Essay: Report On Management Problem Of Amcor." (50 Characters)

About Company

Describe about the Report on Management Problem of Amcor.

Amcor is a leading company in the industry of packaging. It delivers packaging solutions to numerous manufacturing units, like, health care, personal care, food & beverages, home & tobacco. The company has its existence in more than 40 countries, and it has been associated with more than 29000 people with itself. Social, Economic & Environmental Aspect undertaken at Amcor are initiatives, Smarter- which tackles the problem of global food wastage by preserving the food for longer durations. Lighter- 26% reduction is made in the green house gas emissions, 23% reduction in the consumption of energy and raw material is saved approximately 25% .Safer – delivery of medicines under harsh conditions to the extreme areas of Sub-Saharan Africa. (Amcor at a Glance, 2016).

Amcor has a global management team since it operates in domestic as well as international market (Amcor Global Management Team, 2016). The company has six rigid plastics plants in Venezuela, which have been impacted due to deteriorating economic conditions of the country. The company plans to close down this plant because the inflation is souring high and the variability to acquire US dollar to import raw materials is increasing and this is causing Amcor $350 million charge against earnings. The company also plans to restructure the flexible segment which includes tobacco packaging, along with closing several plants in the developed market. The company plans to undertake proactive approach for the business to eliminate the risk and focus on the business opportunities that the emerging markets have to offer. Restricting of the flexible and tobacco packaging is done to align the firm with customer needs as well as market growth opportunities (Johnson, 2016).

Q1 – What can management at Amcor do to survive the loss?

The management at Amcor has decided to shut down its plants situated at Venezuela due to the deteriorating economic conditions of the country. The economic woes in Venezuela like high inflation is causing Amcor take a $350 million charge against its earnings. The company decided to shut these plants and adopt a proactive approach and take conservative charge of accounting for the business. The company plans to eliminate the risk and wants to focus on the opportunities that the emerging markets and the Latin American region has to offer. The co-workers and customers located in the region where the plants are being shut, the company plans to support them. Exploring the boundless potential of the emerging markets and utilizing their resources in investing with a view of more than 20 years the company believes that the emerging markets would be able to deliver more value to them (Amcor update on Venezuelan operations. 2016).

Management Problems at Amcor

Q2- what is the strategy planned by the management?

The strategy planned by the management at Amcor is to enter the emerging markets that will deliver more value to them and to align the firm’s capacity to deliver with the market demands and customer needs. The firm is of the view that for the year ended 30 June 2017, the PBIT are expected to be negatively impacted by approximately $40 million and PAT would be affected $ 20 million negatively for the same. To cope with this investing in emerging markets which are attractive business opportunities with a long term view is the firm’s strategy (Brocklehurst, 2016).

Q3 what organizational changes are desired and what are its benefits?

The restructuring of the flexible segment would include streamlining the organization especially in Europe. The main objective is to reduce complexity by improving delivery speed, increasing customer focus and especially by reducing overhead costs. The firm has to align its supply according the needs of the customer and growth opportunities in the market (Amcor shares hammered on Venezuela write-off, 2016).

Research Methodology aims give importance of the research work undertaken, its plan and methods undertaken to conduct the research work. What are the problems and the

Hypothesis? (Research Methodology, 2016).

Data collection states the methods and techniques, sampling designs and scales of the research work.

Data presentation shows data processing, analysis and representation of data.

The report is concluded with Report writing which shows substance of the report and its presentation.

Importance – This research is undertaken to analyze the management problem at Amcor limited. It focuses on closing of the plant situated at Venezuela and also lays emphasis on the plans of the company in restricting its flexible segment of the market.

Research Problem or the Hypothesis –

Statement - Economic conditions of the country leads to closing of Venezuela plant.

Alternative hypothesis- the economic conditions of the country did not lead to closing of the plant.

Null hypothesis- the economic conditions of the country did lead to closing of the plant.

Independent variables- Economic conditions of the country such as inflation, reduction of domestic demand, currency exchange rate, reduction in the demand of the consumer goods leading to reduction of manufacturing, fall in the investments all of this lead to the fall in the economic growth of the country.

Dependent variable – shutting down of the plant is assumed to be a dependent variable during the research. The company had to shut down its plant due to low operations and heavy losses.

Research Questions

To test the hypothesis we have taken the economy data of Venezuela (Venezuela Economic Outlook, 2016).

Through this table we have analyzed that the population of the country continue to rise, but the economic growth of the country has been falling down since the year 2013. The domestic demand for goods has decreased and also exports and imports of the country have fell. Due to low investments the manufacturing sector has also faced turn down. The inflation rate has risen affecting the demands for consumer goods.

Hypothesis testing –

To test the hypotheses we have done regression analysis, which is a statistical process that estimates the relationship among variables.

The significance value is more than the cut off value (0.05) so we accept the null hypothesis and reject the alternative hypothesis.

Another analysis undertaken is correlation analysis which analyses the strength of relationship between the two or more variable.

