Key issues

Methodology:

Both primary and secondary data are used to prepare this report. For
generating an industry overview, the following samples like Navana, Powercraft,
Uttara Motors, Autoscan is taken for making comparison.

Organization of the report:

					Analysis
	External Environment Analysis

 

 

Fig: Report Organization
Plan

 

COMPANY OVERVIEW

 

Business of the company

 

  RahimAfrooz started its operation as a
trading company in 1954. Today, the company is a leader in Storage Power
Solution to Automotive Components Distribution & Servicing with High Tech
equipments to retailing. RahimAfrooz, comprising of a number of subsidiaries,
has diversified its activities in various areas like Battery, Tyre
Distribution, Energy Saving Equipments, and Car Repairing & Servicing
Center and eventually ended up with Superstore Retailing Business.

In 1954 they first made
their journey with Lukas Corporation of UK for setting up the manufacturing and
distribution business of lead-acid automotive batteries in Dhaka. During 1959
they first start operation with batteries with a production plant at
Nakhalpara. Meanwhile, they also managed distribution agreement with Dunlop
Automotive Tires in the market. During 1982 they first started operating with
huge Network Distribution for their dry charged plastic case batteries. For the
first time in 1990 they established B2B (Business to Business Marketing)
concept by offering “Lead Oxide” to independent batteries manufacturer. In 1993
they offered Instant Power System (IPS) and other consumer electronic goods.
During 1995 the started their first global operation in Pakistan, later on in
Middile East, Europe, USA etc. During 2001 established the first grocery retail
chain superstore called “Agora”.

The mission statement of RahimAfrooz
Company is to ensure quality product and service excellence for total customer
satisfaction and endeavor for constant enhancement of technical and professional
skills of workforce. Also its mission is to maintain high ethical standard in
all spheres of operation and to respect the social norms and customs and
contribute to the welfare of the society.

 

Corporate structure

 

 

 

FIG: Corporate structure and project SBU

RAHIMAFROOZ SERVICE CENTER (AN SBU)

SERVING THE CUSTOMERS
OF THE COMPUTERIZED CAR SERVICING INDUSTRY WITH SATISFACTION BY USING MODERN
TECHNOLOGIES AND EXPERT PERSONNEL.

Mission Statement:

The
mission of RAHIMAFROOZ Service Center is to serve the customers with
uncompromising quality and superior services with trained and motivated
personnel keeping an eye to the customer’s optimum benefit.

 

Objectives:

 

Long Range Objective:

• To
  become the number one service center in Bangladesh .

Financial Goals:

1. To
   grow revenue by 5% per year for the next 4 years.

1. To
   increase profit margin to about 20% by the year 2005.

Strategic Goals:

 

1. To
increase market share at a minimum rate of 3% per year.

 

2. To
   offer a wider range of service than competitors within two years.

2. To
   increase the market shares in corporate segment by 10% within two years.

Organization Structure

In the auto repair
service, the success of the firm is directly linked with employees. Management
and employees share the responsibility for managing and operating the
organization by offering quality service at an affordable cost. The Management
Team that is included General Manager, guided by Assistant General Manager,
Second Layer consist of One Manager – Customer Service and Two Deputy Manager,
Third layer consists of Accounts & Finance, Service Executive and the
Fourth i.e. ground level consist two sub layer which are Supervisor and
Operational People. So, RahimAfrooz Service Center maintains a traditional
organizational structure with four levels. The organogram, represented on the
next page, shows the structure of RahimAfrooz Car Service Center:

Fig: Organogram of service Center

Services Provided by
RahimAfrooz Service Center

 RahimAfrooz Car Service Center offers
different types of services based on customers’ need. The description of
different types of services is mentioned below:

1. Computerized Engine Analysis and Tuning:

RahimAfrooz offers computerized engine
analyses and tune-up facility to ensure optimum performance of customers’
vehicle. A properly tuned engine ensures maximum efficiency, fuel economy,
longer engine life and its components. The capacity is one car service within
35-40 minutes; for fine engine tuning requires additional half an hour.

