CLC Unit 33 Small Business Enterprise

Introduction

Independent businesses which are run by an owner and have a small share in the market are called as the medium and  small business Enterprises.The classification of Small and Medium Enterprises may be done on the basis of the total people employed, the total asset with the company or the turnover the company has. The Small and Medium Enterprises can also be classified on the basis of the type of ownership, the organizational culture or the type of control (Stockdale & Standing, 2006). A detailed discussion of the many elements of running a Small and Medium Enterprises has been covered in this assignment. It also includes description of important business aspects like performance analysis, enhanced business performance and scope of improvisation. The process of revision of the business plans and objectives along with the suggested changes has also been covered. The impact of change in the management on the basic business operation of a Small and Medium Enterprises has also been discussed.

All these elements of running a Small and Medium Enterprises have been explained with the help of the typical example of Cambridge Satchel Company. Cambridge Satchel Company is a Small and Medium Enterprises which was started without any prior knowledge of business at kitchen table by two ladies, Julie Deane and her mother with limited finance. The small company initiated in a house grew into million dollar business house just in a couple of years. The satchels were originally made for the school going children but later they emerged to be a part of the fashion statement for the youngsters.

Task 1

1.1

Cambridge Satchel Company is a company located in UK which manufactures leather bags. The company was started by Julie Deane and her mother inside their kitchen when Deane did not have sufficient money to support the basic education needs of her children. Initially the company designed bags after sourcing it only from a couple of suppliers. But as the brand became more and more popular it was become increasingly difficult to maintain the quality of the brand and integrity of the brand image because of the presence of many other small players who wanted to make the best of the opportunity. Also the problem of fake or counterfeit products was on a rise which was affecting Deanne’s business. In view of all these events, Deane decided to bring up a manufacturing facility of her own outside Leicester where they could manufacture these bags. This was basically to prevent any forged bags from entering the market with the brand name as Cambridge Satchel Company.

A major tool used by Deanne for the marketing of her brand was online marketing that is with the help of a website for Cambridge Satchel Company. The website also provided a facility for selling and buying of bags. The total contribution given by the website for sale was more than 50 percent of the total sales. High margins are obtained at almost negligible costs. Even though the demand for the bags of Cambridge Satchel Company is rapidly increasing and a number of suppliers are available round the globe for manufacturing the bags, Deanne still opts for getting the brand produces in U.K. itself to maintain the image of her brands as British. Deanne insists that the manufacturing facilities should be available in Britain itself as the management and control becomes easier in this case.

But despite of all the measures taken by Deanne to maintain the identity of her brand, she is facing a serious problem. There are a number of fake websites available on the web with the brand name-Cambridge Satchel Company. These companies market th eir own bags of inferior quality under the tag of Cambridge Satchel Company. Sometimes these websites take order from the clients taking advantage of the brand name and later run away with the client’s money without making any delivery.

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All this is affecting the image of the brand Cambridge Satchel Company. It takes almost a lifetime to build a brand but only a couple of days to taint its image. The plight of Cambridge Satchel Company is also somewhat similar. The customers get carried away by the brand name and are caught unaware by such fake websites. Under the given circumstances, one of the prime objectives of Deanne is to track these fake websites and spread a word of caution amongst its present and potential customers regarding the fake website. The entire process of the presence of fake websites and people running away with the customer’s money in the name of Cambridge Satchel Company is something which really proves fatal for the organization and its image in the long run. The work of surveillance has hence been outsourced by Deanne to detective agency who will track such fake websites and report them abuse.

As per details given in the case, the operations of the Cambridge Satchel Company may be analysed as:

• As reflected in the Balance sheet of Cambridge Satchel Company, the variable cost is very high. It is important to reduce the variable cost even after 5 years of operation. This can happen only if the operations are completely standardized (Peel & Bridge, 1998).
• Cambridge Satchel Company has most of its assets in liquid form that is like cash. These liquid assets should be instead invested in the business to get better returns. For example, this money may be utilized in the establishment of a manufacturing facility. (García-Teruel & Martínez, 2007)
• It can be safely concluded that the company has a huge scope of further growth because the value of liabilities is very less as compared to the total assets.

The focus of Cambridge Satchel Company should currently be towards two things: -

• Targeting more customers.
• Establishing more manufacturing facilities in Europe.
• Preventing their brand image.
• Making people aware about the presence of fake websites.

Task 2

2.1

Cambridge Satchel Company is currently facing a problem and that is that fake bags are being sold using the brand name of Cambridge Satchel Company. More than 300 fake sites have been discovered by Deanne already. Majority of these websites are managed by small business owners who manufacture leather bags similar to the designs of Cambridge Satchel Company using cheaper leather and use the label of Cambridge Satchel for marketing.  Even the company’s website has been duplicated for online marketing as well as buying and selling of the Satchels. The techniques used by the companies to increase their visibility on the web are Search Engine optimization and use of similar domain names as that of Cambridge Satchel Company. The clients are generally caught unaware while accessing the website that the domain name is different and as a result they are sometimes duped of their money or get a product of inferior quality while they pay for the brand. Either the customer does not get the product in lieu of the payments made or the quality of the product is compromised and a complaint is therefore lodged against Cambridge Satchel Company. This is resulting in financial losses and also affecting the image of Cambridge Satchel Company. The customers are losing faith in the brand and have stopped making online transactions-a mode which contributed to more than 50 percent sales earlier.

