This is a London college small business enterprise assignment in which we discuss impacts of small business by case study of Cambridge Satchel Company.
Small business enterprises are privately owned which has less employees and turnover from the business. Many countries encourage the small business enterprise as they provide employment to the people. Small businesses are also well known for using up to date technology which also impacts the businesses around. Various companies which operate privately bring business to the country and help in raising the living standards.
The SME is providing a huge number of jobs in UK as the public sector have very minimal jobs and the big companies are trying to recover from the losses they had during the recession (The Telegraph. 2013). While many big businesses are employing cost cutting measures and trying to come to the place where they stood sometime ago the small business enterprise has become the fastest growing industry in the United Kingdom.
The London college small business enterprise assignment report is case study based on Cambridge Satchel Company which a small business enterprise is making English satchels. The company started with a small investment. The balance sheet would be analysed of the organization by calculating the possible ratios and interpreting them. The change management skills would also be applied in understanding the weaknesses and the opportunities and how the company can benefit from the opportunities. The change management would also include the analysis of the changes which have already been incorporated in the business since the formation and the management of the changes effectively. Some recommendations would be suggested to the business to overcome the problems which are faced by business.
1.1. STRENGTHS AND WEAKNESSES
- Half of the company sales coming from overseas which is an advantage in terms of foreign exchange rate for the business.
- Healthy margins kept by the company which helps in focusing on a varied variety of customers.
- Social marketing which has sported the likes from celebrities like Angelina Jolie.
- Manufacturing unit in Britain is also strength as they do not have to wait for the stock. The stock is available and Dean can also inspect it anytime for quality.
- Englishness to the satchel which appeals the customer. The design of the bag is very effective in selling the product.
- Customer reviews suggest that the product is very good quality as it looks as brand new as they bought it.
- Cheaper than the designer bag but is appealing to the customers due to bold style.
- Manufacturing in Britain could be considered a weakness as the cost of manufacturing is much higher.
- Rival product manufacturing by the third party manufacturer.
- The designs are ubiquitous as it does not give the customer that special feeling. This is a strategy used by a number of companies where they engrave the customer’s initials.
- Fake websites that sell the similar satchel but the quality is not good. This gives a bad impression to the customer about the brand.
- Another weakness of the company was that the company did not expand according to the increasing demand (Deane, 2011)
1.2. BUSINESS ANALYSIS
The business analysis can be done using the available data in the balance sheet. The calculation of the ratios allows understanding the performance of the business and also helps in making a comparison using the figures.
It is considered that the current ratio should be above 2:1. The company is able to meet the short term debts if the current ratio is above 2:1 easily. In the analysis for Cambridge Satchel company it is visible that for the first year the ratio was even below the industry median but with the improving business the value has increased in the consecutive year. In 2011 the value did decrease but was not very low and at present the current ratio of the business stands at 2.66:1 which is significantly higher which means there is no problems in meeting the short terms debts on time.
The quick ratio standard is 1:1 and except the first year which is the year of commencement, the business is able to achieve the industry standard. The quick ratio figures suggest that the firm’s liquid assets are able to cover its liability. In 2012 the assets have outperformed the liabilities so there is an option of using the liquid funds.
The debt ratio indicates if the company is burdened with debt and is it able to manage the debt. In 2009 as the debt was very low the company was able to pay 96% of the debt. As the company has progressed through the years it is noticed that in 2011 the debt ratio was 62% which is the industry median but currently stands at 37%. The business might have problems in borrowing money from the investors.
2.1. MANAGING WEAKNESSES
There are a number of weaknesses which have been identified in the business. The main weakness of the business was to give the manufacturing contract to the third party and they produced similar bags. It is one of the key factors to not give out each and every detail to the manufacturer so that they are able to produce a rival product. (Mohiuddin, & Zhan, 2013) cite the relationship between the core and non core activities of the business which have to be outsourced. The research suggests that outsourcing of non core activities and completing the core activities internally has a positive impact on the business.
Dean started the manufacturing facility so that they do not have to face the similar problem again. This was a big step and required a lot of investment. The business could have looked at the option of getting some work from outside like many companies do to save the manufacturing cost.
Another weakness of the business identified is fake online business websites which use Cambridge Satchel Company’s brand and sell fake products. The owner of the business has tried to fix the problem herself by getting the fake websites uncovered. As the task is really time consuming and also there is a lack of technical skill so that the job could be done fast. The company hired Mark Monitor which is an agency to solve the fake website problems.
