Small Business Ent. 1. Investigate Performance of a Selected Small Business Enterprise.
1. Investigate performance of a selected small business enterprise. 1. 1 J&S furniture is a furniture manufacturing company owned by two brothers John and Smith. J&S started operations in 2006 and there is a satisfactory growth in this business since then. However there are fall in turnover in some months as well. J&S import wood from Asian countries and manufacture furniture. Company had been able to get massive discounts from its suppliers because of bulk buying so this had helped them to keep their cost under control.
However government policies such as taxes on imports, interest rates and exchange rates have had negative impact on this business. Taxes on imports Since UK government is taxing heavily on imports from non EU countries this had affected J&S a lot therefore now J&S is looking whether they can find out a cheaper supplier from UK or EU. Interest rates Recent increase in interest rates affected J&S’s profit margins. So J is thinking of increasing the price but if they increase the price the demand may fall. Exchange rate
J is purchasing raw materials overseas and recent depreciation in pound had a negative impact on its cost of production. J currently have eight branches in London and their short term goal is to become a leading furniture manufacturer in UK by the end of 2009 and become a leading furniture manufacturer in EU by the year 2012. 1. 2 J had been performing well from the start even though there is a fall in profits in some months. It is company’s view that this is due to well trained staff and good customer service given and also company is enjoying purchasing economies of scale due to bulk buying.
Competitor bench marking helped J&S to identify its minuses as well as competitor’s therefore company took all possible measures to correct minuses. This is one reason why company sales rose up suddenly in last two months. J carried out a training program about two months ago and there seem to be a massive increase in production efficiency and workers are motivated. 1. 3 Strengths *Being a leader in the furniture industry *Wider market share *Good customer service *Good offers at low prices *Attractive offers compared to competitors Weaknesses Difficulties in finding out a reliable supplier from EU or UK *Limited budget *Place of outlet *Lack of strength to borrow as business is still small *Damaged reputation 2. Propose changes to improve management and business performance. 2. 1 The main weakness of the company is difficulty in finding out a cheaper and reliable supplier from an EU country. Even though J tried they couldn’t. Therefore they should at least try to increase the discount in order to cover up their taxes. Company can examine the design of the product and make improvements.
Since furniture is a product where the customers look at attractiveness management can develop alternative designs which are more attractive to the customer. Customers will have a wider choice and company can spread the risk. This is good for reputation as well. Company should try to identify what features in the design should be removed. If these unwanted features are removed then the cost of production will fall resulting in higher profits. When company is making more profits it has strength to borrow money to fund its operations.
J should try to invest in new technology such as computer software to design the product so it may be possible to develop a design without errors. The quality of the product will be superior and product performance will be superior. J should try to invest on robots in manufacturing bring the product into the market earlier than the competitor then they can have an advantage over the competitor. Although this may reduce his cash flow for some time it will for sure benefit him in the long run. 2. 2 Since J is one of the markets leader in London they should try to be number one and maintain that position.
However it is not an easy task. They should advertise its product in every possible way. E commerce is a growing market and presently growing number of customers are using internet to buy product so if J didn’t advertise in the internet it will be lagging behind its competitors and it will be loosing lot of revenue. Since internet has a global reach J &S should advertise in the internet because it will help them to increase their market share. J &S should carry out a market research and find out customer’s needs and give offers according to their needs.
If this approach is used J can maximize its sales revenue in all the branches. 3. Revise business objectives and plans to incorporate proposed changes. 3. 1 Since UK is in a economic crisis company is planning to open up at least two branches in another EU country such as France and Germany in order to increase the market share and spread the risk J is planning to fund these new projects from their retained profits. Action plan 1st Nov 2008- Have a meeting with all the partners and discuss their opinions in order to do necessary amendments to the plan. 5th Nov 2008- Explain the workers about the new project and make them understand the benefits of this. 31st Nov 2008-Examine the new market and identify the needs of the new customers. 15th Dec 2008-Contact the suppliers and order the raw materials needed for the products. 1st Jan 2009- Open up only one new branch. 1st June 2009-Compare the actual results of the new shops with budgeted figures of the first six months if they are achieved the targets that means the company is functioning well If not amend the plan according to the changing market conditions.
If the targets are not achieved J should identify reasons adverse variances such as changes in customer’s wants. 31st Dec 2009-After the end of 1st year the company should carry out a market research and analyze all its sales figures in order to get a clear picture about the current position of the company and set targets for the next year. 15th Jan 2010- Make arrangement to open up the second outlet. 1st June 2010-carry out a market research and identify minuses and take remedial actions. 31st Dec 2010-Compare the performance of these new branches and to compete in the market. . Examine the impact and management of change in the business operations. 3. 1 When new branches are opened the business operations become more complex and company will not be able to focus on services therefore Smith must make sure to design its business plans in a way that all objectives are achieved at the correct time. If one thing was neglected this will affect the business plan negatively resulting in heavy financial losses. When new branch is opened Smith should recruit more workers. They should always make sure to recruit people who have experience in the similar field.
This is more economical than training untrained people and also working hours should be arranged in a way that workers don’t feel stress. Minor staff’s opinions such as customer service assistants should be taken into consideration when making decisions because they are the people who are dealing with the customers. Since the company is entering to a new market there are barriers to entry such as culture barrier, language barrier. Smith should adopt the local culture in that market. If not they may find it difficult to survive. PEST Analysis P – Political/Legal factors E – Economic factors
S – Social and cultural factors T – Technological factors All these 4 factors are found in the environment. Changes in PEST factors can have an impact one every business. If may be a positive or negative. Economic factors Economic factors refer to change in interest rates, Exchange rates, Inflation, changes in the economic growth and changes in the tax rates. All these changes will have an effect on the business. Eg. If the interest rates increase cost of borrowing will increase and the J&S may have to cut down on the borrowing.
When interest rates increase operating cost will increase and the J&S may have to increase the price . This may affect J&S’s sales. Taxation If taxation increases there will be a fall in profits. Dividends to J partners will decrease and there will be fall in investment but if there is a reduction in taxation J can make higher profits. Inflation If the rate of inflation increases there will be an increase in the cost on and J will be compelled to increase the selling price. J will become less competitive in the market, consequently volume of sales will fall therefore inflation affect sales.
From the above egs. we can see that changes in economic factors may have favorable or adverse impact therefore it is necessary to constantly monitor changes in the economic factors. Technological factors Changes in technology may have an impact on the business. Technology has changed how services are provided to customers. Increase in internet hade enabled People from other countries to Visit J and submit applications. This will help J to attract more customers. J latest technology replacing paper communication thereby LCMIT have been able to show better results by using better technology.
