Jellis Craig Company Evaluation - Case Study Example

JELLIS CRAIG COMPANY- SITE VISIT AND COMPANY REPORT Name Name of Class Name of Professor Institution Affiliation City and State Date Key Value-Creating Activities Value creation is one of the core reasons businesses exist. Business entities have to create and deliver value in an efficient and effective way to generate profits. Beinhocker (2006, p.12) is of the view that a business creates value through an irreversible process that provides order to resources in such a way that the said resource achieves greater usefulness to other people. Organizations can create value through a wide range of activities, interactions, relationships as well as causes and effects. The activities and interactions occur in different contexts and environment, including the market, the regulatory framework and the society. Jellis Craig has been able to create value through its effective interactions with customers, stakeholders, employees as well as regulators (JellisCraig, 2016). This has been achieved through a combination of different business processes and activities that can be best summarized in Porter’s Generic Value chain Porter’s generic value chain summarizes all the activities that a business undertakes in its quest to create value. For Jellis Craig, the key value creating activities including marketing and sales, human resource management, the building of client relationships, redevelopment opportunities as well as corporate social responsibility. Marketing and Sales Jellis Craig has been able to climb the ranks and become one of the leading real estate companies in Melbourne, thanks in part to the aggressive marketing and sales strategy the company utilizes. With the internet becoming the most popular means through which people communicate and interact, the company has made great strides in utilizing internet marketing. Through its social media handles, Jellis Craig has been able to market itself as well as its properties to potential buyers. Social media sites such as Instagram, Facebook and Twitter have also made it easier for the company to link with potential sellers of property (JellisCraig, 2016). The company actively engages its followers on social media by sending personal messages, commenting on posts as well as responding to inquiries promptly. The social media platform also provides Jellis Craig Real Estate Agents with a less costly channel to advertise properties on sale as well as the property related services the company offers. The company also utilizes search engine optimization as a means of directing potential clients to its website as well as social media pages. To improve the user-friendliness of its website, the company has a property-specific tab. This allows potential buyers and sellers of property to navigate easily to the property category of their liking. Given the important role that the image of property plays in the real estate industry, the company also makes use of professional photography. High quality images of property ensure that potential clients are drawn to the property. These images can be featured in a number of channels including company websites, real estate magazines, social media pages, blogs as well as fliers. Despite the increased popularity of the internet and digital marketing, Jellis Craig still makes use of print marketing. The company also markets itself through television adverts as well as billboards, albeit on a smaller scale given the high costs involved. Human Resource Management The company recognizes the fact that a knowledgeable, skilled and motivated workforce plays an important role in driving the business towards success. As far as the workforce is concerned, Jellis Craig describes itself as having employed the best of the industry’s professionals always (JellisCraig, 2016). Hiring properly skilled and knowledgeable employees is very important in the real estate industry given the competitive nature of the industry. Agents need to be very persuasive to attract more consumers while market analysts need be very keen to avoid misinterpretation of the market trends. Apart from ensuring that the company gets the best of the best during the hiring process, Jellis Craig also has some incentives aimed at motivating its employees. The company awards its best performing employees at the end of each year. The company also offers discounts to those employees interested in purchasing property through it. Another important human resource management activity that has proved to be crucial to the company’s success is the compensation packages the company offers its employees. Compared to real estate companies, Jellis Craig offers higher levels of compensations as well as bonuses. This has not only made the company one of the most sought after by prospective employees, but it has also allowed the company retain its current pool of employees. Training and development is also an important aspect of human resource management that Jellis Craig acknowledges. The company offers training to its new employees and allows the existing employees to attend seminars and workshops on industry trends and practices. Additionally, Jellis Craig allows its employees to participate in part-time studies. Employees are thus able to improve their knowledge, skills and competence while still on the job. Building of Client Relationships Customers are an important part of the business. Businesses exist with the main purpose of offering services or goods to the customer. For an entity to survive, it has to establish a positive relationship with its clientele. Jellis Craig Real Estate Agents and Property Managers recognize this fact and have set out to ensure that the relationship with its customers is a healthy one (JellisCraig, 2016). The company points out that since its establishment, it has been engaging its customers positively, an activity it aims to sustain even in the coming future. By establishing an enduring relationship with its customers, the company has been able to retain a good number of customers and even attract new customers (JellisCraig, 2016). Jellis Craig has been able to achieve this fete by providing unrivalled services which include property advice as well as free insight into the market trends. Apart from that, the company offers fair prices and even discounts to customers who have proved to be loyal. The company also maintains communication with its past and even prospective customers. The company has also garnered a significant following on its social media channels as a result of the positive relationship it maintains with its fans and followers. Redevelopment Opportunities Jellis Craig also understands that it can create value by obtaining underutilized or overlooked assets and transforming them into useful assets. The company has over the past years acquired assets that are underutilized, but well located. The