The Management of Friend Company - Case Study Example

Introduction: Friend is a private limited company that runs two hair dressing salons along with two newly established café-bars. Adam and Sandler are the owners of the business and are both brothers. The first saloon was opened in 2002 in Banbury and the second one was opened in 2005 in Witney. The bars however are recently been opened and it have become a new part of the company’s business chain. However recently, the brothers have been having troubles with their business. The problems being both financial as well as related to human resource are pretty much evident. I (David) took the responsibility of finding out solutions to their problems. Therefore a business report is compiled, which itemises each department and issue so that every problem can be studied. For the purpose of clarity, the company can be divided in the following department in terms of their significance: i) Marketing ii) Human Resource Management(HRM) iii) Finance iv) Operations Marketing strategy of Friend: After discussion with the owners and then studying their marketing approach, it appears that they have no such plan at all. They believe in advertising through their customers; however it is evident that the customer base is not at all increasing. Their customers might be loyal, but are not good at advertising them. Similarly there is no customer base in the two café-bars too. Most people only come there by chance. The café-bars again are not advertised. Utilizing the seven P's of marketing, the following information can be produced. 1. PRODUCT: The saloons and bar both sell different products. It can be established that the products need to be suited for the targeted audience. The saloons can sell Aveda products directly to their customers, to get extra income. The bars too can cut their menu to more focused foods. 2. PRICING: The pricing of products are considerably wise, especially the food at café-bars is not relatively inexpensive. 3. PLACE: since both saloons are located in the centre of the cities, the placing decision needs no re-consideration. However the management of both saloons and their café-bars are to be done coherently. 4. PROMOTION: No advertising is used at all. Publicity to increase sales is missing as well. The fact that local music events are organized at the bars makes it easier to introduce new products. This opportunity needs to be utilized in order to publicise the saloons without any additional cost. 5. PEOPLE: Understanding the customer better allows designing appropriate products. The Friends have to understand that they can no longer survive with their current customer base. For example, in the café-bars the food sure has variety, but no focus. This makes customer less likely to come to the bars. 6. PROCESS: After inquiring for some customers it was noticed that the environment at the saloons was not customer friendly. The services given by the staff aren’t satisfactory, thought the haircuts were good. The overall processes of the business are run on ad-hoc basis, with no planning at all. Processes need to be streamlined and a clear guideline has to be established. 7. PHYSICAL DISTRIBUTION: Distribution is a key determinant of success for all companies. Friends have to also concentrate on selling their Aveda products from the saloons too. Friends can utilise their personal relationship to promote themselves, they can easily make promotional offers through their monthly music shows. Small advertisements through pamphlets of leaflets can be done during the music events. Human Resource Management of Friend Human resource management or HRM plays a key role in every business, recruitment of qualified and job oriented professional can boost a business to new heights. For any social group to perform its tasks efficiently and achieve its common objectives, the management of its most important resources - the people - is of utmost importance. The following model can be considerable use to the employers: Commitment Based HRM Policy Area broader jobs; combined planning and implementation; teams Job design principles flat structure; shared goals for coordination and control; status minimized Management Organisation mutual mechanisms for communications and participation; mechanisms for giving employee voice on issues Employee Voice reinforcing group achievements; pay geared to skill and other contribution criteria; profit sharing Compensation mutuality; joint problem-solving and planning Labour Management Relations fulfilment of employee’s needs is a goal rather than an end Management Philosophy The enquiry reveals that poor human resource system exists in the Friends network. One of the main aspects of HRM is to ensure staff and job satisfaction. At Friends, the high staff turnover simply elucidates that job satisfaction does not exists. There can be many reasons for this, for example: 1) The staff believes that no training is provided to them, this makes them believe that their future is bleak in the company. .2) they are not appreciated for their initiatives. 3) No de-centralized system of decision making is ensured. Staffs are not taken into confidence when a decision is made. This creates the impression that they are not part of the decision making process. And their voices are not heard. 4) The staff also complain that their rest rooms are old fashioned and drab. 5) There is little connection between the decisions making of the two saloons. 6) Staff complains are not given priority. 7) Ill-management of staff at the café-bars and saloons. The following SWOT analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats Friends face. Strengths 1. Friend's is owned by two brothers, this makes them more related and reliable on each other. 