After the analysis we accept the null hypothesis and reject the alternative hypothesis. Both the analysis clearly shows that the economic conditions of the country were the main cause in closing of the plant.

Sourcing the data- the data was sourced from secondary sources.

To get the figures of Venezuela, data was retrieved from focus economics.

Analyzing the findings

Critical analysis is done through regression and correlation analysis states that the Venezuela plant was shut down due to the economic conditions of the country. The factors like inflation, low demand of consumer goods, and fall in investments leading to fall in manufacturing sector have played a significant role in closing of the plant. All these factors caused Amcor $350 million charge against earnings (Richardson, 2016).

Management at Amcor should plan ahead to enter the potential markets of developing countries. They should explore the opportunities and should aim to align the market supply with demands and customer needs. The opportunities in the developing market will be of more value than the plants running in losses. Setting up of new plants would require additional cost; the company should bear that cost instead of bearing losses at an unfavorable plant. They should try to cut down on the overhead costs and improve the supply speed to the market (Amcor plans Restructure, 2016).

The management should identify the problem, which in the case of Amcor Limited, is closing of the Venezuela plant due to the deteriorating economic conditions of the country. The country has failed to control its inflation and due to this the economic development has been hampered to such an extent that the investments, manufacturing, exports and imports have been down to negative. Amcor operates 6 plants in the country and had to take $350 million charge against its earnings. This posed a question for the company, that is it a wise option for the company to continue its operations in that country. After bearing financial losses, the company decided to shut down its operations in that region and instead invest with a long term view in the emerging markets including that of the Latin American region (Amcor’s Shares Drop 12.3% on Venezuelan Crisis, 2016).  The company plans on restructuring its flexible segment with the view of streamlining the organization especially in Europe. This would help the company in bringing down the overhead costs, improving their supply to the market and in improving their customer relations. The company plans to capture the opportunities that the markets of the developing countries provide them rather than operating a plant in an economically unstable country (Amcor to cut costs in Flexibles, 2016).

Conclusion

The research aimed at finding management problems at Amcor. It was Amcor’s strategy to close the plant due to unfavorable economic conditions and invest in the market of developing countries with streamlining its operations which would lead to reducing overheads costs and improving delivery speed. The developing market seemed to add more value than bearing the loss in an economically instable country. The company has already taken $350 million on its earnings from the plant situated at Venezuela, the next logical step for the company considering that the country’s economic growth has been stagnant and continuously deteriorating is to close its operations and rather invest with a long term view in the countries that have the potential market.

References

Amcor at a Glance. 2016. Retrieved 21 September 2016. From https://www.amcor.com/investor-relations/about-us

Amcor Global Management Team, 2016. Retrieved 21 September 2016. From https://www.amcor.com/about_us/company/about_smt

Amcor plans restructure. (2009). Retrieved 21 September 2016. From https://www.smh.com.au/business/amcor-plans-restructure-20091211-kohw.html

Amcor shares hammered on Venezuela write-off. (2016). Retrieved 21 September 2016. From https://www.theaustralian.com.au/business/companies/amcor-shares-hammered-on-venezuela-writeoff/news-story/7364800eb1c4b34e9e5beb4b9cd064d1

Amcor to cut costs in Flexibles. (2016). the courier mail. Retrieved 21 September 2016. From https://www.couriermail.com.au/business/breaking-news/amcor-to-cut-costs-in-flexibles/news-story/aeef9d5743956fa37fca09a94ed901af

Amcor update on Venezuelan operations. 2016. Retrieved 21 September 2016. From https://www.amcor.com/about_us/media_centre/news/amcor-update-on-venezuelan-operations

Amcor’s Shares Drop 12.3% on Venezuelan Crisis. (2016). Retrieved 21 September 2016. https://www.moneymorning.com.au/20160610/amcors-shares-drop-12-percent-venezuelan-crisis-cw.html

Brocklehurst, E. (10^th June 2016). Venezuela Divides Opinion on Amcor. Fnarena. Retrieved 21 September 2016. From https://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=311A9C43-E3EF-2C2D-926C78733DF0FCE9

Johnson, J. (9^th June 2016). Amcor signals changes for flexible packaging; problems with Venezuela unit. Plasticnews. . Retrieved 21 September 2016. From https://www.plasticsnews.com/article/20160609/NEWS/160609782/amcor-signals-changes-for-flexible-packaging-problems-with-venezuela.

Research Methodology. (2016) Retrieved 21 September 2016. From https://www.businessdictionary.com/definition/research-methodology.html

Richardson, T. (9^th June, 2016). Amcor Limited shares sent packing on Venezuelan write downs. Retrieved 21 September 2016. From https://www.fool.com.au/2016/06/09/amcor-limited-shares-sent-packing-on-venezuelan-write-downs/

Venezuela Economic Outlook. (2016). Retrieved 21 September 2016. From https://www.focus-economics.com/countries/venezuela