Basic Principles of Management - Essay Example

Introduction "When you start a new business you have to become an expert in a wide range of fields, a jack of all trades, because you can't afford to employ specialists. But, as you get bigger you have to hand over some of these responsibilities to real experts. By far the most important thing I've done is to develop a management team that can compensate for the shortcomings of the founder." Any business, whether small or big, has to be governed by the basic principles of management. It is generally seen that a successful small business evolves into a medium and, ultimately a large business. The success of a business depends on: Identifying opportunities/potential Strategy Plans/ Organization Arranging Source of Finance Managing Costs Project Management Leadership Business Ethics My Experience as a Restaurant Owner/Entrepreneur Recognizing the Potential With globalization and convergence, nascent industries like tourism are bound to grow by leaps and bounds. With the impetus given by the government on creating infrastructure, not only for the local population, but for the perceived needs of the tourists, I had a feeling the tourism industry would pick up in a great way in our region. There have been fast food joints operating in our area for quite sometime, but these predominantly serve American food. There were one or two eateries serving local food, but the service was not upto the mark. The need of the hour was to open a restaurant which could cater to an international clientele , and yet allow them to experiment with the local cuisine, if they felt like. Yes, I had made up my mind to exploit this potential and open a budget restaurant,which could cater to the growing number of tourists, who wanted to have cuisines from all over the world and were willing to experiment the local flavours too. Strategy/Plan of Action Selection of Location Location plays a very important role in determining the success or failure of a business venture, especially a small business venture, like an eatery. The business and revenues would most certainly depend on the number of persons visiting this outlet. So, I had to make sure that it was in the heart of the city or such appropriate place , where tourists would flock for a good bargain. Luckily, an existing eatery was on sale, very close to the city center and I finalized on it. It had only one floor built, so, I could add some more floors, in case my venture was successful. Finance/Credit The cost of the building with the existing unit was 5000. Mobilizing such a huge amount was a nightmare. Somehow, I was able to mortgage my house and apply for a loan from the Bank of . My papers were cleared and I had been sanctioned and amount of 3000 from the bank, to be repaid over a period of ten years. I was able to arrange the rest of the amount as loans from friends and relatives. Next I had to think about the workers, their salaries, cost of renovations etc. Workers We decided to start with a minimum number of workers. The family members would have to pitch in as and when they had a chance. My wife and I would take care of the restaurant in the day and my college-going son was asked to help in the evenings, as the rush would be too much for the two of us to handle. So, we needed minimum help in the form of 1. cook-1 2. servers/helpers-2 Apportioning a salary of 100 for the cook, and 50 each for the servers, we would have the rest of the profits. The cost of raw materials had to be factored in, which would work out to 100 during lean days and any where from 200-300 during the tourist season. Marketing Investing a reasonable amount in marketing and creating consumer awareness has its own benefits for any business. We set aside a sum of 500 fro placing advertisements in in-flight magazines, and pamphlets to be distributed at tourist spots. Once people starting visiting us, our reputation would depend more on the word of mouth. We had to be very careful in treating each customer and paying individual attention. Our place had to be spanking clean and customers could visit the kitchen, if they so desired. The menu cards were designed with the cover having a picture of tourists at local beach. The bright hues on the cover were appetizing enough to make the customer zoom through the menu. We finalized on initially offering 4 kinds of cuisines for the customers: Italian, Spanish, American and of course, Arabic. Our Unique Selling Point We hit upon the idea of offering a discount to our second-time visitors in the from of discount coupons. These would range from a discount of 10-25% depending on the bill amount and would have a validity period of 15 days ( since tourists were not expected to stay fro longer periods) Process Abid, our cook was widely traveled and could dish out the most exotic recipe in any of our cuisines. The servers were trained to be polite, not to be intrusive while the customers were enjoying their meals, and be very courteous, but friendly to one and all. They were given instructions to take special care of children and suggest dishes according to the customers' preferred tastes. Leadership To keep my team motivated, I would make sure I was always the first one to reach the restaurant every day and the last one to leave it. I made it a point to enquire about my employees' problems and help as much as I could, if they were willing to unburden themselves. Expansion and Growth As our restaurant opened and customers started trickling in, we felt elated. Our preparations were well appreciated and many people came to know of our place even before they landed at the airport. Gradually, they felt a visit to AABBCC was incomplete without a visit to our restaurant. It took us 3 months to break even. Our expenditure was apprx. 