The main purpose of this study conducted in Intersco Asia Pacific is to examine the past, present and projected future operation and viability of Intersco Asia Pacific having split from Intersco Group and established itself as an individual entity in the cosmetic and skincare industry. The major purposes addressed by this chapter are to describe the methodology that was used in data collection, in this study, explain the choosing of the target group of the research methodology, and describe the procedure used to conduct research and providing an explanation for the data collected this chapter seeks to introduce how the research methodology employed to conduct this research was important in both data collection and development of the theory.
First and foremost it is relevant to point out that Grounded Theory Methodology was considered during the collection of data for this study. Grounded Theory Methodology (GMT) advocates for the creation of new theories that consist of interrelated concepts rather than testing the already existing theories. However, a study that is guided by GTM is not designed to seek representativeness in order to achieve generalisability, but instead, it aims to explain and in some instances, predict phenomena, all based on the collected empirical data. Data collection typically encompasses in-depth interviews but sometimes it includes other forms of data collection such as existing researched literature and sometimes qualitative data. In this study, the major form of data collection was interviews.
The study utilized interviews as the appropriate mode of data collection. As it is widely accepted, interviews provide a fact-finding opportunity which consequently leads to adequate provision of information, thus facilitating proper interpretations of findings. Interviews provide a one-on-one basis of data collection with the interviewee that other forms of data collection methods like questionnaires would fail to capture.
The researcher chose to use this form of data collection considering the need to acquire first hand information from the interviewees.
The study was conducted using managers of Intersco Asia Pacific as the interviewees for this study. The main reason why managers were chosen was because they knew every bit of the company, from top to bottom. Following the split from Intersco Group, the opposing managers came together and formed Intersco Asia Pacific. Therefore, they were present from the very first day Intersco Asia Pacific became a legal entity. Another reason why managers were selected as the target group for interviews was because they had spent more time in Intersco Asia Pacific than any other employee there. Their perspective towards the company was unparalleled since they were sticking their reputation on Intersco Asia Pacific.
The first manager to be interviewed during the study was Mrs. Stephanie Tan who was the commercial director in the sales and marketing, customer service and packaging department. She described that the main reasons for the decrease in sales volumes over the previous two years was because customers were having problems on their end, financially. Another reason for the continuous decline in sales was the change in ownership of Red Earth that had been a valuable customer for Intersco Asia Pacific. The new owners seemed to have changed suppliers for their products.
Mr. Phua, the operation’s manager, on the other hand, was asked the same question and his response was quite different. He stated that the lack of innovation was derailing the company in achieving new status as a market leader. He also cited the fact that their supplier from Italy was producing goods that were more suited for the European rather than the Asian market. When Ms. Cheang was interviewed she stated that customers were unable to work with the standards from Italy. They encountered some problems as the delayed packaging from china and Taiwan hence taking much time to sample again. Mr. WC. Chang stated that the direct labor together with rental utilities caused decrease in sale volumes because the customers prefer minimum price but good quality goods. According to Ms. Paige Lim, competitors from Korea, China, Thailand and Indonesia contributed to the decrease.
Ms. Irene Ho, the HR and Admin manager, when asked about what contributed to the decrease in sales volumes in Intersco Asia Pacific, she stated that the overall economic situation in Asia was to blame. The increase in salaries, according to the minimum wage law was considered an increase in expenditure for Intersco Asia Pacific. The law also restricted foreign workers who had been valuable input in the company.
Puan Azlinda Abdul Aziz, the quality assurance manager, said that to her R;D was the most valuable. The market requires quality products and, therefore, expectations will continue to get higher every other time. Mr. TK Young the finance manager reiterated that the product Intersco Asia Pacific was not suitable for the customers the company was serving. The bulk products imported from Italy were not suitable for making cheaper products. He stressed the point that, the current market required products that were pocket friendly.
Intersco Asia Pacific suffered problems in profitability whereby it continues to decline with the years of its existence. Mrs. Stephanie Tan the commercial director in the sales and marketing, customer service and packaging department acknowledged this problem and stated that it was due to two reasons. The first one was the field fee that Intersco Asia Pacific had to incur. In the previous year, the fee had increased by 3% while the pricing of the product continued to do poorly in the market. The second reason was operation, whereby she and Mr. Phua cited the increase in operational costs while the pricing of products remained the same in the market.
When asked about the same question of profitability, Ms. Cheang pointed out the lack of utilization of products in the warehouse. Ms. Wang,the quality control manager, accepted the fact that the failure to utilize materials in the warehouse cost the company a great deal of profits. On the other hand, Ms. WC Chang the production manager pointed a few reasons that contributed to the decline in profitability this included direct labor, rental, utilities, packaging and infrastructure. He said that the customers preferred minimum price and good quality. According to Ms. Paige Linn, the assistant sales and marketing manager, there was no decline in profitability in Intersco Asia Pacific, but instead the company was only getting better.