2. Computerized Wheel Balancing:

Computerized wheel balance accurately
detects damage imbalance, inner and outer weight placement, and balances
individual wheel for optimum performance. Improper alignment of wheels result
in exceptionally rapid tread wears, high fuel consumption and uncomfortable
driving and can be dangerous.
RahimAfrooz recommend customer to get the vehicles” wheel alignment
checked every 5000-km to ensure optimum tyre mileage.

3. Valve/Tapet/Ignition Timing Adjustment:

Check the engine valves,
tapping and ignition timing.

4. Auto Air-Conditioner
Analysis & Repair:

 It also provides computerized air-conditioning
analysis to the car of the customer. It is the second only provider after
Navana, which provides of EFI Scanning (Efficient Fuel Injection) engine. Now a
days most of the cars are with EFI engine. So this is also one of their
strength.

 

5. Pre-delivery Inspection (PDI):

 

RahimAfrooz also provides
different forms of customized service with auto and semi auto equipments like
Towing Facilities, Semi Auto, Auto and Tubeless Tyre Repairing & Fitting,
Tube Vulcanizing, Tyre Branding, Car Washing, Break Performance test, lastly,
Dent Remove and Painting.

 

Industry analysis can be done by using Porter’s five forces model
represented below:

 

 

 

Rivalry among established firms:

Degree of rivalry among established is very large because the industry
is consolidated and growing demand stemming from new customers.

Risk of Potential Competitors:

Risk of potential competitors is very low as huge capital
investment is required.

 

 

There is no significance bargaining power of the customers. Still the
owners of brand new cars always want to investigate the problems of their cars
with due care by computers.

 

The
role of Macro environment:

 

·
Market Size is relatively big compare to the existing competition in the industry.
Approximately 70 to 85 thousands (BRTA record) brand new and recondition cars
are running with in Dhaka City.

 

• is 12 to 13% annually.

• is in rapid growth stage as the
  numbers of private cars are increasing; a large number of customer group
  also prefer computer service center more authentic compare to manual service
  center.

 

 

• is 5. The total industry is
  still very small relative to its demand. The companies are RahimAfrooz,
  NAVANA Ltd., Power Craft, Uttara Computer Car Testing Center and Autoscan.

 

 

·
Technology/Innovation is high. As the industry is very
competitive each and every centers offers new technology to improve the
customer service and innovating tailor made service to attract new customers.

 

·
Product Characteristics highly differential as the service
differs not only in the process but also in customer relationship, location and
facilities.

·
Scale Economies is moderate as increased number of car service can
substantially reduce the overhead costs.

Company Competitive Positions

 

a.
Power Craft

 

Power Craft
started its operation in 1996. It is located at 29, Monipuripara, Tejgaon (east
to National Parliament Building). The owner is a former employee of Rahimafrooz
Group. The main focus of Power Craft is engine repairing and wheel alignment.
According to the service engineer of Power Craft, the reason it is not
promoting the center aggressively is due to the space constraint faced by the
center. Due to this problem they have installed a booking system over
telephone. A prospective customer has to call in and make an appointment to get
a booking.

 

b.
Uttara Computer Car Testing Center:

 

 

c.  Packers Industries Limited:

 

 

d. Navana Limited

 

Navana
Limited is the oldest computerized service and repair shop among the current
operators. It is the dealer of Toyota automobiles in Bangladesh. They are also
in the business of spare parts. Navana is located at Motijheel. The total land
area of the auto repair center is about 4 acres. Apart from computerized
service, it provides manual repairing jobs.

In addition to that
Rangs Mitsubishi Service Center, Nissan – Pacific Servicing Center & DHS
(Honda) Servicing Centers are coming with service varieties. Rangs Ltd. is
dedicated for Mitsubishi and Nissan Branded cars; whereas Honda offers their
services only to their respective clients. All these are operating in the
higher price categories.Strategic groups within the
industry is shown on the next page by using a diagram:

 

Fig:  Company
Competitive Positions

 

SBU STRATEGY ANALYSIS

 

SWOT ANALYSIS

Strengths

1. Number
   2 in the market share & being the consistent leader in liquidity and
   profitabilities.

1. High
   quality Service at an affordable cost.

1. Latest
   Technology.

1. Strong
   Image and company reputation.

 

. Highly Skilled Service Manager and Service
Advisors.