2.2. MEASURES TO TAKE ADVANTAGE OF OPPORTUNITIES
The strengths highlight that the brand is now established and recognised by the customers. Business could use the brand to sell the products in the market. The brand is also recognised by some celebrities. Franchising could be a good option where the company can use the brand name to sell the company products through some other business. Franchising is also considered a very important factor for the growth of the business (Chirico, 2011). This allows the business to expand and various areas across the country and internationally.
The company already has online presence and can get social media and Google campaigns so that the awareness increases online. Google has the search engine optimisation where a campaign is prepared by the owner in order to increase the visibility on the search engines. Search engine optimizations help improve the ranking of the website on the search engine. When the website is visible to customers more and more people tend to click on the link and also very few users even go to the second page of the search engine so it is very important for the business website to appear on the first page (Mazurkiewicz, 2014).
Cost is an important factor to increase the profit margins of the business. There are measures which can be taken to reduce the cost which is incurred by the company by outsourcing. It is noticed that the business wants the product to be authentically British but the cost of manufacturing is much higher. The risk relating to the stock which might get delayed is there but to overcome that problem a small manifesting unit can be operational in the country. Once the cost is reduced the profits would increase and would lead to more investment in expansion of the business.
The company was started by two people and is also mentioned before that they only hired one more person for the work. The company made satchels which were handmade. As there were only three employees in the company it was much easier to manage. As the employees increase the quality management has to ensure that they are given the tasks and salaries accordingly. In this case the decisions were taken by Julie Dean and her mother. The decision of doing online research proved very effective and also more innovative as the initial investment was very less and had to be used efficiently.
2.3. BUSINESS EXPANSION
The company is performing well and is also getting business from overseas. The business has to follow the similar style and as there are less cash flow problems, the company could try to expand business by able to attract more and more customers. Also cost is one of the issues in every business. There are various ways to reduce the cost and getting the production done from a country where the labour is cheap.
The business could also expand to different markets like India and china. The market size is much larger and the business can also take advantage of cheap labour in these countries.
Also another area of expansion could be tie up with big designer brands so that there is more market value. People who are associated with certain designer can also buy the bags.
3.1. BUSINESS OBJECTIVES
The main business objectives are to expand for which the company has been in conversation with index ventures for external investment options. Index ventures are involved with companies like ASOS, Moleskin and Nasty Gal. The business has planned the move after a lot of research as the brands with which venture capital is associated are doing good in the market and have no substitutes (Ruthven, 2014). The business is now looking for investment capital so as to expand globally. There are various options for expansions like the Asian markets which have very high potential in terms of expansion.
Recently the owner also toured china along with UK president and also mentions that there is a good market for satchels in china. It was noticed that in Britain one person would by only one satchel while the shoppers in china would take six to eight satchels (Loveless, 2014). This shows that there is much high potential in the Chinese market and also the size of the market is much bigger than UK.
3.2. RECOMMENDATION FOR THE PLAN
Cambridge satchel business has plans to expand the business worldwide. The company already has customers in New York and other parts of Europe. Dean is in conversation with index ventures for the expansion capital which is required to expand the business in china and USA.
Also the company has moved to a manufacturing unit which is four times bigger than the initial one so as to fulfil the high demands by the customers. Julie dean also defines the company as the online business even when the product produced is so traditional. The online marketing helped the company grow with the initial investment in the business of £600. The organization also wants to be surrounded by customers globally through internet. So online marketing could be used for the business in new areas.
3.3. ACTION PLAN
When the company started the business they researched online if people would like to buy the product which they are thinking to manufacture. Every market has a different culture and shopping trends. The business has to first research the trends of the market they want to move in. The detailed research would give more opportunity to the business about the likings of the customers. It would also be easier to make the strategy to be used for expansion. Also researching online could prove to be not enough in some countries. Business networks can be used for market research and they are also considered more reliable (Aichner&Perkmann, 2013).
While expanding to other countries the manufacturing should be done in a nearby area so that the cost incurred for exporting the product from Britain is lower. The company can use the external capital which they are thinking to borrow for the manufacturing unit in the foreign country.
The product marketing should be done according to the requirements of the country so that people recognise the brand which would increase the sales in the region. The marketing campaigns could be online and through advertising on the media like Television and radio.