company usually seeks approval for redevelopment. Once it has made such an acquisition and use of appropriate capital expenditures, it transforms the said assets into more valuable assets. Given the many redevelopment projects the company has taken part in, the company has been sought after by a host of developers around Melbourne and nearby regions (JellisCraig, 2016). Jellis Craig has also been able to create value by taking up properties other players have failed to find buyers for. The company then transforms the said property to conform to the prevailing conditions as well as popular consumer tastes and preferences. Corporate Social Responsibility The company points out that it is more than a local real estate agent. The company engages in other activities aimed at showcasing that it is committed to the well-being of the community. Apart from providing assistance to local schools, the company also engages in sporting activities and provides support to various interest groups (JellisCraig, 2016). The company is an active supporter of Breast Cancer Network Australia to which it provides assistance in raising awareness within the local communities as well as in fundraising efforts (JellisCraig, 2016). By engaging in community activities, the company has proved to care for the whole community as opposed to its interests alone. Supporting community activities ensures that a business gains acceptability among the people. It also increases the credibility of the business and allows many other people to know the key activities that the business engages in. Financial Efficiency Performance Measures Businesses have to keep track of their performance as a means of knowing their relative position to other players in the industry as well as how the performance compares to the business’ mission and objectives. Marr (2013, p.4) holds the view that key performance indicators are an important navigation tool that helps the managers of an organization understand whether the business is on a positive growth path or not. The right performance measures are usually the areas the organization is performing well and areas that need improvement. Jordan, McCarthy and Velo (2009, p.106) holds the view that most performance measurement systems and scorecards used by real estate companies do not adequately communicate the business’s strategic value because they fail to relate the metrics of real estate to the larger organizational objectives. Jellis Craig makes use of the balanced scorecard approach which sees an organization from four perspectives, namely the financial perspective, the business process perspective, the customer perspective as well as the learning and growth perspective (Balancedscorecard, 2016). The financial perspective places emphasize on the company’s financial performance. Under the balanced scorecard, an organization’s financial data plays an important role in measuring the performance of a business (Balancedscorecard, 2016). Jellis Craig provides its quarterly and annual financial data to its key stakeholders. Some of the key measures the company utilizes to measure its financial performance include net profit, net profit margin, revenue growth rate and cash conversion cycle. The company also measures its performance from the customer’s perspective. This perspective allows the company to know whether its customer base has expanded or not and whether customers are satisfied or not. Some of the measures the company makes use of under the customer perspective include customer retention rate, net promoter score, social networking footprint as well as conversion rate. The business processes perspective looks at the internal business environment and allows the business to measure the effectiveness of its internal activities (Balancedscorecard, 2016). Some of the measures Jellis Craig use include employee satisfaction index, average employee tenure, employee productivity, capacity utilization rate and inventory shrinkage rate. Product/Service Costing Product/ service costing allows the organization to calculate and maintain data that is relevant in determining the overall costs of an item of service (Singh and Gupta 2015, p.23). It plays an important role in setting of product or service prices. Jellis Craig provides consultancy and management services and also buys and sells physical property. This means that the company’s cost accounting involves establishing the costs involved in acquiring physical property as well as the delivery of services. Product and service costing aims at determining the accurate costs of a unit of production or service by investigating the resources used in the delivery of the said services or creation of the final product (Singh and Gupta 2015, p.56). Jellis Craig usually calculates the cost of an item or service with respect to the cost of individual components as well as the labour involved. The company charges the final consumers more than the total cost of acquiring a property or managing in order to generate profits. The company separates the direct and indirect costs by identifying those costs immediately involved with the final product or services such as labour. Direct costs can easily be linked to a specific cost item. On the other hand, indirect costs are those that can be directly linked to a particular product. These costs include rent, power bills as well as office equipment (Walker 2009, p.64). Cost-Volume-Profit Analysis CVP analysis makes it possible for the business to determine how its net and operating incomes are affected by changes in costs and volume. CVP analysis requires the business to identify fixed costs and variable costs (Walker 2009, p.101). For Jellis Craig, the company clearly separates its fixed costs from variable costs. The fixed costs include rental expenses, staff salaries, employee training expenses as well as property insurance fees. Variable costs identified by the company include advertising fees, legal fees, transaction fees as well as taxes as variable costs. To determine whether the organization is capable of covering its expenses and making profits, break-even analysis is usually conducted. Calculating the breakeven point usually requires identification of the variable and fixed costs. It is then calculated by dividing the fixed costs by the contribution margin ratio (Walker 2009, p.102). Budgeting Organizations create budgets as a means of carefully planning and allocating the available financial resources to different departments of business activities. According to Singh and Gupta (2015, p.4) budgeting is most widely utilized management accounting tool. Jellis Craig Company utilizes budgeting for control as well as planning. The company prepares its budget on a yearly basis. The responsibility of generating the annual budgets lies with the company’s chief finance officer. The process of budget preparation normally starts three to