London School Unit 33 Small Business Enterprise

This is a London School Small Business Enterprise Assignment in which we discuss business strategy and performance measurement technique.

Introduction

One of the most vital parts of the economy of the UK is the SMEs and their unprecedented growth(Storey, 1994). With the economic downturn, still looming large over the country, small business enterprise have started pouring and those which have got success are able to do so based on the foundation of creativity and innovation. The following report is based on one of the examples of renowned successes the country has seen in the form of Cambridge Satchel Company started and owned by Julie Deane, who used to work formerly as a Chartered Accountant. Julie Deane left her job to pursue the dream of providing the best of education for her kids and to produce traditional British satchels which brought back memories of her own school and college days. With a petty investment of but a total of 600 pounds, the business was started – completely British, from procuring raw material to the final product production – the owner has shown resilience and proved that the economy is flexible enough to promote SMEs when creativity and innovation are involved. The following paper analysis the overall structure of SMEs through this case study in a comprehensive manner.

Task 1.1

Cambridge Satchel Company began its course in the year of 2008 when creative and talented workers rediscovered the art of hand stitched satchels under the guidance of the owner. Chunks of leather was bought from within the country and not from third world economies to focus on the authenticity of British hand woven satchels and to produce what has been in generations for long. Not long after its launch, the satchels became a fashion fad not only among children, for whom they were originally intended, but also among college and offices goers and fashion bloggers(Holland, 2014). Little did the owner know that her creative idea will flourish into becoming a piece of craftsmanship and fetch her company millions of pounds in investments from investors during times when getting funding for SMEs is difficult.

Business Strategy - London SchoolSmall Business Enterprise Assignment

Task 1.2

Contemporary literature states that there should be a balance between a company’s business strategy and performance measurement techniques and that PMS should support the evolution of the company. There can be a balance between internal and external performance of the company and it should not necessarily have to be a financial scorecard only, which is essentially a traditional method of measuring performance. In a recent report, the company has been voted as one of the fastest growing companies in the country.

Top 10 Fast Track 100 Companies

For the purpose of this case study, a traditional approach has been used to measure financial performance which proves that the assets of the company have been increasing ever since the year of 2009. The company’s assets in 2009 were 19,845 pounds and it shot up to 171,265 pounds in 2012. These figures prove that the company has spread out its limited resources efficiently. The company is listed privately and details financial information could not be obtained. However, the turnover in terms of income which is now approximately 15 million pounds speaks volumes about the financial progress(Hurley, 2013). Internally, the company has been expanding at a slow but steady pace with a new manufacturing plant being added to their assets recently. The company has also hired a General Manager for the new manufacturing plant. The company is also in talks with Chinese firms to sell its products there indicates that it is strong enough to explore international markets.

Task 2.1

Post its launch in 2008, the company has made waves across the nation and has become an exemplary case or the success of SMEs in the country. Its establishment and brand positioning is evident from its massive mass following where even celebs can be seen holding the satchels in various fashion magazines(Spencer, 2010). The strong brand positioning is its biggest USP and strength and it is difficult for a competitor to emulate what they have been producing. Their satchels are known for unmatched superior quality which is evident in their hand stitched pure British leather based products. The high demand for the satchels showcases the fact that they are trendy and are considered as classic fashion. However, despite their differentiation factor, the company’s product line and strategies are fraught with flaws or weaknesses. One of the biggest flaws with the product line of the company is that it is predictable. With the same product, albeit they come in different sizes and colors, the company loses on innovation and creativity since it has not yet expanded its product line. Brand extension has been considered as one of the reasons for a brand’s success which can be used by launching a new product. This way brand identity is maintained. The Company has not followed this strategy yet.

