OCR Business Studies F292 JKL Case study (Unfinished)

Apr 042011

Marketing Objectives

Marketing is the management process involved in identifying, anticipating, and satisfying consumer requirements profitably.

Business is about providing something that someone wants to buy. Marketing assists businesses in achieving their objectives because in identifying customer demand, the business will understand its customers and market better. They will then be able to meet customer needs. JKL is a childcare centre and so marketing is important in terms of meeting the customer needs because it allows JKL to know what parents want in relation to the care of their child/children, more so because JKL wants to be the best childcare centre on the market. This will give JKL a competitive edge, especially now they are facing increased competition from TotsAtPlay.

Market Analysis

Customer v Product Orientation

Customer orientation is where a firm considers what the market wants before trying to produce it.

Product orientation is where a firm produces a product in the hope they can encourage customers to buy and then tries to convince the public that they need it.

JKL could be said to be market-orientated because it was Harriet’s demand for the service that started the business. This is also suggested from the fact that JKL has contracted a marketing firm to carry out market research (Appendix 1).

Market Segmentation

Market segmentation is breaking down a large market into subgroups or sections that are likely to respond to products in different ways.

Segmentation is important because it allows a firm to target its marketing effort towards those customers who have similar interests. The need to identify and target is crucial in reducing costs and making marketing more effective. It makes it easier to find gaps in the market and niche markets.

Market segmentation can be:

Geographical
Lifestyle
Age (JKL has done this dividing it into 0 to 2 and 2-5)
Gender
Social Class
Residence
Behaviour

Market Share and Growth

Market share is the proportion or percentage of the total market sales accounted for by an individual firm. As a day-care, what JKL is selling is places, and according to the information in Appendix 1, UK day nurseries provided 604,500 places in January 2011. As JKL has a maximum of 100 places at each of its 3 centres, that’s 300 places. 300/604,500 * 100 = 0.05% market share.

Since nursery groups (with three or more centres) account for 11% of all available places, that’s 66495. JKL has 300/66495 *100 = 0.45% share.

Market share allows a firm to assess its performance. Problems may arise from the definition of a market. Market share is only useful if the overall market can be determined and measured. It is often more useful to measure the share of a smaller section of the market instead of an entire market.

Marketing Strategy

Marketing Objectives are usually in relation to the 4 brand 20 mg P’s, the marketing mix, and should support the organisations’ main objectives.

Prices
- Consumers often have pre-conceived ideas about how much they should be paying for something and so if the price is charged too high, it may be viewed as extortionate and is likely to receive few sales. However if prices are too low, parents would question the quality of the service being offered by JKL.
- From table 1, it can be seen that JKL and TotsAtPlay charge pretty similar prices with the main differences being JKL charging £20 less for children’s parties, £4 more for day-care services and £1 extra for after-school club. Since all of JKL’s centres are operating at full capacity of 100 places, that extra £4 is an extra £400 weekly over TotsAtPlay if they had the same maximum capacity. If TotsAtPlay did have the same maximum capacity, they would be able to make this money by having 20 children’s parties as they charge £20 more than JKL for this.
- Products
  - It is said all products go through the product life cycle of introduction, growth, maturity and decline. Extension strategies can modify the length of each one.
    - JKL’s products are: Day care, After School Club, Babysitting, Children’s Party, and evening classes.
The Boston matrix also helps in classifying products.
Place
- This is about how the business sells to the consumer
- Promotion
  - JKL does not seem to need much promotion now as it is operating at full capacity but JKL has a wealth of below the line methods it can use as it has regular contact with parents and children.

Accounting and Finance

Budgeting

A budget is a management tool and it is for the purpose of allocating, controlling and monitoring resources, especially income and expenditure. There is little mention of a budget in the JKL case study.

Cash-flow forecasting

A cash-flow statement is a documentation of what has happened in the past, while a cash-flow forecast is a prediction of what may happen.

Looking at JKL’s cash flow in Appendix 2, they appear to have an oscillating net cash flow.

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

Business 22 Responses »

Apr 022010

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.

OCR F297 Case Study (2010) (Business Studies: Strategic Management) – F N Lyte Cases Ltd (LCL) Notes.

Business 4 Responses »

Apr 022010

That the name of the business is F N Lyte suggests that was named after another member of the Lyte family, so George is not the founder, but is now the owner through major shareholdings. It is small business, regardless of if it is judged by the number of employees or the profit levels or the number of building it has.

That George is hardly in his office and managing by walkabout means that he won’t be easy to locate. The highly skilled craftsmen and likely to bring high wage costs to LCL, and the job of these highly skilled craftsmen because LCL has almost new CAM equipment and it has case designers.

The exports made by LCL will be affected by exchange rates making it very volatile.

As LCL wants to show that it always acts with integrity and honesty, it may then be obliged to refuse Major Doodes’ order because it is in doubt. CSR stands for Corporate Social Responsibility.