COMPETITION AND FAKE WEBSITES
The competitors should be considered before expanding to the market. Also the legal system of every country is different like china has a socialist legal system which is based on civil law model (harvard.edu. 2014). Business has to ensure that they understand the legal system of the country as some countries have legal systems which take forever to pass judgements. It is recommended for the business to take these considerations so that the business is done properly and efficiently.
As the business is expanding, more employees are required with expertise in the satchel business. One of the customer pointed out that the satchel are colourful but very similar. More designs for satchels have to be considered. A designer would be required to do the designing. A manager is also required to manage the work in manufacturing unit along with the administration.
4.1. IMPACT OF CHANGES
The changes that have happened in the company since 2008 are quite a few. The company has moved forward along with the requirements. More investment is done for the expansion. The changes are listed below.
INVESTMENT FOR EXPANSION
Cambridge Satchel Company has received a £21 million investment from index ventures for expansion of the business. The company would be expanding to United States and China. The bags are already sold in 100 countries and they produce 500 bags a day. The business has expanded since the start which was from their kitchen table (Wood, 2014).
Cambridge Satchel Company has grown fast and employees more than 100 people (London, 2014). The expansion would require more people to work in the manufacturing unit. As the company has received an investment either the company would have to hire more people to manufacture the bags. The impact on the employees is the number is increasing. In 2008 there were only three people working which has moved to more than hundred.
The business has moved to a bigger manufacturing facility which impacted the employees and the business environment. The bigger facility allows the company to use the technology to do work. Dean would not be outsourcing the facility to restore the tradition of handmade bags. The business would provide more employment to the country.
4.2. CHANGE MANAGEMENT
The changes in the business would be managed according to the requirements in the particular area. At the moment the company has got £21m for the expansion. The expansion would be to china and USA. The company would have to hire employees in the country for the appropriate research and development.
The employee number would have to be increased in the manufacturing unit and also the administration has to be considered. A manager is required in order to manage the day to day activities in the business. The human resources is a very crucial department in any organisation as they have expertise in hiring the right people.
Manufacturing unit would have to be expanded according to the demand. Initially the product would be made available to some areas and as the demand rise the manufacturing unit can be set up.
4.3. IMPROVEMENTS IN THE BUSINESS
The business has seen considerable improvement since 2008. The company has grown in size and have also received considerable investment from index ventures. The points which suggest the improvements are as follows:
Business started with £600 pound investment in 2008. The sales figures of the company suggest the improvements in the business. The sales for 2010 were £0.6m and 2013 was £12.9m. The sales figures have gone up by £12.03m. This suggests that the business has expanded and the company is doing huge sales as compared to 2010. The sales growth is 183.7% per annum which is almost doubling every year (Fasttrack, 2013). The company is ranked seven among the hundred fast track companies in the United Kingdom.
The social media plays an important role in the marketing of the business. The company received likes from many celebrities like Alexa Chung and Rita Ora (Independent, 2013). The bags were also seen in the television shows like gossip girl and girl which led to popularity and marketing of the bags in different markets.
EXPANSION OF BUSINESS
The business would expand as it has the required funds. The sales figure suggests that there has been 183.7% increase per annum. The company is expanding to China and USA and has also received a cash injection from index ventures recently. Cambridge Satchel Company has also doubled the number of employees so that they are able to fulfil the growing demands.
The London college small business enterprise assignment report suggests that a business plan can be developed if planned in a proper way. The SME is encouraged by United Kingdom as they provide employment to the country. Cambridge Satchel Company which is entirely UK based which includes the manufacturing unit. Dean did not follow the people who suggested her that there is no demand for satchels. The detailed research which was done online because of the limited funds available proved beneficial for the business. The research also gave the idea if the business would prosper and people would like to buy a product like this.
It is very important for the SME owner to have clear objectives and goals for the business they are running otherwise it is very easy to be influenced. Dean did not outsource the business like most businesses as she wanted to keep it in front of her and also was worried about the delays it could cause. She also did not accept any external investments till she needed to expand.
All the decisions taken by the company were very thoughtful and planned. Many businesses go into debts due to the loan which they take to expand their business. A proper planning is very important for the business to survive and do well. Cambridge Satchel Company had various ways to market the bags. They used the social media for the marketing which is also good and can reach to people all around the world.