This week in our Analysis of Business Problems (ABP), we analysed two case studies, one of which was local (based in Eastern Nigeria) and another was international (based in Spain). The two case studies were quite interesting. The first case was about Mega Mall which had many departments, including a high-end grocery department that sold premium goods. The managers of the mall decided to add a new department to the mall- Frozen Foods Department. The intent was to drive more sales volume to the preexisting grocery department and other departments in the mall. Despite this move, the owners discovered that they were incurring losses in the grocery and food to high indirect expenses and prorated expenses. We were tasked to analyse the situation and with the help of data from the case, decide which alternative to take. Either to continue operations of either the groceries or frozen foods departments or to close the departments.
Another case we studied was a leading pharmaceutical company in Spain that was losing money on one of its well-known products despite having a 20% increase in the same year. The product is used for treatment and prevention of Diaper Dermatitis (Diaper rash) mainly for babies and the elderly. This product was so well-known that it was sold in 98% of Spanish pharmacies. However, the manufacturing cost had been increased leading to a yearly decline in profitability for the company, and to make matters worse it was expected to increase at an annual rate of 3%.
As a result, a request was made to the Ministry of Health 6 years before increasing its selling price but unfortunately was rejected. This is because the product prices were regulated under the system where the government wanted to reduce public spending and citizens were entitled to substantial discounts. The manager and team needed to take immediate action for the next steps to take concerning this product. The few options available in the case to them were:
- Continue selling the product and absorb its losses.
- To make another request to the Ministry of Health and Hope it would be approved.
- Leave the system and be free to increase the selling price.
None of these options were without risk, so we needed to look critically at the data to determine the best decision that could be made. However, the first thing we needed to do was identify the problem. After writing the problem statement, we looked for our objective; What would success look like for the company? Going further, we looked at our alternatives and developed the criteria needed for each. Finally, after analysing the criteria we were able to make a decision on which alternative would work best.
At this point, you may be wondering: WHAT DECISION WAS FINALLY MADE? well in ABP, it is more about the systematic process you take to solving problems than just making a decision. It is the thought that counts. Once you understand the process, it can be applied to any situation you find yourself in.
#MMBA5
