Business Investigation on Bristol-Home Decorating - Example

Bristol home decorating In a company, owners usually try to ensure that the available cash flows are enough to cater for any operations for the company. The major ways of ensuring a stable cash flow for a company is by on time collection of debts, extension of debt repayment by making new deals that will not destabilize the company’s relationship with the suppliers. In the case of Bristol Home decorating, the company should first address the issue of cash flows. The cash flows of a company are made good by the following factors; Proper forecast- The best way of ensuring a stable cash flow is by pin pointing the main areas in the company that spend a lot of cash. Most businesses are usually not ready for costs that are quick growing. In a case of forecasting, a company should keep in mind that a situation of increased sales may call for more sales staff. That will ensure that all the purchases are supplied by the sales staff at the right time and in the desired place. In the case of Bristol Home decorating, the company made a proper cost and revenue forecast. The forecast can be, made by the company coming up with a budget. The budget will be formulated subject to the previous year’s results. A financial analyst should be able to analyze the spending behavior of a company and that will enable the company to come up with a proper budget. A good budget will ensure that money is available when required and that implies will not run into liquidity problems. The increase in cash flows in the company may be attributable to that (Isaac 2001, pg 89). Evaluation of company terms- If a company is having cash flow problems, it should evaluate and revise its current terms will its debtors and suppliers. The policy on cash flow management is ensuring that a company talks the longest time possible to repay suppliers and ask for payment within a short duration. In the case of Bristol home decorating, the company evaluated its policy on debt repayment. It made negotiations with suppliers so that they can extend the debt repayment period. That will ensure that the company is able to plan for its cash flows. The company also ensured that the debts that debtors owed the company are repaid within a short duration. So as not to spoil the relationship that exists with the debtors, the company can offer a discount that should be associated with early repayment of debt. The company can also impose a penalty for late payment of debt. That will motivate the debtors to repay their debts promptly. The company should also investigate to ensure that it does not loose out on discounts offered by the suppliers. If the suppliers offer a discount, the company should ensure it takes advantage of the discounts. Enforcement of discipline in payments- A company should strive to ensure that it finds out the number of days that debtors take in the payment of debt and the collection activity that is been put in place. The company should also ensure that it has the right level of contact with its customers. That will encourage a favorable customer relationship. That will enable the customers to carefully talk about any problems they are having with the company. The company should also ensure that it is able to solve disputes in the fastest and best way possible. Disputes should be resolved out of the way of the public so as not to dent the image of the company. That will ensure that the good reputation of the company is retained. The discipline should also be employed in debt repayment. That means that debts should be paid in time to avoid any penalties. Segmenting of inventory, suppliers, and customers- In the segmenting of inventory, a company should analyze the volatility of sales. That means that it should analyze the stock that sells most and the stock that reaps in a lot of income in terms of profit. From the analysis, the company will be able to make a decision on the stock to keep and the preference rate for restocking. The customers should be categorized in terms of on time bus and regular customers. The company should negotiate better discounts and terms with its regular customers. However, the company should also analyze the payment activities of the regular customers. This is because the regular customers may turn out to be the worst in payments. That should also apply for the suppliers (Krumwiede 1998, pg 33). Bristol home decorating has an option of either rebranding or replacement. Rebranding usually happens in the life cycle of a product when the sales of the products are constant and are in the verge of depreciating. That means that the company can use the option of rebranding which will be more cost effective as compared to replacement. Rebranding will also mean that the customers will not have to be taught a lot about the product because they are already aware about the product. The customers can however be taught about any additional features in the rebranded product. Rebranding may entail changing of product colors or packaging. In the case of rebranding, the company should carry out an intensive marketing strategy that will be aimed at increasing awareness of the rebranded product to the customers. Replacement occurs when a product has become obsolete (Drucker 1995 pg 57). That is a case whereby the sales of a company for the product have drastically reduced and the company is getting losses from the product. In such a scenario, the company should totally replace the product with a product that serves the same purpose but with different features and a different identity. That will enable the customers who bought the previous product to be able to substitute the product with the new product. That means that the company will have to invest in marketing. Marketing will include coming up with billboards and adverts that will inform the customers of the new product in the market. That will be a brilliant idea because the company will have an idea on the target market and the proper positioning of the product (Kaplan 2002, 59). Analysis From the analysis, replacement turns out to be more cost intensive. The initial cost of replacement is equal to $105,000 whereas the cost for rebranding is equal to $45,000. The cost is because replacement will require the establishment of a very different product