Mrs. Stephanie Tan, the commercial director in the sales and marketing, customer service and packaging department was asked to give her reason for the increase in annual costs for Intersco Asic Pacific. According to her, the increase in rent for the Intersco Asic Pacific offices of 100,000 was the major kick. Also, the minimum wages law which stipulated an increase from 500 to 900 cost Intersco Asic Pacific a great deal of revenue. This was an increase of 30% not forgetting the EPF which also cost the company the revenue. When the operations manager, Mr. Phua was asked about the same incident, he also cited rental prices as well as over capacity of Intersco Asic Pacific. He specifically cited the fact that there were 9 guards taking care of a single location.
Ms. Cheang, the customer service manager and Ms Wong the quality control manager had a different opinion regarding the reasons for increase in annual costs for Intersco Asic Pacific. Customers were imposing penalties to the company because of delayed delivery of products because they were either being shipped or the freight charges had caused a delay in delivery of goods. The field fee for Intersco Asia Pacific needed to be decreased such that the little products that were coming in for Intersco Asia Pacific could be accommodated. The lead time for products from Italy was causing the company too many problems to begin with much less an increase in annual costs.
The production manager Mr. WC Chang, when asked about the increase in annual costs for Intersco Asia Pacific, he cited the problem of capacity as the main hindrance. Intersco Asia Pacific was not performing to the required capacity mainly because of its floor space and the resources it had to import. The company was not able to perform as it was required because of the financial constraints it was undergoing.
Ms. Paige Lim the assistant and marketing manger was quick to respond on the issue stating that packaging cost had increased over the years. The cost of acquiring packaging materials had significantly gone up yet the price of the products could not be reduced to fill in this gap. The problem of suppliers had become relevant in terms of revenue spent by Intersco Asia Pacific.
Both the Italian and Swiss suppliers would sometimes supply in bulk and sometimes fail to supply as many products as were required by Intersco Asic Pacific Ms. Irene Ho, the human resource and admin manager cited the minimum retirement age being too low. For example in 2013, the minimum retirement age was between 55 and 60. This cost the company more revenue in terms of pension schemes and retirement benefits. Ms. Irene also said that the costs incurred by the company in terms of medical and health expenses for its employees was increasing by the year, given that the number of employees close to retirement was getting bigger by the year.
Puan Azlinda Abdul Aziz, the quality control manager, when asked about the reasons for increase in annual costs for Intersco Asia Pacific cited the production process. The extra costs incurred in freight charges had proven to be sizable primarily because this problem was occurring often, yet the products were more suited for another market. On the other hand, the resending and reworking of products increased the time spent waiting by the customer, thus causing a potential risk of losing the customer. The finance manager, Mr. TK Yong was adamant to say the customer’s demand was not meeting the MOQ. This was a clear indication that the forecasting done by Intersco Asia Pacific personnel was inaccurate. The prediction was that the company would make more sales in coming years and the demand for its products would continue to grow, with minor setbacks. iv. Causes of obsolete inventory.
According to the commercial director in the sales and marketing, customer service and packaging department, Mrs. Stephanie Tan, the main cause of having obsolete products in the Intersco Asia Pacific inventory was the buying of bulk from Italy. On the other hand, Swiss suppliers use the Minimum Order Quantity (MOQ) for packaging Intersco Asia Pacific products. Mr. Phua, the operations manager at Intersco Asia Pacific also agrees with the point that MOQ has been a cause of having obsolete products in the Intersco Asia Pacific inventory. He also brought up a valuable point that the company was chasing customers trying to convince them to buy the little products that the company has or else the other batches would be more expensive due to MOQ purchases again.
Ms. Cheang, the customer service manager had something to say about the level of obsolete products in Intersco Asia Pacific. Her’s was an optimistic view whereby she does not perceive the non-selling products as obsolete, but an opportunity to venture into another market. She stated that the obsolete products were not totally useless because there were some ways that they could be used instead of having them lie around in the stores. The production manager, Mr. WC Chang cited MOQ as a possible cause of Intersco Asia Pacific having obsolete products. He also stated that there are customers who purchase products from Intersco Asia Pacific but never come around to collect them.
The Assistant sales and marketing manager, Ms. Paige Linn brought some interesting points to the interview. She said that sometimes the company, based on the forecast that sometimes proves to be unreliable orders more products. Sometimes, trends in the market can be misleading and so the company sometimes buys lots of like products with the hope that their demand shall go up.
Causes of flat cash flow
The commercial director in the sales and marketing, customer service and packaging department Mrs. Stephanie Tan made a point to elaborately answer this question. Intersco Asia Pacific was facing problems of cash flow over the years and there are several factors that can be pin-pointed to indicate the reason and source. For instance, the pay up capital was always kept at a minimum and so the company did not have much to go on in terms of conducting huge transactions.
Moreover, all purchases were done in cash and in light of this point, Mrs. Tan does not see it as having negative cash flow. She gave an example of 2009 whereby Intersco Asia Pacific owed 9 million to Italy and 3 million to other suppliers. However, during the time of the interview, Italy was owed only 0.5 million while customers owed Intersco Asia Pacific 7 million. To crown it all up, the cash on hand was 2 million for Intersco Asia Pacific, which showed that the company did not have negative cash flow. Mr. Phua, the operations manager cited MOQ as the major cause of flat cash flow in Intersco Asia Pacific but did not explain further on this.
