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OCR F292 Case Study (2010) (Business Studies: Business Functions) – Stone Restoration & Conservation Ltd (SRCL) Notes.

SRCL is a LTD (Private Limited Company) which means that it has limited liability. Set up in 1968, it is now 42 years old. SRCL’s are specialists in what they do. A management buyout (MBO) is a form of acquisition where a company’s current managers buy the business from its owners, possibly because this may be to save their jobs, either if the business has been scheduled for closure or if an another buyer would bring in its own managers. It may also be because they want to maximize the financial benefits they receive from the success they bring to the company by taking the profits for themselves. There is also less potential for conflict between stakeholders as managers are now the owners.

The business is UK based and therefore operates on a national market and may not be as affected as multinational competitors by the exchange rates set by Governments.

The fact that SRCL’s stonemasons are experts’ means that their skills will be much in demand and the overhead costs of SRCL in terms of wages and salaries is likely to be quite high.

Who	Value of Shares	Percentage
Joe Kring	£22 800	38%
Fred Emerald	£7 800	13%
Six Senior Managers	£29 400	49%

SRCL seems to be growing rapidly in terms of turnover. Joe’s approach to business seems to be taking a stakeholder stance, which means they give all stakeholders equal importance, as opposed to a shareholder approach where they would only be interested in making profit.

The market size of the restoration and conservation of famous crumbling building and monuments, in terms of value, according to the case study, is £4 billion. For the 2010 turnover value of £8, 310, 106 means that (£8310106  ÷  £4000000000) × 100 = 0.21 %. This means that SRCL currently has 0.21% of the market.

The 2010 figures on the balance sheet are currently unaudited, but it would appear as though SRCL has managed to increase their working capital because their current liabilities have reduced substantially and their total current assets have increased.

SRCL is going to need some form of waste management for waste from humans or otherwise.

SRCL has the benefits that because it is a LTD, shareholders have limited liability and more people might be prepared to risk their money although profits have to be shared. Control of the company cannot be lot to outsiders, with new shareholders joining with the permission of all current shareholders. There is also business continuity because the business continues if the owner dies.

“SRCL has always competed on quality rather than price” might mean that they have no clear pricing strategy. This also means that SRCL may have lost customers who are more concerned about price, maybe SRCL should consider competing on price and quality.

Bespoke projects means that SRCL will need some way of taking these orders and finding out what the clients want, visiting locations of big jobs. This also suggests that they make use of job production for one-off projects.

From Hampshire, Surrey is 38.2 miles (61.4 km) away and North London about 55 miles (115 km).

As it used to be part of a civil engineering business and currently only does civil stonemasonry, Stonemasonry for the military is a possibility which is open to the business, such as training facilities or fortifications.

It is questionable if accepting small jobs is cost effective for SRCL, are wage, time and material costs of repairing a front step covered in £50, also bearing in mind supply and demand, the exclusivity of SRCL could add value and increase the prices they can charge and maybe SRCL should not just accept any job that comes their way.

SRCL’s Objectives: £10 million (may be SMART, but we’re not told), £15 million by 2015 (Boosting turnover by 50% in the next 5 years) is SMART in form but there is question as to whether 50% is realistic and may not be SMART in that way.  Attract more work in the high value, new-build housing.

The high value, new-build housing is a growing market because of those, according to the case study, flocking to UK.

Joe takes a stakeholder approach to business, which costs SRCL in time, money, paper and privacy, but may brings its own benefits (good PR and fulfilment of their Corporate Social Responsibility [CSR]).

The highest quality at the headquarters, if it cannot be matched by other offices, then there may be varying degrees of quality and risks to SRCL’s reputation.

By purchasing the saw which can satisfy the requirements for most of their work quickly, they have increased capacity because they can produce more in the same space and time that they used before.

The Corinthian shields are labour intensive while the saw indicates that the mass production is capital intensive.

Clare Bennett splitting her time between the Hampshire workshops and various worksites will most likely incur travel costs that may be covered by the business.

The company may want to consider the philosophy of lean production to combat waste. They need a way of turning the stone chips from the machine into a by-product. The fact that Mike thinks a use should be found for the waste from the machine means that he’s sure that the machine is staying and that his concerns about the machine will be briefly considered, if at all. Mike believes the machine is only as good as it’s operator which is a further argument for training.

Staff motivation is an issue, how can SRCL ensure job security, possibly by retraining Mike Harris and others. It costs SRCL £400,000 – £500,000 every 3 years for apprentices.

The risk of subcontracting is that they may not do it to the standard of quality customers expect from SRCL. The labour turnover has complicated decisions because they will need to replace those who leave before considering growth. Replacing them will eat into funds for subcontracting.

The business can respond to labour turnover issues by hiring more apprentices 4 years before those who will retire reach the retirement age retire. They can also use the usual labour turnover strategies concerning earnings and transport. They could even try getting more young people and ingrain within them the culture that the managers would like to see at SRCL.

The marketing manager needs to choose between organic growth, inorganic growth, and diversification. The other three elements of the marketing mix which are not mentioned are price, product, and place.

The Stone Federation is the official trade association for the natural stone industry. The Federation co-ordinates all aspects of the industry and provides those who request it and users with a first point of contact for information, advice and guidance in sourcing an appropriate material and a reliable service which is evidently beneficial for SRCL if they have won an award from them.

RoSPA is The Royal Society for the Prevention of Accidents and have been recognising health and safety success for over 50 years. The president’s award which SRCL won is categorised on the RoSPA website as an achievement award. The President’s Award is given to businesses who have gained 10-14 consecutive gold awards. Gold awards are given based on their health and safety performance, which SRCL most have obtained for 10 years as stated in the case study. The next step up from the President’s Award is the Order of Distinction which is for 15+ consecutive gold awards. The Order of Distinction award is the highest level that can be attained. SRCL has now received the President’s Award for 4 years, which means that at the next assessment, it should receive an Order of Distinction.

All the managers are not aligned with Joe’s vision for SRCL which could be problematic.

Filed under: Business

Tags: 2010, Business Functions, Business Studies, case study, f292, notes, ocr, SRCL, Stone Restoration & Conservation Ltd