 

Weaknesses

1. Space
   constraints.

1. Few
   traditional old workers are still in the factory and not well trained.

Opportunities

 

1.
Relatively faster growing market in Bangladesh.

 

2.
Growth potentiality of service facilities.

 

3.
Now a day’s people are more conscious about quality service rather than
cost of the service.

 

Threats

 

1.
Availabilities of non-genuine parts.

 

2.
High custom duty has been charged on cars.

 

3.
Political Instabilities.

 

4.
The Great Dholai Khal impact.

 

Strategy Analysis Strategies:

 Business Level Strategies:

• Adopting
  niche differentiation strategy.

• Focus
  primarily on high-income-level customers and secondarily on corporate
  customers.

• Spend
  sufficiently on promotion and marketing activities to keep customers aware
  of the services provided.

• No
  compromise with quality.

 Functional Level Strategies:

• Reduce
  the staying time of the vehicle to a minimum possible limit.

• Continuous
  improvement of the services through constant supervision of the expert personnel.

• Invest
  substantial portion of the profit in acquiring new machineries.

• Concentration
  on relationship marketing through word of mouth.

• Advertise
  in daily newspapers at certain intervals.

• Maintain
  liaison with corporate houses.

• Give
  discounts to people coming to the servicing center regularly.

• Provide
  as much broad a service range as possible.

• Collect feedback from the customers to maintain quality
  & keep pace with the other competitors.

• Emphasis on cash payment for the service instead of
  credit.

 

 

Fig: Overview of SBU Strategies

RESOURCES AND PERFORMANCE
ANALYSIS

Marketing performance analysis:

 

Marketing activities is one of the most
important things for increasing revenue in any business. Now-a-days companies
operate in a very non-stable marketplace requiring frequent attention on
technology advances, consumer preferences, laws and regulations, and
diminishing customer loyalty.

 

Market Size

 

,44,25,000. Different services are provided by
the computerized service centre shown below:

 

 

 

Market Trends

a.
The trend of the number of cars being purchased reflects an
increasing rate. In the last two or three years import of cars has increased
considerably.

b.
Income level of people is also increasing. GNP of Bangladesh is
increasing though at a very slower rate which has a definite impact on the
quality of life of the urban population of the country. The income level of the
urban population has increased at a higher rate than the income level of the
rest of the population of the country.

c.
People’s
awareness about the quality about this type of services is growing. As the
income level is increasing, the customers have more discretionary income. This
makes them relatively less price sensitive. So, customers are looking for
comfort and increased quality of life. This is reflected in the awareness among
the customers about the quality of the service. For this they are even willing
to pay a higher price.

The potential market size for
computerized car servicing in Dhaka city is approximately Tk. 80,00,00,000 (Taka Eighty crores). Earlier, current
market size was estimated to be around Tk 10 to 15 crores. The comparison of
these two amounts shows a huge opportunity for potential investors in this
sector.

The main customers of
computerized service centers are:

• Private car owners

• Government

• Embassy
  & Business Institutions

  Several buying behavior are distinctive among
these customer groups. These behaviors are summarized in the following table

 

CONSIDERATIONS BEHIND BUYING BEHAVIOR
Service Considerations	Business Considerations	Other Considerations
Quality Price	Image of the Company Promotion Variety of Services Delivery Times	Shifts in Car Purchase Trend Changing Attitudes

 

Pricing Strategy

 

Price operates as a major determinant of
buyer choice. It is the only element in the marke

 

Consumer Perception

The consumers are quality
sensitive. The service of RahimAfrooz is positioned on a high quality-medium
value area where the consumers will be satisfied from the service & money
savings..

The firm is presently
pursuing Maximum Sales Growth objectives. Higher sales volume will lead to
lower unit cost and higher long run profit. This is also called price
penetration strategies. The firm can gradually increase its capacity, win
larger market share and in future may be able to cut its price further. This
objective is based on two assumptions: –

·
Comparatively lower price stimulates more market growth

·
Low price will discourage a

 Analyzing Competitors’
Prices and Offers

 

There are three major competitors for
this firm existing in the current market. Their price positions and variety of
service offers are compared in the following table.

