Reference no: EM131520512

Question: AL plc is a company which supplies industrial cleaning services. After it was founded, 15 years ago, AL Ltd (as it then was) achieved rapid growth and high levels of turnover. The board of directors at the time believed that its traditional scientific management style, based on Taylorian principles, was the main reason for the company's success. As the company grew, the directors found that the company had insufficient capital resources to meet the increasing levels of demand for its services. As a result, AL Ltd was floated on its domestic stock exchange and increased capital resources flowed into the business, allowing it to maintain its rate of expansion. This seemed to be further evidence of the success of the traditional management style employed.

In each of the last three years, however, AL plc has found that its turnover and profit have fallen below the industry average and that its market share has reduced. There is increasing concern among the shareholders about the long-term decline in turnover and profitability. The finance director of AL plc (to whom you report as management accountant) has quoted the performance of CC Ltd, a similar-sized company in the contract catering industry. While CC Ltd is not a competitor, it is often viewed as a benchmark against which AL plc can measure its own performance even though it employs a different management style which requires the consent and commitment of employees. CC Ltd has managed to increase its market share, turnover and profitability consistently over the last five years and the finance director has turned to you to analyse why AL plc seems to be producing continuously unsatisfactory results.