Task 2.2

As per MarkMonitor, a brand protection company, approximately one third of the British population shops online. Therefore, one of the ways the company can strengthen its existing position in the market is by channeling all online media sources to reach to even wider audience(Bolger, 2012). The expansion of markets can also be considered upon; however the same will require investment. The company has so far remained debt free as it did not depend on external source of financing. Sealing the deal with venture capital firms can also be considered only when the investors share the same values and objectives. The firm recently has sealed a deal with San Francisco based Index Ventures for $21 million. Similar investments will be required to make the company a $100 million company in the next 5 years, which is the vision shared by the owner(Hurley, 2013). The company realizes that its current strength lies in its quality products which contribute in making the overall profits for the company. The company is not big in size, has limited resources and uses manual labour to produce products. However, it maintains strong customer relationship and fulfills its promise of delivering high quality product that the consumer can have through online marketing. This strategy works well at targeting those customers who are tech savvy and use the internet for online shopping purposes. However, the company can also look at opening retail shops across major cities in the country. The company has already opened a physical store in London, securing more funds from investors will ensure the products are sold and are easily accessible to most number of customers, both tech savvy and non tech savvy. The company can also focus on brand extension and launch products in the same production line without altering a lot. It can launch leather wallets, belts and shoes for different customers. This strategy can also help the company in targeting international customers as well. The existing online presence of the company is strong and forges a bond with the customers and calls for more trust. Ensuring its online presence remains intact by engaging the customer will only boost the sales further. The company can also hire a new designer who can get new designs without altering the brand value of existing products. This strategy will make sure that even if the main proprietor is lost the company can still rely on its established strength and efficient and trained staff. This business strategy will also ensure that the business operations will remain the same despite the ongoing competition.

Task 2.3

The company’s main raw material is leather and therefore, most of its revenues are dependent upon the cost of raw material. If the company wants to increase revenues, it can expand its business operations to reach a wider consumer base. The company has taken the first step in this field and established a manufacturing plant to make more satchels and may be new products as well(Burn-Callander, 2014). More workers will also be hired and proper training will be given to them to make sure operations do not suffer. However, the company produces just one product and it’s the company’s biggest strength and biggest weakness as well. The company will have to consider creative business strategies and adopt innovative techniques to produce more produces which are in demand by a different target market for different age group. The company can explore other areas and target different audience and not only school and college goers. Before it reaches its maturity phase, the company can expand into new target markets.

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Task 3.1

Planning, controlling and evaluating are the keys to ensuring that business objectives are achieved within the allocated budget and time frame. Therefore, objectives are set strategically in a way that resources can be utilized efficiently and also in a way that existing operations is strengthened. This strategy always ensures that all employees work in collaboration in achieving the goals of the company(Williams, 2013). When strategic plans are laid out, companies can assess their current position and adopt strategies as per changing internal and external environment. A company’s internal and external market environment affects its operations therefore both factors should be considered before making plans. The company had a humble beginning for even a small business enterprise and the owner used 600 pounds to buy raw materials and rest she learned everything using search engines. Use of Google Analytics, Facebook marketing and Tumblr for promotion helped the company reach a wider audience. With a little amount in hand, the owner used available resources to the maximum and used them to her advantage. From the small beginning, the business has outlived many other businesses and is at par with the best companies in the industry, so much so that its products are shown in hit TV series such as Girls as well and is sported by celebrities on fashion magazines such as the American Vogue. The company has also managed to grab a place on the shelves of Harrods and Selfridges, etc. The current objective of the firm is to grow at a steady pace and expand operations to new markets and this is evident from the fact that the company has recently launched a physical store in London and is in talks with Chinese firms for a possible venture.

Task 3.2

The company has to integrate business strategy with internationalization which can be linked to the internationalization theory. In some ways and as per this theory, the company can consider internationalization; however, being a small firm, its strategies may be different. As per this theory, the small firms can identify new market developmentwhich can be a feasible strategy for the case company for its future growth within the product market expansion matrix(Westhead & Wright, 2002). It can follow this approach as an alternative to introducing new products to the existing product line for the domestic market. Contemporary literature suggests that SMEs pursue a rather unplanned export strategy instead of a strategic and proactive one. This may reflect upon the company that internationalization is secondary to domestic market and something to be considered only when the firms have to establish a strong foothold in the domestic market. Therefore, instead of being complementary, domestic and international approaches are diverse. Also, the company will be dealing with resource poverty because there is a financial and human resource constraint on it. Managing this resource poverty will require a different managerial approach. The firm can opt for top-down approach. It is not necessary to have a formal strategic plan and it should not be mistaken for a lack of vision on the part of the company. It merely suggests that the strategic operations of the company will become even more formal over the lifecycle of the business(Knight, 1999). These strategic decisions will and should be based on opinions of stakeholders after checking the market reports for the company – whether there is a demand for additional products in the domestic market or whether the company should expand international markets with the similar product line. Recent reports suggest that it is in talks with Chinese firms which can indicate a possible joint venture. If they continue to produce same satchels for the domestic market, it will saturate soon and if they explore international markets without the help of investors, then they may face many challenges too considering that it is still a small firm with a small capital producing only 900 satchels in a day.