 

PRICE & QUALITY POSITIONS OF COMPETITORS
Competitors	Quality	Price	Product Variety
Navana	High	High	Maximum
Uttara Service Center	Medium	High	Few
Power Craft	Medium	Medium	Medium
Auto Scan	High	Medium	Medium

 

The major purpose of promotion is to
disseminate information – to let the potential customers know of its existence.
Initially, promotional activities were directed at building awareness among
customers. Most of the target audience is unaware of the services offered,
benefit derived by availing these services, and the name of the firm.

 

Even after building awareness, some
customers might not quite get around making the purchase of services. In this
case, word-of-mouth will play a vital role.

 

The promotional mix contains the following
elements:

·
Advertising

·
Sales Promotion

The advertisement
directly expresses the potential rational
reward behind adopting the services. The advertisement slogan is:

“QUALITY SERVICE AT AN AFFORDABLE
COST”

Human Resources Practices

To sustain the present
position in the market and to ensure customer satisfaction RahimAfrooz
mobilizes its human resources carefully. To meet the growing demand RahimAfrooz
has to recruit new staff as well as ensure training of the old staffs. Since
the industry require highly technical people; so the prime objective of the HR
would be to ensure employee satisfaction and motivated them to reduce employee
turnover ratio.

Assessing the needs, RahimAfrooz has
opened this new section. It is being supervised by General Manager and
Assistant General Manager. The need and demand of people are changing all the
time. In this global world competitors are coming with new offerings and taking
the market share away. So it is necessary for different companies to come up
with new offering like new or customized sevices every

FINANCIAL PERFORMANCE ANALYSIS:

 

RAHIMAFROOZ Car Service Center Limited
Balance Sheets
31 July 2001, 2002 and 2003
															2002-2003			2001-2002			2000-2001
															(Taka)			(Taka)			(Taka)
Current assets:
												701947			629401			755763
		Trade Debtors												28834206			26868482			26020246
												7639662			4754123			2311962
		Temporary loan												86300			86300			86300
		Security Deposit												48273			48273			48273
		Stock In Trade												989378			858338			567439
		Work In Progress												1557963			866825			617768
39857729														34111742			30407751
Current Liabilities:
		Inter Company Loan												3057130			2948630			11584642
		Sundry Creditors												16557742			15464753			4301630
		Accrued Liabilities												705078			493277			401254
		Other Liabilities												283847			276847			—
		Advanced Against Sale												70307			242688			—
		Provision For Bad Debts												3887011			3887011			3349641
			Total											24561115			23313206			19637167
												15296614			10798536			10770584
												2260426			1893004			2031021
												17557040			12691540			12801605
Profit & Loss Statement
for the Years Ended at 31 July 2001, 2002 and 2003
											2002-2003					2001-2002			2000-2001
											(Taka)					(Taka)			(Taka)
Turn Over (Parts)											28685662					19881713			20155630
	(-) Cost Of Goods Sold										24357301					17693452			16808771
	Profit on Parts										4328361					2188261			3346859
	Turn Over (Overhead)										14236996					9045624			7571569
								7229359					5452742			5182031
	(-) Workshop Overhead:										834227					767664			733482
								810428					488023			429624
	Total										(-)8874014					(-)6708429			(-)6345137
	Profit On Overhead										5362982					2337195			1226432
	Total Profit										9691343					4525456			4573291
	(+) Non Operating Income										275239					482088			—
											9966582					5007544			4573291
	(-) Administrative Expenses										5101082					3756989			3466440
	Net Operative Income										4865500					1250555			1106851
	(-) Provision For Bad Debts										865000					537370			520405
	Net Income After Bad Debts										4000500					713185			586446

 

:

 

Profitability Ratio	2002-2003	2001-2002	2000-2001
Gross Profit Margin	21%	17%	15%
Net Profit Margin	10%	4.7%	2.65%
Return On Assests	8%	5%	2.5%