Constraints which may affect the LCL include legislation by government, maybe affecting the acquisition of aluminium.

LCL adds value by changing raw materials into a finished product, but also more subtly through their reputation for quality, therefore creating an image for their products in the mind of consumers which may persuade them to pay more for their products as they believe they are getting more for their money. As a result of the added value, LCL may be able to achieve a high profit margin on each sale, covering their production costs, but this may be neutralised by what Shelia, the Finance Director, considers being over-engineering, whilst on the other hand, this may have contributed greatly to the added value.

LCL’s products are consumer durable goods and it operates in the secondary sector, turning raw materials into finished products.

LCL’s USP (unique selling point) is their reputation for quality. Factors that may affect LCL’s future success include effective employees, effective managers, sources of finance, reliable suppliers, loyal customers, effective marketing, a clear business plan and luck.

LCL is more product-orientated, therefore doing little marketing and not focusing as much as they can on profitability.

The opportunity cost of not accepting Major Doodes order is that they won’t meet their targets. If they do accept it, their reputation is at stake.

The fact that the other members of the senior team feel George’s views dominate too much suggests that although, George listens to the views of others, he does not take it into account. This is also an indication of resentment in the senior team. The extent to which LCL and George are considered to be one may explain the reluctance of the managers to make any decisions in his absence. He does not delegate the authority or train others or give the opportunity for others to make decisions.

LCL’s Stakeholders

Shareholders/Owner – George Lyte, Banks, Minority Shareholders
Managers – George Lyte, Dave Short, Chris Hodder, and Shelia Ranger
Employees – Highly Skilled Craftsmen (20)
Customers – Major Doodes, Musicians, IT companies, aerospace industry, manufacturers of scientific instrumentation, companies that participate in exhibitions and trade fairs.
Governments – EU, USA, Australasia and others
Suppliers –

Indirect Stakeholders

Suppliers – Supplier’s Banks (while they do not directly supply LCL, they supply LCL’s suppliers with finance and financial services, therefore allowing LCL to be supplied.)

Importance and Impact of Each Stakeholder group on the business:

It may be said that LCL takes a stakeholder approach to business as opposed to a shareholder approach because it needs to.

Owners – George as a majority shareholder has the most influence on the business. With a 60% share of the business, his decisions can not in theory, be effectively opposed. The other shareholders with a total of 40% of the shares cannot exert much control or influence the business too much individually or collectively, other than withdrawing their financial support.

Managers – They make all the tactical and strategic decisions. They have a lot of control in the short term, more so in their own departments and divisions of the business. George still has overall control here as managing director.

Employees – They have operational control of the business and as highly skilled workers, they may not be easy to come by. They have even more control with industrial action because they cannot operate if the workers go on strike. Geroge doesn’t have much choice but to listen to their views, which he enjoys doing.

Customers – These are also of great importance to LCL, because some of them are hard won as mentioned in the case study. Due to LCL’s size (and bank loans), LCL needs their customers to survive.

Governments – The Governments of all LCL’s markets has great control over LCL’s future success, which is at the same time limited. The government could enact new or amend existing legislation to affect, the way LCL trades, obtains materials, taxes that LCL must pay, LCL’s exports and imports and trade relations. If the governments do not specifically target LCL, any changes they make will also likely affect other businesses in the same market in similar ways, therefore not affecting LCL’s position. This is however dependant of the skill of management at LCL and how lucky LCL is.

Suppliers – A refusal to supply LCL will very much destroy LCL because they seem to have quite a trusting relationship (which may weaken, because of the worry from the banks of LCL’s suppliers). LCL does appear to have any alternative suppliers, but they do make items for stock.

As can be seen, George, in effect controls the strategic and tactical running of the business. If not using the weight as the owner of LCL through his shareholdings, he can do so as the Managing Director.

What George enjoys doing is also what LCL must do to survive, so showing just how intertwined the two are and George may be holding the business back.

Finance

LCL currently uses overdraft, which it seems, may no longer be available, as a source of short-term finance to obtain working capital. Another source of finance for LCL appears to be trade credit from its suppliers because the supplier’s banks are worried that someone else might not be as trustworthy, which means that LCL currently gets trade credit but that George is good at paying them off. LCL itself also offers trade credit as can be seen from the balance sheet.

LCL could possibly raise finance through the issuing of shares but this is likely to result in George losing some control of the business.

The retained profit for LCL seems small in comparison to the other figures on the profit and loss account. The business may also have access to some Government assistance.

Reading from the Balance Sheet, Everything physical the business owns comes to a total value of £92,050. This means that their building and machinery are individually less than this. They all add up to this figure.

Since it has been mentioned in the case study that LCL IS George in many ways, any questions asking about George may also want to know about LCL, or vice versa.

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