Task 3.3

The new changes to be implemented in the company can include brand extension and to do the same they will have to formulate certain strategies. The company can hire a new designerwho will be in charge of designing for new leather belts, wallets and shoes. The company can initially launch an aggressive online marketing campaign and advertise its new products before the eventual launch so that customers are aware of the upcoming products and the news can spread(David, 2011). The company can use Facebook’s marketing or Google’s Ad Sense as well as SEO tactics to drive traffic to its website. With the new manufacturing plant in operation, the company can produce additional 300 – 500 more products as well excluding 900 satchels per day. To achieve this target they will have to procure more raw materials and therefore, workers will also have to be trained to produce the new products. Since this project will be carried out in different phases, its better for the company to plan for each phase in terms of timeframe and budget for these – market research, distributors, retailers, international marketing, supply and demand capacity, training, raw material, promotion and launch. The company has remained debt free so far and at this stage it should not try to get external funds since the new production will also require less capital because the production will take place on a small scale. Therefore, 10,000 – 20,000 pounds for the initial phase should be spread out for all the phases.

Task 4.1

When the changes have been implemented, they will have profound impact on the operations and the personnel. With the proposed expansion of the existing product line By doing so the company’s target market will expand and new segments will be added signifying that customer base will increase. Furthermore, loyal customers will be spoilt for choice with the newly launched products. This strategy will eliminate the risk of competitors launching those new products and in doing so the company will be able to tap in the gaps in the market. Also, the new change will not only impact the external market environment, but internally also the company will grow as new opportunities will be provided to employees to grow and foster. They can learn new skills in creativity and leadership. These skills are transferable and therefore it will help the economy as well. Similar changes encourage innovation as well which is the backbone of the reformed economy(Spencer, 2010). This will ensure greater flexibility and resilience and also open up doors for further exploration. The government of the UK gives tax deductions to firms which contribute to the economy with their innovative skills as these are considered as a necessity to encourage self employment in the times of recession.

Task 4.2

Simple managerial strategy formulated by Kotter can be implemented to evaluate implemented changes within the firm. These are as follows -

  • Urgency Implementation – The entire firm should take part in implementing the change and therefore motivational skills are required of a leader to inculcate urgency to achieve objectives of the company.
  • Cooperation and Coalition – It is difficult to accept change and employees should be convinced of the same. This process involves leadership skills and motivational skills which the General Manager or Owner can provide. All kinds of people should be involved in decision making process thus making everyone feel part of the change.
  • Vision – Team building process can include idea formation as well and these can be linked with the overall objectives of the firm.
  • Communication –The changing needs of the workers should be responded with efficient response by the senior management.
  • Remove obstacles – Removing bottlenecks is important for the successful implementation of the change. Since not all employees are tech savvy, it is important to convey the firm’s objectives as efficiently as possible.
  • Create Short Term Targets – New targets should be small and gettable. Investments should be made smartly considering the overall objectives of the firm.
  • Build the change – Victory should be celebrated only when the change has been implemented successfully for a long time since it is a continuous process (Kotter, 2012).

Task 4.3

Performance of a business can be evaluated using various business performance techniques to check what effect the changes have made on the entire operations. These techniques help business formulate short and long terms objectives and plans to achieve them. Cambridge Satchel Company is a small scale company and therefore its performance can be gauged over a 6 month period or twice a year to implement changes and the financial year can be used to evaluate the implemented changes. Some of the traditional business performance models can be used by the company considering its small scale and one of them is the EVA model. EVA is economic value added model which takes into account the value added to the objectives of the business. It can be calculated by using this formula -

(Net operating profit after taxes) – C*K

C = weighted average cost of capital and K is the total economic capital employed.

The Cambridge Satchel company can use this method in order to evaluate the changes implemented through a financial lens(Gay, et al., 2007).

CONCLUSION

The company has made good progress and continues to grow by using strong business strategies. Being debt free made the company strong from within and therefore, it has added to more value in the market. The company can utilize its strong brand positioning and consider brand extension as an option to grow domestically first.

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