How customer can increase their purchases.
According to Mrs. Stephanie Tan, maintenance of good customer service, provision of quality products within an acceptable lead time, innovative technology, competitive pricing and the search of new customers and new markets should be top of Intersco Asia Pacific’s agenda. Mr. Phua agreed that the facilities at the company were outdated and needed modernization if not replacement. Ms. Cheang, the customer service manager pointed that in order for Intersco Asia Pacific customers to return for more products, it was paramount that the pricing becomes competitive. She also said that service delivery levels for Intersco Asia Pacific had to improve if any progress was to be made in any manner.
Ms. Wong agreed that there was need for improvement in pricing as well as lead time for products so that customers are not disappointed due to the failure or lateness in deliver of products that they have already purchased or ordered from Intersco Asia Pacific.
According to the production manager, Mr. WC Chang, the issue of service delivery is unquestionable. Without proper service, the company would lose a huge piece of it customer base which would be a huge blow to the company. Ms. Linn, stressed the point that contact with customers had to be constant in order for them to feel assured that the company was keen on the kind of products they sold and the satisfactory level in the market. Mr. Yong, on the other hand, stated that there was a lack in relationship management between Intersco Asia Pacific and the customers. He added that S;M was not nearly good enough for both the company and the customers. If the customers were to remain loyal to Intersco Asia Pacific, then the system had to be tweaked a little.
Mrs. Tan suggested that for Intersco Asia Pacific to acquire new clients there was a need for exhibitors and meetings whereby the company would showcase its products to potential clients. Moreover, if potential clients would be give free samples to try out during market research, and then there would be a chance of the potential clients becoming long term clients of Intersco Asia Pacific. In addition, contacting of locals would be a preferable deal whereby they would provide opinions for Intersco Asia Pacific’s products as well as provide information on market changes. The operations manager, Mr. Phua pointed out that exploiting new region, provision of halal was very important for the company. This would make the company more appealing to customers of Islamic religion, who are the major targets as customers for Intersco Asia Pacific products.
Ms. Cheang stated that having a Halal logo would greatly increase the credibility of the company particularly because there were a dwindling number of customers over the years. Ms. Linn proposed that a search online would greatly increase the number of customers served by Intersco Asia Pacific. Having a website that would advertise these products would go a long way in attracting new customers. The concept of halal was also approved be Ms. Linn.
Competing with direct competitors
The cosmetics industry can be brutal at times, as was stated by Mrs. Tan, and having a large number of competitors meant that Intersco Asia Pacific would have to stand out. With local, Italian, Swiss, Thai and Korean as well as Chinese competitors would be a tall order for Intersco Asia Pacific.
Decreasing cost ration vs. Sales Volume
For this concept, Mrs. Tan suggested that a decrease in the cost of materials purchased, enhancement of local R;D, improvement of technology would go a long way in reducing cost ratio. On the other hand, even though the packaging cost was not easy to decrease, it should be minimized, otherwise, the purchase of mold would better the cost of packaging, which would in turn increase sales and reduce the cost of packaging. The operations manager suggested that I order to keep both the sales volume and the cost ratios at a minimum, and then more negotiating power was needed so that Intersco Asia Pacific could acquire products at a cheaper price.
Activities as departmental heads that would increase annual sales volumes.
According to the commercial director in the sales and marketing, customer service and packaging department, in order to increase sales, Mrs. Tan would propose the increase in the number of new customers just like the Chinese have formed affiliation with other countries. Diversification in terms of starting a new business unit, perhaps introducing a new product would suit the company in terms of increasing sales. The Operations manager, Mr. Phua suggested customer education to increase sales volumes whereby they would be informed on both advancements in the hardware and software bit of the business. This would in turn make them happier since they would be up-to-date on new products that sellers were offering.
Improving on product development time and the communication between IAP and the customer was recommended by Ms.
Cheang, the customer service manager. She also noted that because different customers have different needs, she would conduct customer analysis to figure out what the customers’ preferences were. The production manager, Mr. WC Chang stated that if it were up to him, then he would ensure that the company enlisted as little labor as possible, made sure that wastage was kept at a minimum, and there was controlled consumer usage.
On the other hand, Ms. Linn’s thoughts drifted towards forming a bigger customer base that would provide an eminent source of income for the company. She would also form a strong team that would ensure that customers remained happy and satisfied with products provided by Intersco Asia Pacific. Ms. Irene Ho, the HR; Administration manager was adamant on having most of the work being done manually. The costs of developing, improving and repairing technological gadgets was too much. According to her, online banking would greatly improve customer reliance because she would propose opening up of new branches in new locations thus facilitating ease of access for customers.
The finance manager had the final say whereby he stated that customers would lean more on Intersco Asia Pacific because of ISO 9000. While saying this, he meant that his plans would be those of social accountability SA 8000, which would translate to more sales for Intersco Asia Pacific.
, market forces notwithstanding.