 

Liquidity Ratio	2002-2003	2001-2002	2000-2001
Current Ratio	1.65	1.85	1.55
Quick Ratio	1.62	1.43	1.52

 

Asset Utilization	2002-2003	2001-2002	2000-2001
Asset Turnover	1.04	0.78	0.82

 

Financial Analysis	2002-2003	2001-2002	2000-2001
Revenues	6%	4%	3%
Gross Profit	12%	6%	4%
Current Asset	51%	21%	44%
Fixed Asset	7%	5%	6%

 

By doing financial analysis it can be
noted that Gross Profit Margin has given a good jump in year 2003 from 2002
& 2001. This indicates that the value of the company is gradually
increasing. Net Profit Margin has also increased in year 2003 compare to 2002
and 2001. Quick ratio and current ratio is almost the same due to the absence
of accounts receivable.

 

From the Financial Analysis it reveals
that from 2001 to 2003 there is a gradual improvement of revenue from 3% to 6%.
Current Asset has got an improvement after the negative drive in year
2001-2002.

 

PROBLEM ANALYSIS

 

Computerized car servicing business is
getting popular and just about everybody seems to be getting into the act.
Failure to capitalize on the opportunities now may well lead to the exit from
the marketplace in the coming years. Some major problems regarding to
RahimAfrooz service center are discussed below:

 

1.
Location & Space constraints:

 

The location of RahimAfrooz is not
suitable to offer service around Dhaka city evenly. The customers of this firm
are mostly concentrated in Gulshan, Banani, Mohakhali and in Motijheel areas
and the rest don’t find it convenient to come here for servicing or repairing
their cars. The total area of this service center is also small relative to its
competitors and space allocation is a major problem. Because of limited space
it cannot provide service to all the customers and can take maximum booking of
20 to 25 cars during the rush hour and this lost sales impact largely due to
customer dissatisfaction.

 

2.
Limited Service offering:

 

RahimAfrooz offers a limited service to
its customers compared to Navana, Power Craft, Packers, Auto Scan and other
competitors. Customers usually prefer those centers that offer a wide variety
of services and it also creates an image of superior quality. Most of the brand
new and reconditioned cars are now having EFI engines and owners of these cars
prefer other Service centers even for repairing other parts not related to
engine repairing.

 

3.
Fake or Non-Genuine Spare Parts:

 

This is another major problem face by
RahimAfrooz. Because some cars come from Toyota, Nissan, and other brands,
which requires spare parts. In Bangla Motor and Dolaikhal area mostly offers low
quality and fake parts which also do not serve the purpose. These fake parts
are relatively cheap than the original parts. So the customers thought that
they are getting the original parts in cheaper price. This wrong perception of
the customers is affecting their image of the company and also the market
share. That’s why they consider it their one of the major problem many customer
prefers to go for manual and cheap servicing.

 

4.
Old Organizational Structure and People

 

This is another major problem they are
facing. RahimAfrooz has a relatively old traditional organizational structure
and management staff. Other than operational problems top management sometimes
takes decision, which seems impractical in connection to the situation. Old
staffs are less efficient as they have traditional experience and they fear to
cope with changing environment. In addition to add value, they creates problem
for the organization.

 

Strategic
Problem

 

Major Problem

 

–
Non-Conformity in Decision Making and
Implementation Phase

 

–
Proper Booking System to optimize the
benefit

 

–
Offer full range of service to attract
more customers

 

Minor Problem

 

–
Need Office location at some suitable
points to serve the volume of customers

 

Financial Problem:

 

Major Problem

 

–
Huge investment is required to solve the
space problem on a permanent basis which is a bit difficult at this stage.

 

Minor Problem

 

–
N/A.

