Parker Pen Company

In January 1983, Mr. Joseph Kabiling, Cosmos Club’s Business Manager, was left with the decision of whether or not to present his proposal to acquire a point-of-sale equipment at this year’s Finance Committee meeting on capital expenditures. Through the years, the club’s restaurant registered higher than expected losses, compared to any of the club’s revenue-generating services. Thus, he left that this might improve the dining room operations although he was unsure of its viability and adoptability to the club’s environment. Company Background

The Cosmos Club which started in 1878, is a private social club and its purpose was to provide a venue for discussions and an exchange of ideas among individuals who were distinguished in the arts and sciences. Its office is located along Massachusetts Avenue, right at the center of Washington D. C. ’s embassy row. The club had an original membership of ten. But its membership roster had currently reached 9,500; however, only 3,500 were active. To limit its members, the club enforced a policy that applications were accepted only upon the demise or resignation of existing members.

Among its members were several Nobel Prize winners, award-winning writers, known politicians, and other distinguished individuals. There were three committees that governed the operations of the club: 1) the House Committee; 2) the Finance Committee; and 3) the Admissions committee. The House Committee was responsible for the overall operations of the club. It also looked into its facilities and is responsible for supervising the daily activities of the club. The Finance Committee, managed the club’s assets, and reviewed all capital expenditures request.

All proposals for changes in the operating system of the club were reviewed by this committee. The Admissions Committee required each member to pay $500 annual dues. New member were also required to pay an invitation fee of $400 for members over 40 years old, and $350 if below 40 years, and around 100 new members were admitted each year. The Cosmos Club, being a non-profit entity, depended heavily on the dues and initiation fees collected by the Finance Committee to cover its operating expenses.

Service revenue alone was insufficient primarily because the club offered its services at subsidized prices. II – Perspective This case analysis was taken from the view point of the Top Management in deciding what strategy to use and how to implement the strategy to address the root cause of the major issue of the company. III – Statement of the Problem The club offers several revenue-generating services which includes the restaurant. However, the income from the restaurant showed higher losses, compared to any of the club’s revenue generating services.

The root cause of this problem is the unorganized overall order servicing system that is being practiced in the operation of the restaurant. IV – Statement of Objective To improve the operation of the order servicing system in the restaurant and promote honesty and company loyalty among the employees. V – Areas of Consideration SWOT Analysis Strengths: * Has a strong reputation and carry a prestigious company image, having the most distinguished personalities as members. * There is variety in services offered by the club which serves as a venue for discussions and an xchange of ideas among individuals who are famous in the arts and sciences.

The nature of business offers exclusivity among members and promotes privacy in extending facilities and services for the benefit of its distinguished members, which is not commonly offered in other social clubs and makes the club unique; therefore, the company has fewer competitors. * Constantly conducting research studies and development activities which are necessary for decision making and innovation. * The club’s long existence provides a certain amount of prestige to its members.

Weaknesses: * Has a limited source of funds. Being a non-profit entity, funds used to cover the operating expenses depend heavily on collection of dues and initiation fees and service revenues. The club offers its services at subsidized prices; therefore, revenues from services are insufficient. * The company is practicing a poor servicing system in their business operation. * Company loyalty and honestly among the employees are questionable. * Expertise of some employees may not be relevant to their specific function in the organization. Opportunities: Upgrading of facilities and developing a new servicing system that would address the issues in the company’s daily business operations.

Promoting company loyalty among employees by helping the workers acquire new skills that support their advancement to grow out of their jobs, into new ones within the company. * Facilitate more revenue generating services and activities to promote more income. Threats: * Adaptability to the recent developments in technology. * Price competition and economic pressure. * Potential new government regulations which may affect non-profit organizations.

VI – Alternative Courses of Action 1. Hire new employees who are knowledgeable with the ordering system and proper billing operation of the restaurant. Pros: Knowledgeable employees can provide faster service and proper pricing of chits will increase revenue. Cons: Additional cost in hiring new employees. 2. Improve dining room and billing procedure by creating a price-coded list of items in the menu for the day so the pricing of chits is done in an instant upon ordering. Pros: Faster ordering and serving of food.

This will result to a faster billing process and will also address the issue on waitresses sneaking out extra food since the cook will only prepare whatever is ordered referring to the price-code; hence, ensuring an increase of revenue. Cons: Employees who are resistant to change may not easily adopt the new servicing system. 3. Accept Mr. Kabiling’s proposal of using the NCR 2160 Food Service System for the club’s dining room operation and conduct up-training with the current employees to prepare them to adapt to changes in the new servicing system.

Pros: The purchase of the new equipment will improve the restaurant and billing operation and could also facilitate management control since it could also provide a comprehensive and detailed management report on the sales activity, server productivity, inventory status, food cost, and employee time-keeping record which would address all the issues the current restaurant operation. Cons: The new equipment is quite expensive and it only has an estimated life of 5 years. VII – Recommendation

Accept Mr. Kabiling’s proposal of using the NCR 2160 Food Service System for the club’s dining room operation and conduct up-training with the current employees to prepare them to adapt to changes in the new servicing system. This strategy is the most effective from my point of view because this will address the main objective and that is to improve the operation of the order servicing system in the restaurant and promote honesty and company loyalty among the employees.

This strategy will provide faster service and avoid having the customers wait for too long before they could be served. This will also prevent the waitresses from sneaking extra food to their favorite customers, to gain bigger tips. The purchase of the new equipment will make sure that orders are properly priced. The implementation of this strategy will definitely improve the revenue in operating the restaurant. VIII – Action Plan Task: Purchase of the new NCR 2160 Food Service System and implement changes in the new servicing system of the restaurant.

Up-training of employees, faster ordering system, and speed up the billing process) Person Responsible: Mr. Joseph Kabiling should present his proposal to acquire the new equipment to the Finance Committee. The proposal should be approved by the Finance Committee. Mr. Patrick Kruckshank should be responsible for training the current employees to prepare them to adapt to changes with purpose of improving the operation of the restaurant. Time Implementation:

To offset the incurred expenses in the purchase and maintenance of the new equipment, the management should improve or maximize the use of their resources to be able to increase the revenue in operating the restaurant. To do this, the management should first conduct up-training among the employees. This activity should include the introduction of the new purchased equipment. The employees should familiarize themselves with how the equipment works and how it can help them to improve their services. Educating the employees will help them accept the changes in the dining room procedures being introduced.

To address the issue on employee’s honesty and company loyalty, the management should track the individual employee sales, analyze product acceptance, and monitor advertising and sales promotion. The management should also closely monitor the activity report obtained from the new equipment which includes the number of daily transactions; number of service, cashiers, and other employees on duty; average check count; customer count and number of items sold; and the percentage of labor cost to net sales.

This will enable the management to efficiently plan the shift assignments and work load be distributed more equally among employees. This strategy should be fully implemented. If it will be carried out successfully, it will not just offset the cost of purchasing the new equipment, but will also help to significantly increase the revenue in the restaurant operation.