Health of Family Business - Essay Example

Health of Family Business Executive Summary In the present scenario, family businesses play an important role towards better development of an economy. Family businesses are accountable for creating better job opportunities and community growth. In this regard, the family bakery business i.e. Morningstar Bakery is conducted by a close friend of business consultant from KPMG who has been appointed for reviewing business performances. The nine key elements of business model canvas have assisted the business consultant in identifying that the organisation has been performing its business operations effectively. The organisation with the assistance of quality and homemade ingredients is facilitated in providing fresh products, which have assisted in performing business operations in a financially stabilised manner. The marketing activities have also aided the organisation in creating better awareness amid customers in the market segments. However, certain limitations are identified in the area of financial operations, investment procurement and management structure. In this regard, recommendations are made which include online business operations, external investments and developing business relationship with external business consultants in order to ensure that business operations are conducted sustainably. Subsequently, it can be stated that the business operations of the organisation are performed moderately in the market segment of the UK. Table of Contents Executive Summary 1 1 Table of Contents 2 1.0. Introduction 4 2.0. Review of Key Elements 5 2.1. Customer Segments 5 2.2. Value Propositions 6 2.3. Channels 7 2.4. Customer Relationship 8 2.5. Revenue Streams 8 2.6. Key Resources 10 2.7. Key Activities 11 2.8. Key Partnerships 12 2.9. Cost Structure 12 3.0. Financial Review 14 4.0. Evaluation of Financial Performance 16 5.0. Organisational Structure and Roles 17 6.0. Marketing Review 18 7.0. Conclusion 20 20 8.0. Recommendations 21 References 22 1.0. Introduction Family business is a kind of business domain which is conducted based on the prevailing ethos of a family. Family business is recognised as an important backbone responsible for the development of an economy. The concept of family business has assisted in generating wealth along with job opportunities in a community. A business is identified to be a family business if an individual, who has developed the firm, possesses the majority of the rights in making decisions. Additionally, in circumstances when the business operations are managed by family members, it is recognised as a family business. In this respect, when individuals from one generation to another are involved in a business then it is termed as a family business (Drake, 2009). Moreover, family businesses are conducted by developing a better connectivity with the communities. Family business is also identified to possess certain limitations in relation to conflicts amid family members and incompetent members (Schwass, 2013; Sharma & et. al., 2013). Correspondingly, a very close family friend operates a family bakery business in the United Kingdom named ‘Morningstar Bakery’. The prime objective of the business is to provide quality goods at an economical rate. The friend is entitled with the task of performing management operations. Additionally, the friend is also accountable for making business decisions in accordance with which business operations are required to be conducted. In this regard, the management ensures that products and services are offered in keeping with preferences of customers. The products of the organisation comprise different assortments that include tortes and pastries among others. The management of the organisation motivates staff to perform their operations in accordance with the needs of customers along with maintaining a friendly attitude towards the customers so that they are encouraged to revisit the bakery time and again. Contextually, an external Business Consultant from KPMG has been appointed by the Board of Directors of Morningstar Bakery with the aim of identifying the health of the family business in relation to strategic plans that are adopted. The business consultant and entrepreneur of the family business are close friends and subsequently, the business consultant has derived adequate information in relation to the family bakery business 2.0. Review of Key Elements The business model canvas consists of nine important elements assisting in obtaining important facts about the activities that are relevant for enhanced performances of business organisations. The business consultant with the assistance of the business model canvas will be able to have a comprehensive understanding about the business performance of the family bakery business i.e. Morningstar Bakery (Santos & et. al., 2014; Laurea, 2012). Correspondingly, the business consultant will identify business performances with the assistance of nine elements as described hereunder: 2.1. Customer Segments The family bakery business i.e. Morningstar Bakery has developed different varieties of products that include baguettes, bread, pastries, tea biscuits, cookies, pies and diverse types of bread. In this respect, the organisation has been developing diversified products with the aim of meeting the preferences of enormous number of customers served on a daily basis effectively. Moreover, the organisation targets to serve customers having different preferences as well as attributes. Subsequently, the organisation is identified to target customers on the basis of segmented market. Segmented is a strategy of targeting customers based on income, as the organisation has been targeting customers of low along with medium income groups. Contextually, the organisation has targeted local residents and workers in the region. The prime objective of the organisation is to provide quality products with a touch of home-made favour at an economical cost. Respectively, the organisation with the assistance of segmented strategy has been performing business operations effectively (Laurea, 2012). 