Module Name: Business Communication

OPEN UNIVERSITY MALAYSIA

FACULTY OF BUSINESS AND MANAGEMENT

BBKN 3103

BUSINESS COMMUNICATION

BBA B8: GROUP ASSIGNMENT

ALI HAMZA (S11722600)

ASIYATH SUBAATH (S11722597)

ADAM KHALEEL (S10722481)

HUSSAIN FAISAL (S11722612)

IBRAHIM RAFEEU (S11722598)

LECTURER: MOHAMED  AZEEM HAROON

LERNING CENTER: VILLA COLLEGE

TRIMISTER: JANUARY 2012

Date: 10th March 2012

The Board of Directors

Male’ Brothers plc.

Fini magu Male’, 202 Filaa Building

Dear Members of the Board of Directors:

We are writing to you on behalf of Male’ Brothers PLC executive management team. This letter is to inform you and get an approval regarding the decision we made to survive the current economic crisis.

In the meeting held on 27th of February 2012 to take an action to survive the economic crisis, we the executive board recommends you to downsize the company. We discussed a number of options on series of meetings and the decision of downsizing was selected from the last meeting, in which sale of Addu canned tuna production and downsizing was discussed as the final two options.

Based on the financial position of the company, the past years income statements shows that profits of the company was steadily declined year by year. It shows that in 2008 the company total profit was Rf 1,300,000. However in 2011 it has been decreased to nearly Rf 400,000. When we analyze the different departments profit, Male’ Brother canned tuna production show the lowest income generated department.  

In addition, when we studies the situation in year 2010 and 2011 Male’ Brother canned tuna production department experienced a huge loss. In 2011 it was approximately 5.5 lacks Rufiyaa. The whole company fore-casted profit and loss account for the year 2012 shows a loss. Therefore to cope with this crisis, we need to cut down our overheads and improve our cash flow.

We would like to emphasize that 70 percent of our budgeted expenditure is allocated to recurring expenses. From the recurrent expenses 40 percent of the budgeted expenses are assigned to employees’ salaries and incentives. Nearly 5.1 million Ruffyia we spent on employee’s salary.

When we downsize the company it’s estimated to recover 1.53 million Rufiyaa from the budgeted employee’s salary and incentives. Total annual recurrent expenses can be minimized from 70 percent to 45 percent. So at the end of the year, the company will generate profit of 250 Thousand Rufiyaa instead of loss in 2012.

At present we have total of 210 staffs which comprises 102 foreign employees. When we go ahead with a downsizing plan we can lay off up to 30 percent which is 63 employees. We planned to lay off 42 foreign employees and 21 local employees. In addition we have decided to reduce more supervisory level employees compared to subordinates. We will also try to retain more skilled and technical staffs, so there will be less impact on production of the company.

After redeeming 30 percent of employees, we will restructure the company while giving more importance on production department. Currently we have one manager and two assistant managers in each production department. After the restructure each department will be headed with one manager.

After implementing these strategies, we will be able to reduce the total incentives and salary by 1.2 Million Rufiyaa.  Often downsizing cause disputes among employees, but as we planned to lay-off more foreign workers there will be fewer disputes among the employees. Moreover we have decided that we will give 3 month basic salary to the redundant employees and counseling would be provided to decrease any de-motivation situation that may arise.

We are currently operating at our maximum capacity of 3000 units per week.  In production department there are 120 staffs, out of which 75% staffs are directly involved in the production and 25% staffs are at supervisory and administrative level.

Due to the economic crisis, the current demand for our products has fallen by 34 percent. The economic crisis would reduce the personal consumption rate and this would also reduce the demand for our products and we will have an excess supply if we produce at maximum capacity. Operating at maximum capacity would increase the cost of production such as warehousing cost, electricity and other operational costs.

When we choose downsizing we would produce at our current demand of 1980 units per week. We have decided to decrease current working hours of production staffs from 8 hours to 6 hours, which will minimize operation cost. Maintaining re-order level of raw materials at current production level would reduce cost of holding stock. Also we have decided to lease out the extra production machines to other companies to generate revenue from it.

When we go ahead with downsizing plan, to assist this plan the marketing and research department has decided, not to further investment in new products. Furthermore we can also reduce marketing cost by decreasing advertisements and promotional activities. Furthermore to assist this plan the marketing and research department has decided, not to further investment in new products. In addition we can also reduce marketing cost by decreasing advertisements and promotional activities.

In the strategic plan for year 2012 we have included to conduct a consultancy program that will increase the quality of the products. It is budget to spend 40 thousand for 2 foreign consultants. To reduce expenditure, marketing and research department has decided discontinue this program. As it is believed that, downsizing will have a negative impact on our goodwill. So in order to reduce the negative impact we have decided to improve the quality of our customer service as well as our after sales service to maintain our loyal customer.

Finally, if we successfully implement this downsizing plan, in 2012 we are expecting to recover 1.8 million Rufiyaa. We also like to highlight that the decisions of downsizing will cope the current demand of products. In addition   to this we assure you, there will not be major impact on the employee’s motivation and the goodwill of the company.

Furthermore we would like to highlight that during an economic crisis world’s most of the well-known organizations preferred to downsize. According to the management of these organizations it shows positive outcomes on their organizations.

So we are expecting to get an approval as soon as possible to implement the plan successfully. Furthermore we welcome any recommendations and ideas from you.

Yours sincerely,

Ibrahim Rafeeu

Managing Director