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To handle this issue Deanne has appointed a detective agency to keep a track of the fake websites. Their main responsibility of this agency is to keep a track of the counterfeit websites across the entire web. This agency will also keep an account of the duplicate labels of Cambridge Satchel Company that are being used and report the same to the concerned authorities. Deanne also is thinking of completely outsourcing the online sales, advertising and promotion part to an e-commerce portal. This portal would definitely have a wider reach with more secure interfaces which cannot be copied that easily (Chrysostome & Rosson, 2009). The main reason for adopting such an approach is mainly to safeguard the brand image of Cambridge Satchel Company which has been built with a lot of efforts and hard work.

2.2

The measures that have been taken for personnel management are:

• Cambridge Satchel Company has been a good pay master for its employees on the manufacturing side as all the bags are handmade with a lot of concentration.
• Retention of employees is important as the employees are the strengths of any organization. The credit of quality of the bags goes to the quality of work of the employees.
• Proper surveillance and monitoring of the factory workers is required to make sure that they are not stealing away the company labels as a lot of fake products are available in the market with the label of Cambridge Satchel Company
• The web site of Cambridge Satchel Company needs to be made more secure. This can be done by officially registering the customers who visit the web and transact online. This can be done by issuing them a unique membership code and sending the information about their registration details on their phones. (Levy & Powell, 2003).
• The liquid cash with Cambridge Satchel Company needs to be utilized to set up new facilities and initiate marketing activities to revive the brand.
• A new manufacturing house will help in reducing costs and increasing reach.
• Hiring of more workers would be required for additional manufacturing facility.
• Social media sites and mobile apps may be used for marketing.
• An alliance with a professional e-commerce can also be done to ensure safer online transactions and a cost effective marketing strategy.

Task 3

3.1

The main objective of Julie Dean while starting Cambridge Satchel Company was to make the most from the web. The main objectives of the business which has now become a name in the fashion industry were:

• To create a success story by ensuring optimum utilization of resources that could be afforded by Deanne in the initial phase on the business.
• To make the best possible use of the limited financial resources at Deanne’s disposal.
• To use the most cost effective methods of marketing like online marketing and ensure maximum brand exposure.
• To run the business only on cash transactions.
• To avoid any credits because the suppliers never wait for payments and the cash supply within the business was limited in the starting phase.
• To make sure that the costs were minimal such that profits were high and there was a consistent flow of cash in the business.
• To maintain the quality of satchels as the unique selling point of the brand.
• To ensure than the identity of the brand in purely British and the same stays intact.
• To guarantee that there are no shortages of raw materials and the supply chain management is maintained efficiently
• To look after the needs of different target segments like children, teenagers, adults etc.

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The business plan of Cambridge Satchel Company with the above mentioned objectives is:

• When Deane started her business she had a limited capital at her disposal. She managed the same judiciously to give her business a good kick start. An investment of only £70 was made to get promotional leaflets printed for publicity and produce pre booking orders. Online marketing was used for promotion as it was the most cost effective marketing tool available.
• The Cambridge Satchel Company was kick started with a minimum investment of just £600. The initiative was purely creative and began at kitchen table of Deanne along with her mother. But the Cambridge Satchel Company tasted good success as the resources were utilized in an optimum manner.
• The initial cash flow for Cambridge Satchel Company was limited. Deanne took all possible measures to maintain this cash flow as avoiding credit periods, conducting all cash transactions. To maintain this he even had to forgo some large orders from retailers in the initial phase of the business as they were not ready to do cash business and Deanne could not afford credit because of limited cash reserves.
• Deanne was always sure of the fact that the biggest USP of Cambridge Satchel Company was its quality. She took utmost care to maintain the quality of her satchels and never made a compromise. All the suppliers for supplying leather were chosen carefully and third party manufacturing was avoided. If at all manufacturing was done from another vendor Deanne would supply the raw material herself to ensure premium quality of the products (Hong & Jeong, 2006). She even started up her own manufacturing facility at Leicester to maintain the best quality.
• In order to ensure that the material never goes short, Deanne never gave the manufacturing work to third parties at faraway places. This was to avoid any delays in manufacturing and maintain an efficient system of Supply Chain management and make sure that sufficient supply was available to meet the current demand.
• Deanne was very particular about the identity of the brand as being British and took every possible step to maintain this identity as this was the competitive edge of her Satchels. To maintain this identity she even started her own manufacturing facility at Leicester and hired highly skilled labour. (Ghobadian & Gallear, 1996)
• The designs of the bags were highly creative and catered to the needs of different target segments from varied age groups-from school goers, to teenagers to adults.
• The Cambridge Satchel Company had an effective marketing strategy. The main tool for promotion was online marketing with the help of the company website.