2.2. Value Propositions Morningstar Bakery has been providing quality as well as fresh homemade products at a competitive price with the aim of ensuring that business operations are conducted successfully. The products are developed based on fresh ingredients and on the expectations of the customers and in this respect, the organisation is able to provide better valued products to the customers. Additionally, the organisation is facilitated with the opportunity of producing unique products, which has also aided in developing an effective brand image in the operational market segments. Subsequently, the provision of quality products at an economical rate has assisted the organisation in meeting the needs of the customers successfully (Laurea, 2012). In this regard, the uniqueness of the business is based on the products and the prices at which the products are offered. Subsequently, the organisation with the assistance of quality products and competitive prices is facilitated with the opportunity of conducting business operations successfully as compared to other bakery companies. 2.3. Channels Morningstar Bakery has developed an effective transportation system with the assistance of which supplies of materials are made efficiently. Additionally, the organisation has also established a prominent market network with the assistance of which communication and linkage are made with customers. The products are sold from a retail outlet of Morningstar Bakery. The bakery mainly deals with general public including the local residents and workers. In this regard, the organisation by developing effective promotional channels which include television, hoardings and radio is able to create an association with the customers successfully. The organisation has also developed ads in social media platforms in order to have a better direct association with customers. Respectively, these channels have assisted the organisation in promoting value propositions to the customers, which in turn has aided in building better awareness in the market segments (Laurea, 2012). 2.4. Customer Relationship Morningstar Bakery has developed an extensive relationship with customers with the aim of retaining as well as acquisition of a large pool of customers in the market segment of the UK. In this regard, the staff members are seemed to play an effective role in developing an effective relationship with customers. The staff members are entitled to ensure that the customers are offered with the products based on their needs. Additionally, the products are offered to the customers in a timely manner. Subsequently, the staffs have developed direct contacts with customers so that long-term relationship is developed. Moreover, the organisation with the assistance of social media technologies is facilitated in obtaining feedbacks from customers successfully. In this context, the organisation by developing human interaction with customers is able to leverage the experiences of customers (Laurea, 2012). 2.5. Revenue Streams Morningstar Bakery has been focused on providing products as well as services through effective channels along with developing an effective association with customers, which in turn has been the key driving force behind the existing strong business value. In this context, it is affirmed that the customers obtaining better value added products are willing to pay for the value obtained. Subsequently, the organisation has developed revenue streams through transaction revenues, which imply that customer make one-time payment for the products obtained. Contextually, the organisation generates revenues through asset sales. Asset sales signify that revenues are generated from the sales of bakery products of the organisation. The organisation has obtained fixed pricing policy depending on various elements that comprise quality, customer segments and quantity. Correspondingly, the customers are provided with the quality products at an appropriate price in a timely manner (Laurea, 2012). 2.6. Key Resources Key resources are the prime assets that are essential for business operations to perform their activities effectively. In this regard, Morningstar Bakery possesses different key resources including physical resources, human resources and financial resources with the aim of entering target market segments effectively. Additionally, resources are also important in building effective relationship with customers and generating revenues as targeted. Physical resources play an important role in conducting daily operations significantly. Contextually, the family business organisation possesses different physical assets which include distribution networks, cooking utensils, cooking machineries, building and vehicles (Laurea, 2012). Morningstar Bakery also possesses an expert set of employees for cooking, product delivery and online community. Additionally, the entrepreneur is entitled with the responsibility of performing marketing and procurement operations as well as financial measurements. In this regard, the employees recruited by the company are needed to possess expertise in their services in order to ensure that products and/or services are offered on the basis of needs of customers. The organisation also possesses adequate financial resources with the aim of ensuring that planned business operations are conducted efficiently in accordance with organisational business objectives. The owner of the family is identified to obtain required funds from different sources that include bank loan and personal investments (Laurea, 2012). 2.7. Key Activities Key activities signify the business operations that are conducted with the intention of accomplishing business objectives successfully. In this context, Morningstar Bakery is seemed to undertake different activities that include procurement of required materials, developing homemade products, marketing activities and financial analysis. The activities have assisted the organisation in building an effective relationship with customers, so that better value added products are offered to the customers based on their requirements and preferences. Subsequently, the family bakery shop is identified to adopt different operational activities which include production activities, platform activities and problem solving activities (Laurea, 2012). Production activities have assisted Morningstar Bakery in producing and delivering quality products and/or services for better satisfaction of customers. Additionally, the organisation has been focused on developing effective customer relationship through human interaction and social media technologies by obtain feedbacks from customers. Accordingly, the organisation has provided products on the basis of customers’ preferences in order to meet their expectations. Subsequently, the organisation has developed an effective platform with the assistance of which promotional as well as delivery services are conducted successfully. The developed communication platforms have aided the organisation promoting products successfully in the market segments (Laurea, 2012). 