Essay: DMC (business)

DMC needs to identify their main business problems and develop a new strategy along with procedures to address it. Although DMC had grown into a multi-billion dollar company and regularly ranks in the top of the industry, gross margins have decreased steadily between 2010 and 2012. Depicted the Table 1 below, margins ranged from a net income loss of $2.6 billion in 2010, $1.7 billion in 2011, down to just $940 million.
DMC’s senior leadership understands the affect that a change in strategy can have a ripple effect throughout the company. Each manager has become focused solely on his or her department, rather than the company as a whole. This mentality makes the process of change exponentially more difficult despite the understanding that the current strategies are not working. They know that growth is lacking and that in order to survive, DMC must alter course now. Senior leadership needs to determine which market segment to pursue, and how this strategy may or may not affect other areas of the company including, but not limited to: Human Resources, Manufacturing and Distribution. Senior leadership must also be aware that any change in strategy will influence I.T. also. While IT is a broad-minded team willing to offer up technical solutions to advance product development and sales, their budget, as well as other departments has been inhibited over the course of current recession and the inconsistency of returns to the company.
Finance and accounting continue to be apprehensive about cash flow demands and financial activity for major company endeavors. HR understands that any change can have substantial impact, especially on morale. DMC is also dealing with the ever-changing nature in the electronics industry. Responding to market forces has always been difficult due to the nature of the product and large investments required for advancement in technologies. Rising development costs and decreasing margins become immediate priorities. Innovation is not an option, rather it is a requirement for preserving a competitive advantage. Growing market share is a slow process that happens to companies who adapt quickly.
DMC needs new or revised strategies in order to obtain positive results while continuing to understand and adapt to their strategic business problems and industry problems as a whole. DMC should consider increasing sales to wholesale distributors, particularly Value Added Reseller, (VAR) market segments. This particular segment is highly price sensitive, demanding attractive discounts and low delivery costs.
DMC needs to develop a sales process in order to improve selling. Creating a set of in-house sales courses, will stream line the selling process and will empower the sales force. Along with sales, DMC believes that product development continue to be important. The founders thought that an entrepreneurial spirit must begin from scratch, they do not believe that forecasting and planning play an important role in the future of technological industries. Despite Business-to-Consumer (B2C) being and unconventional approach in the industry, DMC should consider this avenue as a way to increase sales. Tom Grant (CEO) comprehends the opportunity of moving into B2C without large amounts of investment spending if they could apportion some programming time to the project.
There are still some worries over the fact that the sales team would have to be greatly involved in a project of this magnitude as well as small orders not be cost effective and would tie up human capital in support for product selection. Nonetheless, the IT team’s understanding of sales on the web was that it could mainly be an automated process, with a built-in digital configurator tool to help customers choose the right parts with minimal human intervention overall. With the B2C online, DMC can truly consider downsizing their wholesale distribution. Not only would this save cash outflow, but likewise avoid the inconsistent demand from VAR. This strategy will enable DMC the ability to react quickly and decisively to market changes and thus save money in the form of unit production. B2C is an ever growing market segment. Utilizing B2C, enables DMC the ability to reach worldwide markets with limitless volumes of customers. This will also allow them to better advertise their products and services without spending additional dollars in the way of print advertising. By decreasing the advertising costs, DMC will save money that can be used that on new product development as well as make up the cost of implementing strategies toward each functional division more effectively. B2C e-commerce creates an easier task of order processing than before. Moreover, DMC also can save manufacturing costs and in turn, use that to make the sales more efficient. One of the largest benefits of B2C e-commerce is that overhead can be decreased or virtually eliminated.
VP of manufacturing Bret Hendricks states, DMC’s manufacturing division consistently does an effective job of cost control and process improvement. Unless they do a major overhaul and or replace some of the equipment, Mr. Hendricks feels his group can’t be any more effective than they are now. Due to the strong competition from foreign merchants who get funding from governmental sources; DMC needs to find a way to make the manufacturing processes more and more effective. In the financial part, DMC has been good discussing deals with the company’s line of credit to generate resource and capital for the company to make horizontal moves, such as acquisitions and mergers. However, the financial team needs to focus on areas that lower general operating expenses, which, in turn, create difficulties for the bottom line.
In conclusion, if DMC is to embark with a major change in strategy, they must consider the expenses of doing so. One of the major changes can be made is that DMC might consider insourcing. The IT division of DMC has been doing well over all. They need to continue as well as to research new Business Intelligence strategies. These strategies should include the development of running the e-commerce site. The IT division could create an incentive program that keeps employees motivated and produce more ideas to help the company achieve greater success.
Recommendation for DMC would be to consider a major change in strategy as well as their manufacturing process, enabling company sales to be more effective. They need to formulate a simple and careful plan since it requires a large investment in time and money that involves nearly every division in the company. DMC also needs to invent and explore more avenues that generate new products and select the right market segments to promote these new products. They should find a way to effectively combat international competition and respond quickly to market change. DMC has problems with market changing and wholesale distributor’s irregular demands, therefore, they should seriously contemplate starting B2C e-commerce. B2C e-commerce will exponentially increase DMC’s business, rewards of e-commerce far exceed the costs and could really change the position of the company.

Source: ChinaStones -

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