Small Business Enterprise - Case Study Example

Part I: Business Profile The coffee shop and gift shop ran by Bob and Jane is a small tourist oriented business located in the Peak Distinct NationalPark in Derbyshire. The business was successfully managed by Bob and Jane for several years now and due high quality of products offered proved to be efficient without additional marketing expenditures involved. While Derbyshire opens great opportunities for tourism business, the coffee shop alongside with gift shop does not use the opportunities arising from location to the full extent. Thus, through by analyzing the current situation the business is facing the following key strengths have been identified: Highly beneficial geographic location. According Lee Karen Stow (2001), Peak Distinct National Park in Derbyshire is the most visited park in the world after Mount Fuji located in Japan. Stable financial situation. The business at the present moment does not have any outstanding debts payable. Good reputation and experience in the industry. Dues to already established positive reputation, further expansion of business involves less risks. Moreover, the managers have experience in the industry, while lack of experience is one of the top reasons of small business failure (Holmes, S. Haswell, S. 1989). High quality of products served. The major reason of coffee shop success is the high quality of food served that results in positive reputation and word of mouth spread of information about services and products offered. While, undoubtedly, there is a vast number of factors that have a positive influence on business functioning, the coffee shop has significant drawbacks that should be particularly considered when planning expansion. Poor marketing campaign. The business has to concentrate on development of the marketing mix alongside with research of the target audience needs. The issue is particularly relevant due to the fact that the target audience of the gift shop is mainly tourists; consequently, word of mouth recommendations are not sufficient enough. The variety of products offered at the gift shop should also be considered in relation to the target audience needs, perhaps, the products list offered should be expanded. Poor labor specialization. Bob and Jane are the only two employees of the business. While their day to day duties involve simple serving work, obviously, the personnel are too qualified for this type of work. By hiring helpers that would serve at the coffee and gift shop, the managers could devote more time to marketing and planning of their business, thus, the efficiency of the business would grow. This issue is particularly relevant when considering business expansion. In order to neutralize the negative effects of business weaknesses, the identified strengths should be matched against weaknesses and on the base of the received outcome further planning should be implemented (Bannock, G. 2005). The effect of poor marketing campaign can be neutralized by further development of positive reputation of the business in the industry alongside with conducting marketing research in access of funds available in terms of the geographic location of the business. Poor labor specialization can be matched against high quality of products served alongside with positive reputation of the business in the industry, since expansion of the business will most likely result in diminished contacts with clients (Bitner, L. Powell, J. 1987). Part II: Existing Business Improvement and Expansion Consequently, the business should concentrate on development of the marketing mix applicable in the present situation alongside with marketing planning and labor specialization that should be considered in terms of business expansion. While development of the marketing mix and marketing campaign as well as research of the present market should be outsourced to the third party, e. g. marketing agency, such issues as financial planning and staffing should be directly solved by the management. Marketing and promotion is crucial to any business. Development of the marketing mix involves such steps as analysis of the market a company is facing, estimation of the target audience, investigation of tastes of potential customers. After the initial search and analysis is done, the 4P have to be developed: place, price, promotion, and product. Each segment of the marketing mix has to be adjusted specifically to the targeted customer group. To be more specific, the business has to develop own logo, mission and vision, ethical policy, as well as choose the channels through which the target audience will be reached. When deciding on the key personnel and choosing the working schedule, the management team should consider such issues as delegation of responsibilities. In relation to the present situation a company is facing, management should hire one person to serve at the coffee shop, one person to serve at the gift shop, as well as hire waitresses at the new location. At the same time, company owners themselves should manage the new location including financial and administrative parts as well develop a system to track quality of goods served at the coffee shop and gift shop. Financial part will include the approximate expenditures on start up of the new location as well marketing and wage expenses. Management team should buy the new location rather than rent it, as considering the present interest rates it would be more profitable to purchase rather than rent the place. Part III: Business Planning Changes in the strategy of business will be in the three dominant spheres: marketing and promotion, personnel and management team, and, finally, company finance. Consequently, business planning is required in these three dominant spheres (Stoner, C. Fry, F. 1985). Marketing and Promotion Target audience Target audience is mainly tourists of all ages. When developing design of the interior of the caf, the dominant interests and values of the target group will be considered, e. g. authentic traditional style. When establishing the price on the services provided, the income of the target group should be considered, e. g. middle level of income. Customer needs One of the key issues to be reconsidered is needs of the target