Overall performance of Better Beauty, Inc was not good, one reason being that the company was missing its cost improvements target by substantial margins.

One major Cost Improvement Program, known as the A53 project, had not only failed to provide the projected savings, but according to the company controller, it might end up costing the firm money.

According to Mr. Williams, the company had problems with new assemblies in toiletries, the start up of their lean management initiative on the plant floor, and the new formulations for their latest shampoos.

If Mr. Williams and his team cannot do something to reverse the evident patterns of failure, they will have no chance of achieving the company's goals.

After change of management, Better Beauty, Inc new management embarked on adopting a new strategy. At first the change in strategy looked promising, but then the company reported operating losses in 2006-2008

While the 1990s had witnessed robust growth, the recent industrial trends had not been as favorable. Real shipments had declined, and price competition had decreased.

Demand for personal care items, considered to be discretionary purchase, was hurt by the sluggish economic activity in the 2008-2012 periods, as well as by the secular changes in the product markets.

The overall softening of consumer demand for cosmetics and fragrances resulted in slow down in new product development activity through out the industry.

BBI and the other firms in the fragrance industry had used fluorocarbons as propellants almost exclusively up until in the mid 1970s, when fluorocarbons were banned by the U.S. government because of concerns about their destroying the ozone layer of the atmosphere. The propellant suppliers who had relied on fluorocarbons as their major sources of revenues were severely affected by the ban.

Right from the start the A-53 project ran into several serious problems. One problem was production delay.

1. Problems:

Planing and budgeting:

• Long range planning was done informally at the corporation level only and were not communicated to all funtional managers.
• Performance reviews were conducted on a monthly basic

Capital Budgeting:

• The project is justified based on a two-year payback, it is very short term and was not not based on NPV
• Capital budgeting reviews took place in mid-September, it is the middle of budget cycle.
• There is no consideration of risk

Incentives compensation:

• Incentive compensation was provided for only director level and above, it was not paid to personal below the director level.
• Bonus pool was established as a pre-established percentage of corporate net income, not based on manager's peformance.
• The evaluations of performance were done subjectively

Cost production program:

• The CIP/CAP were expected to achieve a one-year payback, it is very short term
• No cost improvement targets by substantial margins.

Questions: Why the company couldnt succeed with their cost improvement program? Recommendations for these problems? How to implement these recommendation? based on control system costs and what kind of control can be used. for example what action control, result control, personal control can be done?

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The company Better Beauty Inc faced challenges in achieving success with their cost improvement program due to several reasons 1 Problems with new ass... View the full answer