2.8. Key Partnerships Morningstar Bakery has developed an effective relationship with business partners in order to ensure that business operations are performed effectively so that customers are offered better value-added products. The organisation by developing partnership with suppliers is able to ensure that required materials are procured effectively, which assists in performing operations with better business capabilities as well as competences. The organisation is identified to develop scale alliance with different suppliers with the aim of ensuring that procurement and delivery operations are conducted effectively. The alliance has also aided the company in maintaining an effective relationship with customers, as the customers are offered products in a timely manner (Laurea, 2012). 2.9. Cost Structure Cost structure implies that costs incurred are taken under consideration with the aim of ascertaining business expenses. In this respect, Morningstar Bakery is identified to undertake cost measurement option with the aim of ensuring that better value added products are offered in order to control channel costs and other relevant costs in the field of key resources, key partners and key activities effectively. In this respect, the organisation with the identification of various activities and resources is able to implement an effective cost structure. The family bakery business is identified to adopt a value-driven approach, which implies that the business operations are focussed towards providing quality products. Subsequently, the organisation by offering better value added products at economical rate is able to meet the expectations of the customers successfully (Laurea, 2012). The nine elements of the business model canvas have assisted the business consultant in having a comprehensive understanding about the business process and operations among others of Morningstar Bakery. In this context, the business consultant has obtained adequate information about the procedure based on which business operations of the friend’s bakery business are executed. It has been identified that the family bakery business is conducted effectively owing to the provision of offering products and/or services in accordance with the preferences of customers. Additionally, the organisation has been providing better value added products. The business model has also aided in obtaining important facts about the value proposition delivered, key activities, key partners and key resources used in conducting business operations effectively. 3.0. Financial Review The profit and Loss Account of the bakery family business is obtained from inadequate financial information due to confidentiality and limited access to financial statements. The family bakery business of the friend is seemed to be carried out in an effective manner due to quality products, homemade ingredients and human interaction. The financial figure depicts an increase in the sales and operating profit i.e. EBIT. Financially, Morningstar Bakery is recognised to perform in a stable manner but there are certain issues that might affect the viability of the organisation in future. The organisation might be under the influence of inherent tax, which might pose financial pressure on the organisation. In this regard, the organisation might face the challenge of destabilised capital base. Moreover, the business operations of the organisation are executed with the assistance of financial funds acquired from bank loans and personal investments. It has been also identified that the organisation lacks investments from outside investors owing to the behaviour of cautious risk-taking. The owner of the business is seemed to obtain financial instruments, which might not affect their ownership status. In this regard, it can be comprehended from the current strategies adopted that the owner is focused on operating the business operations with better personal control (European Commission, 2009). Respectively, based on analysis of the business model, the owner of Morningstar Bakery is required to adopt effective measures of consulting with different consultants which include lawyer, insurance advisor along with tax specialist so that the business operations are performed with better sustainability in future. Moreover, the owner is also required to ensure that effective planning is made in relation to tax so that business capital is maintained in a stabilised manner (KPMG LLP, 2012). 4.0. Evaluation of Financial Performance Morningstar Bakery is a small business operated by family members. In this regard, the business consultant has limited access towards the financial statements of the organisation owing to which, financial information is not analysed in an elaborative manner. However, the limited financial information obtained revealed that the business is operating in a positive manner with better revenue and it will operate successfully in future for its quality products and competitive pricing policy. Respectively, on analysis of financial information, it has been identified that the operating income of the family business has depicted positive as well as steady rise in the future. The increase in the sale figures and profit margins signifies that the bakery business is performing effectively in the market segments. It can be ascertained that the business in near future will operate with better cash flow objectives and returns. The business is seemed to lack investment liquidity due to non-involvement of external investors. Thus, it can be determined that the organisation with the provision of homemade quality products at economical price is able to excel in business performances. 