3.2

Following changes could be made by the management in the business plan:

• The cash reserve of the company can be utilized in setting up another manufacturing facility so that bigger orders can be catered.
• Deanne could also now start giving credit to the big retailers which she avoided in the beginning because of a cash crunch. This would increase sales volume.
• Stringent measures need to be taken to maintain the identity and integrity of the online customers since 50% of the total sales are from online transactions and the company is facing a problem of fake sites and spurious products.
• Deanne can also think of extending the product line and start bigger advertising campaigns.

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Task 4

The Cambridge Satchel Company was started as a Small and Medium Enterprise in the kitchen of Julie Deanne with her mother. Today this project is worth millions. This success was not overnight but a lot of operational changes were made in Cambridge Satchel Company. In the initial phase, the following policies were adopted for operation.

• It began with a limited investment of £600
• The advertising medium used in the pre-launch phase was through leaflets.
• Marketing expense was just ten percent of total capital invested.
• Online advertising was used as another cost effective promotional tool
• Business was operated only in cash.
• Goods were never supplied on credit.

As the business gained success certain changes were made in the operations. These were

• Cambridge Satchel Company was available on the web and had its own website.
• Online transactions could be made which made things easy for the customers.
• The option for ordering online provides an easy access to the potential customers.
• The web was extensively used for brand promotion with help of social media networks like Facebook, twitter and even blogs.
• Hollywood personalities also promoted and showed their love for the satchel.
• The brand identity of being British was always maintained.
• Manufacturing was never outsourced to a company outside the U.K.
• Deanne even started a manufacturing unit of her own in Leicester.
• Highly skilled professionals were also hired to maintain brand quality.

Deanne was successful in not only kick starting her business efficiently with the limited capital reserves in the beginning but also successful in taking her business to great heights later. She used the internet extensively for aggressive promotion of the Cambridge Satchel Company as that was the most efficient and cost effective tool present at that time.

However, today Deanne is facing a serious problem of counterfeiting products and fake websites which is negatively affecting the brand image and identity which has been made after a lot of toil and hard work. The customers are losing trust and faith in the brand. The fake websites are either duping the customers of their money after booking the orders or are providing low quality products with the label of Cambridge Satchel Company on them. This situation can prove fatal for the business and requires immediate attention and solution.

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Control measures need to be taken to make sure that customers who are making their purchases online are interacting at a genuine platform. This can be done by

• Developing a system of creating unique log in ids and passwords for the members logging at the website. (Raymond & Bergeron, 2008)
• Mobile applications available on smart phones can be linked to the e-mail account and be used confirm the identity of the customer and hence provide a secured platform for transactions.
• More manufacturing units may also be set up to narrow the demand and supply gap
• Employee retention is important to protect the designs of the satchels from others.
• Skilled labour needs to be roped in to maintain the quality of the brand.

Conclusion

Cambridge Satchel company case is an excellent case study to analyse the critical success factors for a Small and Medium Enterprise. One of the most important lessons learnt from this case is that a huge capital investment is not always the quintessential requirement of starting a business. The more important features are judicious utilization of resources, adequate planning, and right selection of the target and proper study of the customer needs. Another important outcome of the study is that there are no doubts about the fact that internet has emerged as a cost effective and efficient tool for marketing with excellent penetration. But at the same time it has also lead to the development of counterfeiting which can really prove to be disastrous for a business and its identity and sales. Hence control measures need to be adopted to prevent the selling of duplicate products or development of fake sites. Deanne has also given a classical example that outsourcing is an easy method of getting the work done but this should not be done at the cost of compromising the brand quality or brand identity. (Robson & Bennett, 2000). Hence it gives us a clearer picture of all the things to be kept in mind while starting up and running a business from a Small and Medium Enterprise effectively and efficiently.

References

Stockdale, R., & Standing, C. 2006. A classification model to support SME e-commerce adoption initiatives. Journal of Small Business and Enterprise Development, 13(3), 381-394. García-Teruel, P. J., & Martínez-Solano, P. 2007. Effects of working capital management on SME profitability. International Journal of Managerial Finance, 3(2), 164-177. Peel, M. J., & Bridge, J. 1998. How planning and capital budgeting improve SME performance. Long Range Planning, 31(6), 848-856. Chrysostome, E., & Rosson, P. 2009. The internet and SME internationalisation: promises and illusions. Journal for International Business and Entrepreneurship Development, 4(1), 107-118. Levy, M., & Powell, P. 2003. Exploring SME internet adoption: towards a contingent model. Electronic Markets, 13(2), 173-181. Hong, P., & Jeong, J. 2006. Supply chain management practices of SMEs: from a business growth perspective. Journal of Enterprise Information Management, 19(3), 292-302.

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