1000 per month and our earnings were 1,5000. We had to factor in the salaries and costs of fittings, electricity, raw material etc, so it was just break even. Then, it was Christmas and the tourist season begun. A journalist's family had visited us the previous week and the lady had written an appreciative article about our eatery in one of the leading magazines. Hoards of tourists came to our place to get a taste of the local food. We had to consider expansion. Another cook was hired and the salaries of the present employees were hiked 10%. We made a make-shift room on the first floor of the building, and a ladder was placed for accessing this room. To give it a rustic look, there were local handicrafts and murals on the walls. We also had to shift our focus from the American and Italian food to Spanish and Arabic food, as most of our tourists were American and wanted to experiment a new cuisine. In six months, we were overflowing and had to refuse customers due to lack of space. Incidentally, my daughter has just finished her college and wanted to join the business. She suggested opening another branch in one of the main tourist attractions, so the crowd would get divided between the city and the tourist spot. This was a brilliant idea and got our instant approval. With whatever profits we had earned in six months of operation, we bought a piece of land facing the sea. Single handedly she got a place built, hired staff and started running a Caf. This place had more open space, like an open air restaurant. Though she retained the original Arabic recipes, more emphasis was laid on fast and convenient food. Shakes, sandwiches, rolls were always kept ready, keeping in mind the paucity of time tourists have. She was able to manage single-handedly, with no help from the family, what-so-ever. However, her friends /students did join in on a part-time basis to help her out when the tourist season was at its peak. Thus, she saved on expenditure on immovable assets and furniture. Once the business picked up, she earmarked a small corner for selling local handicrafts and clothes. She asked the village craftswomen to display their wares in her eatery and got a part of profits as commission. Thus, she got profits without any additional investments. This was how the chain of XYZ started. Today, it is a thriving industry on its own. We are proud to state that our retrenchment rate is 1%. This happens only when someone is forced to leave the city. Otherwise, we have been doing a great job. The bank loan was repaid in the third year of operations itself. Now, we are systematically planning to open our branches not only in other parts of the country, but also in other parts of the world. One thing has remained constant. Our commitment to quality, affordability and impeccable service have always remained our hallmark, and will continue to do so. Going Public To augment our company's profits and to be able to grow in a bigger way, we are planning to go in for an Initial Public Offering. These shares will not only be listed in the bourses in our country, but will also be listed on the New York Stock Exchange. We are planning to raise a corpus of 300 billion through this issue. We have already finalized our fund managers and brokers to the issue. The capital raised will be used to augment our expansion plans all over the world. We are planning to open our outlets in Greece, China, India, Brazil, Malaysia and Thailand. We have started recruiting skilled staff for this purpose and a batch of chefs have already started undergoing training. We have selected the cities in theses countries where we will be opening our outlets and our personnel are in talks to buy fresh land/buildings or existing buildings with the required infrastructure to open our outlets. We envisage a turnover of 100 million and a profit of 50 million per annum. The EPS would be around 20 in the first year of expansion/operations. With the business metamorphosing from a small business unit to an industry, we will have to adopt newer and smarter management practices like six sigma in our company. . It measures numbers of errors in implementation of the process -higher the sigma value more is the reliability of the process/ product. It is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process -- from manufacturing to transactional and from product to service. The statistical representation of Six Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. Process sigma can easily be calculated using a Six Sigma calculator. Learning from Failures It is always wise to learn from failures, whether our own or someone else's!!! Well, in the beginning, I used to be very particular about the ingredients used in the Arabic dishes and their recipes. In an attempt to keep the taste original, I would insist on using the original recipes with the local taste intact. However, some tourists would find the food too spicy and the smells too pungent to be able to enjoy it. It was only after an year that I realized that if I needed more business, I should be more customer-friendly and learn to offer the customer what he would want. Thus, today, though we keep the recipes and the basic ingredients the same, we have learned to make Arabic food according to the tourists' tastes. Thus in the outlets to be opened in other countries, we will make it a point to adapt our dishes to the local cuisine and try to take in a few local recipes too. After all, adapting and flexibility are the thumb rules for any successful business. References Bridge, S., O'Neill, K. and Cromie, S. (1998) Understanding Enterprise, Entrepreneurship and Small Business, London, Macmillan. Burns, P. (2006) Entrepreneurship and Small Business, London, Palgrave. Carter S. & Jones-Evans D. (2006) Enterprise and Small Business: Principles, Practice and Policy. Pearson Education Ltd, Harlow Chaston, Ian (2002) Small Business Marketing Management Palgrave London Clancy, K. J. and Shulman, R. S. (1994) Marketing Myths That Are Killing Business, New York: McGraw-Hill. Cox, T., Hooley, G. J. and Lynch, J. E. (1994) Marketing in Small and Medium-sized Companies, In J. Saunders (Ed.), The Marketing Initiative: Economic and Social Research Council Studies into British Marketing. London: Prentice Hall. Stokes D., Lomax W. & Dhanani A. (2000) 'Taking control of word of mouth marketing: the case of an entrepreneurial hotelier' MEG/UIC/AMA Special Interest Group Symposium on the Marketing and Entrepreneurship Interface, Robert Gordon University, Aberdeen Stokes, D. and Wilson, N. (2006) c, London, Thomson Learning. Phillips, M. and Rasberry, S. (1990) Marketing without Advertising, Berkeley: Nolo Press. Weinrauch, J. D., Mann, O. K., Robinson, P. A. and Pharr, J. (1991) 'Dealing with Limited Financial Resources: a Marketing Challenge for Small Businesses', Journal of Small Business Management, 29, 44-54. Stokes, D. and Wilson, N. (2006) c, London, Thomson Learning. Stokes, D. (2006) Small Business Management, London: Continuum. Read More