that will have to undergo testing and research. The research will be meant to ensure that the company is aware of the wants of the customers and that will make the company to design the product that fits the specifications of the customers. Replace will also have to cater for extra marketing cost that will be aimed at ensuring that the company sells out properly. The cost of rebranding is low because the company only changes a few things on the commodity and that will make it more attractive and less costly. In the analysis of different projects, a company should compare costs against revenue. That means that a project may be cost intensive but the benefits reaped from the project are more. Therefore, financial analysts will have to analyze the benefits of a project by carry out project appraisal. There are a number of project appraisal techniques. The appraisal techniques include, IRR, payback method, and NPV. NPV is a project appraisal technique that tries to evaluate the net present value of future cash flows. That means that the cash flows of a company have to be evaluated to calculate the project that reaps the highest NPV. For mutual projects, a company should choose a project that has the highest NPV. That is because the project will add up to more profits to the company. For projects that are independent, the management of a company can choose any project that has a positive NPV. A company should ensure that the project that has been selected has a positive NPV. For a project that has a negative NPV, the management should not take up the project because it will yield to losses. For a project that has a NPV that is equal to one, the project to be undertaken should be chosen at the discression of the management. That is because the projects will yield the same results and hence the most convenient project should be undertaken. In the case of Bristol Home decorating, the company should take the option of rebranding. Rebranding will lead to a higher NPV as opposed to replacement. Rebranding will yield a NPV of $1,775,321 as opposed to replacement that will yield a NPV of 1,763,032. Therefore, the company should not replace the product and instead rebrand (Ellram 2004 pg 28). Rebranding is associated with a number of advantages over replacement. The advantages include the following, Awareness- This is because it is believed that awareness of a product is usually increased because of rebranding. Most customers would like to be associated with the product because it is more attractive than the prior image of the product. Branding usually deals with identity and not the composition of the ingredients of a product. That means that there is no extra additive to the product in terms of quality other than the image of the product (Steven et al, 2007, pg 28). Consistency in market place- a customer usually considers a product that he / she constantly sees in the market. This is because many customers do not prefer been first trails. If a brand is found often in the market, the customers would like to be associate with the product so as to try out because they believe it has stood the test of time as opposed to new products that are been tried out in the market. Customers usually believe that because the identity and brand of a product are kept the same that the quality will also be the same and hence the quality is preferable as opposed to other trail products in the market. However, rebranding is usually associated with a number of disadvantages; the disadvantages include the following; A product may become a common place- this happens because most companies strive to ensure that their products are the best in the market place. After the goal is achieved, the products name may turn out to be a generic name whereby customers refer to the company’s product when referring to a different product. Therefore, rebranding should ensure the product is the best in the market but not a generic term (Cooper 2007, pg 35). Negative attributes- this happens in a case whereby a product has ever been associated with a negative thing or event. That will mean that the negative attribute will become attached to the product and it may take a long time to wipe off the wrong image of the product. In such a case, replacement may be preferred as a better option. Confusion among customers- customers may be confused about the company product and that may lead to loss of customers. This is because most people may perceive the rebranding to be a way of camouflaging a negative attribute about the product. That will lead to loss of customers. In addition, a drastic change in the product’s image may cause confusion among the customers and that means that the customers may confuse the product for other products. Complications- the issue is usually not smooth, as most people perceive it to be. This is because the company may end up getting losses that may be associated with the old stock for the old brand. The changeover may turn out to be difficult and lead to losses. Conclusion In the case of Bristol home decorating, the best option will be rebranding as opposed to replacement. This is because the option is cheaper and yields to a higher net present value. That will yield to more profits and that is the main aim of rebranding for a company. Rebranding is usually not a necessity to a company. However, it is usually true that rebranding will be necessary for a company at some time in its products life cycle. That will enable the company to reap the benefits of rebranding. Bibliography Compton, Ted R. 2004. "Selection of projects in an Organization - Part 1." Journal of Systems Management 45, no. 3 32-40. Cooper, Robin et al. 2007. "Project management." Management Accounting 1A, no. 5 54-57. Drucker, Peter F. 1995. "The Information Executives Really Need." Harvard Business Review 73, no.: 54-62. Ellram, Lisa M.2004. “Revenue recognition" Journal of Cost Management, 22-31. Isaac, Stephen, and William B. Michael. 2001. Handbook in Research and Evaluation. San Diego:EdITS Publishers, Kaplan, Robert S.2002.Brand management. Marketing management 74, no. 5 58-63. Krumwiede, Kip R.1998. "ABC, Why Its Tried, and How It Succeeds." Management Accounting: 32-38. Steven P., Larry M. Wood, and Tim M. Lindquist.2007. "Appraisal techniques” Management Accounting : 28-33. Read More