four months before the start of a new financial year. The yearly budgets usually present the expected needs of the different departments that make up the business. Budgeting helps organization limit the wastage of resources and also allows the business to create a financial roadmap to govern business operations (Singh and Gupta 2015, p.73). The size of the budget often depends on the levels of activities each department seeks to engage in as well as the amount of revenues the company has earned. More activities often result in bigger budgets. However, lower amounts of revenue earned often call for tighter budgets (Walker 2009, p.34). Sustainability Organizations promoting sustainability engage in activities aimed at safeguarding the environment and promoting the well-being of other people. As a real estate company, Jellis Craig has consistently been at the forefront advocating for the construction of buildings that are environment-friendly. The company highly values properties designed to be environment-friendly. The company also actively engages in campaigns aimed at making the public aware of the importance of a sustainable environment. Through its website as well as social media pages, the company has been able to update its customers about the latest house designs, building materials as well as technology constantly, making the real estate industry more sustainable. The company engages in other activities aimed at showcasing that it is committed to the well-being of the community. Apart from providing assistance to local schools, the company also engages in sporting activities and provides support to various interest groups. The company is an active supporter of Breast Cancer Network Australia to which it provides assistance in raising awareness within the local communities as well as in fundraising efforts Appropriateness of the Management Accounting Tools in Decision Making Performance Measures As pointed out earlier, performance measures allow firms to know where they stand in comparison to other players in the industry as well as in relation to the business mission and objectives. For Jellis Craig, the different performance measures have proved quite effective, enabling the company to identify its strong areas as well as weak areas. Performance measurement has also enabled the company to improve its internal and external communication. Apart from that, the different measures of performance have proved to be useful in justifying the different projects and activities the business engages in and their costs. Product/Service Costing Product and service costing makes it possible for a business to allocate costs to inventory as well as production processes. Through product costing, the company has been able to achieve high levels of accuracy when it comes to the tracking of business expenses. By assigning costs to different processes and projects, the company has also been able to achieve effective project tracking. These activities play an important role in decision making. Product and service costing allows management to identify costly processes or items and come with proper alternatives. The costing process also allows the business leaders to decide on the most appropriate prices for its products and services. Cost-Volume-Profit Analysis CVP analysis plays an important role in decision making by helping business leaders decide the type or range of products to deal in. Knowledge of the company’s breakeven point allows managers to determine how future production and spending will make an impact on the business. Such an analysis allows the organization to decide on areas that currently need improvement for success to be achieved in future. CVP analysis heavily borrows from statistics, meaning that the options available to the business can be broken down into probabilities. This allows the business leaders to make better-informed decisions. Budgeting As the most commonly used management accounting tool, budgeting plays an important role in the decision-making process. Budgeting allows business leaders to plan for future growth and expansion of the business (Jeremy Hope 2013, p.88). The capital expenditures an entity can save as a result of budgeting can be put into other uses aimed at expanding the business in future. Through the budgeting process, business leaders are also able to identify the important processes and less important processes. This, in turn, facilitates the making of better financial decisions Recommendations Budgeting Jellis Craig is a hierarchical company in which the budget is prepared by the chief finance officer. This is a “top-down” approach in which budgets are initiated and initially prepared at the top level of the organization and then passed down to other departments at a lower level of the organization. This approach is time-consuming since it requires comment, negotiation and agreement before approval. A bottom-up approach would be more effective and less time consuming. This approach starts with top management setting key targets and directions for each department. Department managers then use the targets and directions to draft initial budgets. Departmental managers are aware of the nature of the different activities within their departments; thus, are better positioned to draft their budgets. Performance Measures The performance measures the company currently uses do not take into account the numerous perspectives that characterize the real estate industry. It is important for the company to widen its perspectives in such a way that it will be possible to compare the company performance with that of key competitors. Additionally, it is recommended that the company should strive to make available its key performance indicators as well as results. This will not only allow key stakeholders to know how the company is performing, but it will also help attract potential partners. References List Balancedscorecard, (2016). What is the Balanced Scorecard? [online] Balancedscorecard.org. Available at: http://balancedscorecard.org/Resources/About-the-Balanced-Scorecard [Accessed 18 May 2016]. Beinhocker, E. (2006). The origin of wealth. Boston, Mass.: Harvard Business School Press. JellisCraig, (2016). Company Profile. [online] Available at: https://www.jelliscraig.com.au/go/about-us/company-profile/ [Accessed 18 May 2016]. Jeremy Hope, R. (2013). Beyond budgeting: how managers can break free from the annual performance trap. 3rd ed. Harvard Business School Press. Jordan, M., McCarty, T. and Velo, B. (2009). Performance measurement in corporate real estate. Journal of Corporate Real Estate, 11(2), pp.106-114. Marr, B. (2013). Key performance indicators. Harlow, England: Pearson Education. Singh, S. and Gupta, S. (2015). Entrepreneurship: Commerce. 4th ed. Mumbai: SBPD Publications. Walker, J. (2009). Fundamentals of management accounting. Oxford, UK: CIMA Pub.Elsevier. Read More