group. Obviously, the tourists are not in a hurry and demand high quality of the services alongside with personal toughch in accordance with genuine English traditions and customs. Consequently, design as well as personnel training and message delivered by advertising should be centered on this issue. Service positioning and advertising The product and services positioned should be centered on top quality and developed logo should be present in the interior. Logo as well as mission and vision of the company that emphasizes high ethical standards, tradition, and quality of product should be the distinguishing feature of the business. Company should target its customers through the following channels: billboards, commercials in tourist publications, agreements with tourist agencies and local sights. Key Personnel and Management Team The structure of the company is presented in the following form: Either Bob of Jane will take the position of the production and manager and the top manager, whereas qualifies personnel with floating schedule will be hired in the coffee shop, gift shop, and at the new cafe. While production manager will be preoccupied with the quality of service and product provided, the top manager will keep track of financial, marketing, supply issues. Financial Planning The capital costs that will have to be covered as a lump sump investment at the cafe start up are 355,000. In case if the business is not able to raise the needed money internally, it would be advisable to take a bank loan. Advertisement costs will be approximately 7,000 within the first month of change implementation and will include expenditures on advertising agency services such as logo development, and costs of publishing information in tourist brochures as well as percentage from the revenue paid to tourist agencies in accordance with agreements. Wage expense on the floating schedule will vary depending on the number of customers and approximately is 6,000 per month. In general, the financial statement will have the following form: Revenue Cost of goods sold Gross profit margin Operating expenses: Advertisement expense 2,000 Wages expense 6,000 Supplies expense Utility expense Other expense Total expenses Net profit Depreciation Net profit before interest Interest Net profit before taxes At the present moment with the amount of information available on the business it is difficult to estimate the approximate revenue of the business due to lack of information about business past performance. It should be noted that in order to break even, the business will have to cover wages expense, advertisement expense (approximately 2,000 in subsequent months), utility costs, and cost of goods sold. It should be further noted, that long-term financial planning must involve risk budgeting, e. g. funds or at least sources to raise the funds in case of extraordinary events. Part IV: The Impact of Implemented Changes and Change Management While in the short the business will experience financial losses due to high capital investment and adjustments to the change in the business structure, the long run outcome will most likely involve positive cash inflow. There is a number of potential problems that might arise in the process of change implementation. All of these potential problems can be categorized into three major categories: marketing problems, problems with personnel, and financing problems (Lundstrom, A. 1990). The problem is a consequence of the scale small business operates on; it is the most common problem due to limited funds of only two co-owners. This problem may be managed by bank loan or attraction of potential investors with or without a consequent share in the business. In any case, the solution must be adjusted to the specific problem a business might be facing in future. Problems with finding highly skilled personnel for the business are common when a business is expending. While the issue may be rooted in the skills and experience of the potential workers themselves, another problem is diminishing contacts with customers that might negatively influence manager's ability to quickly react to the information. In the case of small business expansion specialization and delegation of responsibilities is necessary (Hornsby, J. Kuratko, D. 1990). Consequently, mangers' roles change from being front line entrepreneurs and span of control is a major concern, as manager is less able to directly supervise the tasks. The problem may be managed through development of the new control over quality and efficiency of the business than that of used before. Also, such issues as quality staffing and long time planning alongside with production (service process) have to be raised by a manager (Bitner, L. Powell, J. 1987). Finally, the marketing program used by the business before may not be efficient in terms of the expanded business. Due to geographical shift and business reorganization implementation of the new marketing campaign might cause problems. Solution to this issue may be outsourcing of the marketing part to the third party, e. g. marketing agency. Short term and long term business planning should consider not only the direct decisions necessary such as geographic location, financing and staffing, but also the degree of autonomy of each business unit as well the applicability of the currently employed accounting information system, extent of buying integrated, and image of the separate business units. References Bannock, G. (2005). The Economics and Management of Small Business: An International Perspective. New York: Routledge. Bitner, L. N., & Powell, J. D. (1987). Expansion Planning for Small Retail Firms. Haswell, S., & Holmes, S. (1989). Estimating the Small Business Failure Rate: A Reappraisal. Journal of Small Business Management, 27(3). Hornsby, J. S., & Kuratko, D. F. (1990). Human Resource Management in Small Business: Critical Issues for the 1990s. Journal of Small Business Management, 28(3). Lundstrom, A. (1990). The Development of Small and Medium-Sized Enterprises - Some Empirical Findings. Journal of Small Business Management, 28(1). Stoner, C. R., & Fry, F. L. (1985). Business Plans: Two Major Types. Stow, L. K. (2001, September). Up Hill and Down Dale. Geographical, 73, 22. Read More