2. Both owners are talented stylists themselves, this can be used as a marketing objective. 3. The owners are known by the locals. They have a market value of their own, and can be trusted by the people. Weaknesses: 1) There is no staff training at all. 2) Poor human resource management 3) No planning and ad-hoc decision making. Without taking the staff in confidence. Opportunities: 1) With the local presence and experience of Friends, it can easily utilise its personal relation to get a better customer base. Threats: 1) The opening of a new saloon is a crucial threat. 2) Straining employer-employee relationship can be dangerous to the business overall. 3) Financial issues have to be resolved before they take a turn for the worst. The actions which can be taken to manage human resource properly may include, providing proper training to the staff and listening to their voices. This creates a sense of importance in the staff too. The staff must be involved in the decision making process, allowing them to share their ideas and give their input in the better interest of the company. Incentives and rewards must be introduced so that a spirit of competition and better output is established. Finance Financial strength of the company lies in its ownership. Friend is owned by the same family; however the financial issues are not taken seriously. There exists no plan or strategy for the financial support of the company. The opening of both café-bars has been a loss at the best. It was noticed that more money is thrown on the café-bars, rather than on saloons. Moreover, if the figures are analysed then it would appear that the overheads of both café-bars equal their profits. The Friends’ management should have considered the financial aspects of starting new café-bars. A serious look at the financial figures provided can reveal that saloon 1 has been in profit consistently. However saloon2 has shown loss over the past years. The money was provided by the bank, and an interest is being charged on all four premises. Financial statistics reveal that the overheads are not clearly identified; the data must be itemized to account for overheads, which make 10% to 13% of the net sales. Subsidising the net profit to only 90% - 87% at once. Extra income can also be generated if both owners give time working at their own saloons. This will increase the confidence in employees and will help the owners utilise their time for better income. Moreover, Aveda can be contacted to review its policies regarding stopping the supplies. Moreover a good accountant can be hired as well, who can give accurate figures and make analysis. Operations The significant part in this study is operations of the company. Firstly the fact that operations do not correlate is evident, since decisions are only made on gut feelings and not planning. The Friends have to consider that their operations and decision making lack planning and ideas. They need to establish a strong plan for operations. The operations include supply of products to the saloons and supply of food to the bars. It should be noticed that saloons need considerably more funding then the bars, since they are being established for a long time and are the prime earners for the company. The saloons need to be more furnished and must appeal to the customers. The bars on the other hand have to focus more on food, then on other overheads. Plasma screens for example only add to the cost. The same amount could have been invested on the saloons’ refurnishing. Moreover, slashing prices to sell food at the bars in turn ends up in a loss, since most food has to be thrown away. Therefore the company must keep in view the demand of food before buying any. Recommendations: After interviews with the staff, management and the customer the short comings were founds, therefore certain recommendations can be made based on the situation 1) The management must plan their decisions. 2) The staff should be involved in the decision making of the company. 3) Proper training should be given to the staff. Long-term recommendations: As the business conditions are stringent and competition is tough, the Friends Company can manage to maintain their operations in a short spread area. This means that only a single saloon can be used, with a single bar. A small club or gym can be opened under the same premises too, to boost sales and earn maximum profit. Since the financial statistics prove saloon2 to be in loss through out, the workforce can be managed under saloon1 only. This will help them look after their business more accurately. It will also decrease overheads. Thus losses can be recovered early. Conclusion The conclusion from the present situation can be that, Friends have a financial crunch ahead. If they do not start working on serious notes, they might be out of business. The fact that they are willing to put their heart and sole into the business is positive. A bit more organized and they can start earning profits. References Cravens, D., W. & Piercy N., “Strategic Marketing,” Eighth Edition, 383. Kotler, p. (2003). Marketing management, 11th ed., America: prentice hall. Koontz, H. & Weihrich, H., (1994). Management: A Global Perspective, International Edition, McGraw-Hill, Singapore Fred R. David, Strategic Management Concepts and Cases, Eleventh Edition, pp.165-166. Kim, Daniel H., (1997). Toward learning organizations: integrating Total Quality Control and systems thinking. Cambridge, MA: Pegasus Communications, 1997. pp. 17. Lundy O (1994) From Personnel Management to Strategic Human Resource Development, International Journal of Human Resource Management Vol. 5 pp 687-720 Read More