Possible Causes of Sales Decline - Case Study Example

Possible Causes of Sales Decline Introduction Sales decline happens when the amount of goods or services exchanged for money reduces and become abnormal. The decline in sales may be been caused by several reasons like lack of enough funds, lack of proper planning, poor coordination between the staff members and so on. In my discussion with the manager, Carol Todd, I will talk about the probable causes of the problem, and how to investigate the probable causes of the sales decline with an intention of generating a solution. Lack of Business Plan Failure to plan is planning to fail. One cannot just walk without knowing where he or she is going. Many people start businesses without proper planning. They just open their doors for business hoping to succeed. Research has indicated that business plans form an imperative tool for any business enterprise; thus, before one starts a business. This identifies what one wants to go and how he or she will reach there. During our discussion, I will ask the manager, Carol Todd whether she made a plan before the business started. If she did not, this might have contributed to the sale decline problem. I will therefore advice her to come up with a business plan. This will assist her to run the business well and hence improving the amount of sales. (Blank, 2010) Lack of operating goals and objectives In most cases businesses plan to get a loan. Once they obtain the loan, they completely forget about the plan. Apart from having a business plan, it is also vital to have specific objectives especially for the first one year of the business operation. In the planning process, one should develop goals and objectives for the business, break them into stages and identify anything which must be done in each of the stages. In my discussion with Caro Todd, I will ask her whether there are goals for the business. If there were no goals, this might have contributed to the problem. I will then advice her to start setting goals and objectives for the business. Failure to Measure Goals and Objectives After establishing the operational goals and objectives, it is also important to ensure that one measures how the business is performing against the established goals and objectives. This will help the owner know whether modifications and other strategies are needed. The manager may have failed to measure the objectives as well as the goals of the business, this might have contributed to the problem. During our discussion, I will therefore advice her to start measuring goals and objectives which will help the amount of sales to increase. Not paying attention to cash flow Cash is like a king in a business. It is important to monitor cash in a business. If one keep on spending more money than he or she brings in, he or she will soon be out of business. Many businesses do have negative cash flows especially in the earlier times of the businesses. However, it reaches times where the cash from revenues exceeds expenditures and the business will be in a position of positive cash flow. Every business has to ensure that it has enough cash to reach this point. This problem might have contributed to drop in sales. There might be no enough stock to sale and that is why the amount of sales reduced. I will therefore advice the manager to start a behavior of paying attention to the business cash flow always. This will help the business improve (Blank, 2010). Failing to Understand the Industry and the Target Customer Some people start their businesses without an enough investigation of the industries. Before starting any business, one needs to observe; the trends in the industry, opportunities and threats, where he or she can position the business in that industry for it to succeed and also think of whether new technologies will have an impact on the business: When one fails to do this, his/ her business is usually subjected to risks of failure. Through the discussion, I will ask the manager whether she took time to understand this. If she never did it, then it could have contributed to the problem. I will advice her to always take time to comprehend facets of the industry as well as the target customer before starting any business. May be the business was set in a place where the demand of such commodities is low or may be the people have changed their taste. Lack of products differentiation Many businesses fail to win customers because they are exactly like the others. When goods are of the same quality and prices like your competitor’s people will not see any need of buying from you since they are having an existing supplier. However if one can offer a better product, many customers will be willing to buy from him. This problem could have contributed the decline in sales in the East campus refectory. I will therefore advice the manager to find means of differentiating her products with the others. Maybe their products are just the same like for the other campus refectories. The manager can differentiate her products by improving the quality, at least lowering the price, offering good packaging, among others. This can really help to improve the quantity of sales. Lack of Marketing Programs to Attract New Customers It is important for every business to advertise for its products or services. One needs to announce to the potential customers of the existence of the business and why the customers should deal with it. One can reach his or her customers only through knowing their demographics and psychographics. During our discussion, I will ask the manager if they usually do some advertisements of their products. In case they have not been doing this, then it could have contributed to the sales decline problem. I will therefore explain to her the importance of advertisement and hence advice her to start practicing it. This will be among the possible solutions the problem and it can enable the sales to improve. Underestimating Competition When any business perceives that a new business has entered to the industry and it is likely to attract some customers, the business will to look for ways to defend itself against the customers. It can do it by reducing the price, improving its packaging, extending terms, bringing new products, improving the quality of products, advertising more among others. In our discussion, I will ask the manager whether among the other two refectories existed before the East campus refectory started. If yes, then maybe this new business underestimated completion on the other two businesses. Maybe the other two refectories tried to retain their clients by enhancing the quality of their products. If the East campus refectory products are just of ordinary quality, the students or customers will be willing to buy from the others and not from this business. This could have a major attribute to the sales decline problem. I will therefore advice the manager to check on this and try to look for measures of improving the business (Blank, 2010). Lack of cost competitive Before beginning a business one needs to attempt to get information about and the cost structure and selling prices of the cost and competitors and make an effort to understand them. One may find that the competitors have less operating cost than his or hers. If the selling prices are the same but the operating cost is higher than the competitors, then one must look for a way of reducing the cost if he or she plans to stay for long in the industry (Blank, 2010). Poor Management Skills Many businesses take their employees to be the most important assets. Customers mostly buy from a certain business just because they like the person they interact or deal with in the business. If one does not value customers and treat them with respect and give a fairly treatment, the manager may have a regular employees turn over. This may make customers become worried with dealing with the business and probably running away to other companies. In some cases, it is not an easy task to get an acceptable replacement especially when the business needs employees with unique knowledge and skills. This can lead to declining in the product quality and even output hence more customers escaping from the business. In our discussion on the problem of sales decline, I will ask the manager if she is aware with how her employees deal with customers. It is thus imperative to advice her to find ways of knowing the employees customer relationship. She should make sure that her employees deal with customers well and treats them fairly. If this happens, then the amount of sales will definitely improve. Conclusion In regard to the above discussions, the reduction in sales in the Eastern campus refectory might have been caused by several problems such as; poor business plan, lack of goals and objectives, failure in measuring the goals and objectives and even poor management skills among others. If Carol puts into consideration all this causes and look for possible ways to correct and solve them, the amount of sales will definitely improve and hence better performance of the business. Bibliography Blank, S. 2010. Possible Challenges Facing Global Food Businesses, Washington: Jamestown foundation Read More