 

Operational Problem:

 

Major Problem

 

–
Replacement requirement of old and
relatively unskilled labor to enhance efficient service

 

–
Lack of variety of service offerings

 

–
Lack of promotional services

 

Minor Problem

 

–
Find sourcing agents to ensure the
availability of genuine sphere for automobiles

 

Summary of Major and
Minor Problems

 

	Major Problem	Minor Problem
Strategic	– Non-Conformity in Decision Making and Implementation Phase. – Proper Booking System to optimize the benefit. – Offer Full range of service to attract more customers. – Need Office location at some suitable points to serve the volume customer.
Financial	– Huge Investment is required to solve the space problems on a permanent basis, which is a bit difficult at this stage.	N/A
Operating	– Lack of Variety in Service Offerings. – Lack of Promotional Services	– Find Sourcing agents to ensure the availability of Genuine Sphere Parts for Automobiles.

 

Solutions:

 

Strategic
Problems

 

Financial Problems

 

Operating
Problems

 

 

Key factors of
consideration

 

From the problem
analysis part it is revealed that RahimAfrooz has some major problems or issues
to deal with. Some of these problems are strategic followed by financial and
operational. As all the problems are major one, necessary steps should be taken
to resolve these tribulations. But any organization’s resources be it financial
or human are limited. As a result, a company has to solve its problems within
the given resources.

Obviously RahimAfrooz
will not be able to give its attention to all the problems at a time. What it
should do is prioritize the problems and take initiatives to resolve them
sequentially within a targeted time frame. Thus, my recommendation is
management should mull over those problems first that are strategically
important to them as well as less time and financial resources are required.
The precedence is given below:

Management should undertake
Alternative # 1 and Alternative # 3 gradually. Although it is time time
consuming and lots of investment is required; that can be solved by taking help
from either financial institutions or from other subsidiaries from within the
group.

Management should also increase
promotional activities too. It has a wide variety of service and new technology
relative to its competitors. So, by proper advertisements or PR Activities they
can also create huge awareness among the customers.

Implementation Plan:

 

Position	Action
GM, AGM in Collaboration with Manager Customer Service	Establishing conformity among staffs and management
GM, Manage Customer Service, Asst. Manager and Service Executive	Establish effective Booking System and Offer Service Varieties.
GM, AGM and Accounts	Choose Location to Build Multi Storied Buildings for service purpose.
GM, AGM and Manager Customer Service	New Recruitment, Training and Downsizing of relatively unskilled labors to enhance service.
Offer New Promotional Services and Create Awareness among the customers for loyalty.

 

Contingency Plan:

Even the best of plans
sometimes do not work. Unforeseeable events may creep up. Management of Rahim
Afrooz Service Center should anticipate any unforeseeable events that may affect
their original plan and thus there should always be contingency plan to back up
the original one.

 

Failed Plan	Contingency Plan
Establishing conformity among staffs and management	Conduct massive survey to find out real cause and effects thus solve the problems.
Establish effective Booking System and Offer Service Varieties.	Run it on trial and error basis unless effective system comes out to solve the problem. In this case we may take consultancy from system experts for error free operation.
Choose Location to Build Multi Storied Buildings for service purpose	If proper location doesn’t match with expected price then stick to the previous location is the only best option.
New Recruitment, Training and Downsizing of relatively unskilled labors to enhance service	If proper candidate doesn’t match with the RahimAfrooz expectation then train the old staffs for continuous improvement thus enhance service.

 

CONCLUSION

Rahim Afrooz Service
Center undoubtedly contributed to the growth and success of Rahim Afrooz
Company since its introduction in 1990.The strategies and policies followed by
the SBU has had strong resemblance with that of company. The functional and
financial performance so far has clearly revealed the success story of the SBU.
Nonetheless, there are some locations and space related problems that should be
overcome sooner than later to remain competitive in car repairing and service
industry in future.

 

BIBLIOGRAPHY

 

–
Boston: Irwin McGraw Hill, 11^th
Edition, 1999

 

–
Milkovich, G and W. Glueck (1985), ‘Personnel Human Resource Management : A
Diagnostic Approach, Plana, TX : Business Publications

 

 

–
Schuler, R.S. (1998), ‘Human Resource Management’, 6^th
Edition, Cincinnati : South Western College Publishing, 1998

 

 

–
Zeithaml, V.A. & M.J. Bitner (2000),
Service Marketing, 2^nd
edition, Mcgraw-Hill, 2000.