5.0. Organisational Structure and Roles Organisational Structure of Morningstar Bakery Morningstar Bakery is a family bakery business conducted by a close friend of the business consultant appointed from KPMG with the intention of analysing the financial performances of the organisation. The friend is the entrepreneur entrusted with the responsibility of formulating plans and making investments decisions on the basis of which business operations should be conducted. In this regard, the entrepreneur or owner is accountable for management operations and there are other individuals under the owner accountable for performing relevant business operations. Contextually, the organisation structure comprises the following individuals that include three bakers provided with wage of £30,000 p.a. each, two staff for attending customers with wages of £27,000 each and an employee assigned with billing as well as maintaining online community operations who is offered £28,500. The entrepreneur has entitled the operations of the shop to operation manager, who is entrusted with responsibility of managing all the on-shop daily activities in relation to production and customer orders among others. The operation manager is provided with a salary of £33,000. The entrepreneur is accountable for managing stock and bookkeeping operations. Additionally, the entrepreneur is also entrusted with the responsibility of conducting promotional activities and building customer relationship. Bakers will be liable to seek that food products are developed in an appropriate manner and in accordance with the preferences of the customers. The organisation is also consisted of two other staff members accountable for serving customers. One staff will be liable for managing payments and maintaining reviewing social networking sites of the shop. Thus, the family bakery business is based on the competency level of the entrepreneur, as the management decisions in relation to the business operations are made by the entrepreneur himself. In this respect, as a business consultant it has been recognised that there is a limitation in making effective business decisions owing to the fact that business operations are conducted on the basis of decisions of an individual without adequate market research and consultants. 6.0. Marketing Review The marketing activities of Morningstar Bakery are identified to be carried out effectively by the entrepreneur. In this regard, the products of the organisation are promoted through different media technologies which include television, radio and hoarding. The organisation also promotes food products with the aid of social media technologies that include Facebook and Twitter. Subsequently, the marketing activities have assisted the organisation in creating better awareness amid customers in the market segments in relation to the products offered. Additionally, social media technologies have facilitated the organisation in obtaining feedbacks from customers and accordingly, the organisation provides products to the customers for better satisfaction and relationship development. Correspondingly, the marketing activities have assisted the organisation in developing an effective brand image in the market segments in terms of its key ingredients such as bread, baguettes, pastries, tea biscuits, cookies and pies. In this regard, as a business consultant it is signified that the marketing activities performed are efficient for product promotion, but lack effectiveness in the provision of service delivery. The marketing operations of Morningstar Bakery are conducted on the expertise of entrepreneur, due to which there is limited access towards the marketing plans adopted from the point of view of the business consultant. In this regard, it can be comprehended that Morningstar Bakery with the assistance of its adopted marketing strategies and plans has ensured effective means for developing better awareness amid customers in relation to products and prices. Additionally, marketing activities have assisted the business in conducting operations in accordance with the needs of the customers. Subsequently, the business is able to operate effectively in the market segment. 7.0. Conclusion It can be comprehended from the foregoing discussion that Morningstar Bakery is a family bakery business conducted by a close friend of the business consultant appointed from KPMG. The business consulted with the assistance of nine key elements of business model canvas has recognised that the friend is the prime individual accountable for conducting business operations successfully. Moreover, it is identified that business operations of the organisation are executed in an effective manner in relation to customers’ preferences, pricing policy, customer relationship, marketing activities and financial streams among others. However, the business consultant implied that there are certain limitations in relation to management structure, financial considerations and marketing activities. Respectively, it can be determined that the family bakery business has been performing its business operations in a moderate manner with definite scope of further improvement. 8.0. Recommendations After conducting an efficient analysis, it has been identified that the business operations of Morningstar Bakery can be enhanced in certain areas that include marketing, finance and management structure for better sustainable performance. The organisation in order to improve marketing operations is required to recruit marketing manager and develop an online business, where customers will be facilitated with the opportunity of making online orders of products. Additionally, the customers will also be able to make online payments. In this respect, the organisation will be able to enhance its market share (Peace of Cake, LLC, 2012). The entrepreneur is responsible for making management decisions, which might limit effectiveness of decisions and thus the organisation is required to develop partnership with business consultants so that effective decisions are made, which might assist in performing business operations with better profit margin and sustainability. It might also aid in expanding business operation successfully in the future (SBA, 2013). Morningstar Bakery is also required to adopt investments from external investors with the aim of ensuring that business operations are conducted appropriately. Moreover, the organisation with the assistance of investments and comprehensive analysis of taxation policies will be able to retain adequate funds for sustainable business operations with minimised risks factors (Invest Barbados, 2012). Correspondingly, the recommendations provides by the business consultant will aid the organisation in conducting business operations successfully in the future. References Drake, A., 2009. Understanding Family Business. A Practical Guide for the Next Generation. [Online] Available at: http://www.ifb.org.uk/media/44248/nxg_ufb_final.pdf [Accessed April 27, 2014]. European Commission, 2009. Overview of Family-Business-Relevant Issues: Research, Networks, Policy Measures and Existing Studies. 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