Case Study 3: Soled Out?

Read the case study below and answer the questions that follow.

Background

T-Sole Ltd produce fashion boots and industrial footwear, which are sold under the brand name of MDs. This footwear brand can only be bought in specialist retail outlets throughout the UK or from their own shop, which is situated in the heart of London.

During the mid 1980s to the mid 1990s the company achieved huge successes. Their footwear range was particularly popular with the student segment of the market, because of their durability. Sales to other segments of the market were also increasing, as were their profits.

The managers of the company decided to expand their factory to cope with this increased demand, which also meant doubling their workforce.

The present situation

Their factory is situated in a rural area approximately 200 miles from their London store. New employees were recruited from the locality and are given one days training in the production process when they first started. Management introduced a piecework rate, which means employees are paid for each item of footwear they produce. The managers believed this system is an incentive to increasing productivity. However, the new recruits made many mistakes and a lot of the footwear produced had to be rejected.

The experienced workers started rushing their work in order to increase their wages and this led to an increased number of consumer complaints regarding faulty or poor quality goods. Added to this was the increased competition from trainer manufacturers. The MDs brand saw its sales figures drop by 50 per cent within three years, which was a huge loss of market share.

Two-thirds of the workforce have now been made redundant. Those remaining feel very insecure and are unhappy with their current working conditions. Production has been limited, which means they are losing out on wages. The equipment they use is constantly breaking down, leading to further time lost for which they are not being paid.

The remaining workers have asked the management to change their payment system to a guaranteed weekly wage for the hours they work. They have threatened to withdraw their labour if conditions do not improve.

Options for the future

The managers of T-Sole Ltd have discussed the following options.

1. Change the payment system for the employees and improve maintenance procedures on the machinery. This would eat into their already reduced profits and would not be popular with the shareholders.

2. Keep the present payment system for the employees and instead move into the casual footwear range and hope that the employees will accept the change. This would involve some modification and upgrading of existing machinery. Finance could be a problem.

3. Have a combination of both options. Give the employees a guaranteed wage and diversify into the casual footwear market.

After careful consideration the management choose Option 3.

Soled Out?: questions

1. Challenges for business can come from internal and/or external pressures.

Explain two such pressures affecting the current situation of

T-Sole Ltd. (4)

2. Explain the stages in the product life cycle of the MDs footwear

brand and state which stage it is now at. (8)

3. Employee relations at T-Sole Ltd suffered because of the new payment system. Explain what the Human Resources Department of T-Sole Ltd could have done to avoid these problems. (4)

4. In todays competitive markets quality products are extremely important. Explain what measures T-Sole Ltd could have introduced

to ensure a high quality product reached the consumer. (4)

(20)