Unit 33 Small Business Enterprise

Introduction

Small and Medium Enterprises (SMEs) are independent businesses characterized by limited market share and often run by their owners. Classification of SMEs can be based on factors such as the number of employees, total assets, or turnover. Additionally, SMEs can be categorized by ownership type, organizational culture, or control mechanisms. This assignment provides a comprehensive exploration of various aspects related to managing SMEs, including performance analysis, enhancing business performance, and opportunities for improvement. It also addresses the revision of business plans and objectives, as well as the impact of management changes on SME operations.

Throughout this assignment, we will use the Cambridge Satchel Company as a real-life example of an SME. This company, founded by Julie Deane and her mother, started as a small venture at their kitchen table due to financial constraints. Over the years, it transformed into a multi-million-dollar business specializing in leather bags, particularly satchels. The Cambridge Satchel Company’s journey serves as an illustrative case study for understanding the challenges and strategies involved in managing an SME.

Task 1

1.1 Overview of Cambridge Satchel Company

The Cambridge Satchel Company, situated in the UK, specializes in manufacturing leather bags. Julie Deane and her mother initiated this enterprise when Deane faced financial difficulties providing for her children’s education. Initially, the company sourced its bag designs from a limited number of suppliers. However, as its brand gained popularity, maintaining quality and brand integrity became challenging due to the increasing presence of small competitors. Counterfeit products also posed a threat to the company’s reputation. In response, Deane established a manufacturing facility outside Leicester to ensure the authenticity of their products under the Cambridge Satchel Company brand.

A significant marketing strategy employed by Deane was online marketing through the company’s website. This online platform contributed to over 50 percent of total sales, offering high margins at minimal costs. Despite global availability of bag manufacturers, Deane insisted on producing the brand in the UK to uphold its British image, which simplified management and control.

However, the company faced a pressing issue – numerous fake websites masquerading as the Cambridge Satchel Company. These websites marketed inferior quality bags with the brand’s name, causing harm to the company’s reputation and financial losses. To combat this, Deane outsourced surveillance to a detective agency tasked with tracking fake websites and reporting abuse.

Analyzing Cambridge Satchel Company’s Operations:

An analysis of the balance sheet reveals several important insights into the Cambridge Satchel Company’s financial position and growth potential:

  1. High Variable Costs: Despite operating for five years, the company continues to contend with high variable costs. This suggests that there may be inefficiencies or lack of standardization in its operations. Addressing these issues is crucial for reducing variable costs and improving overall profitability. Implementing standardized processes and optimizing the supply chain can help in achieving this objective.
  2. Asset Composition: The company primarily holds its assets in liquid form, particularly in cash. While liquidity is essential for day-to-day operations and financial stability, having a significant portion of assets in cash may not be the most productive use of capital. Instead, these liquid assets could be strategically invested back into the business. For example, the company could consider allocating these funds to establish additional manufacturing facilities or invest in research and development to expand its product offerings. This would lead to improved returns on its assets.
  3. Growth Potential: The low liability-to-assets ratio indicates that the company has relatively low levels of debt in comparison to its assets. This signifies financial stability and a healthy balance between debt and assets. With a low liability burden, the company is well-positioned to leverage its assets for further growth. The significant room for leveraging assets and minimal debt exposure suggests that the company has substantial growth potential.

Key Focus Areas for Cambridge Satchel Company:

The Cambridge Satchel Company should focus on several key strategies to address its current challenges and ensure future success:

  1. Increasing the Customer Base: To expand its market reach and customer base, the company can consider implementing targeted marketing campaigns. This can involve identifying and appealing to new customer segments, both domestically and internationally. Additionally, offering promotions or incentives for existing customers to refer new clients can help boost customer acquisition.
  2. Establishing More Manufacturing Facilities in Europe: To meet growing demand and enhance operational efficiency, the company should explore the establishment of additional manufacturing facilities in Europe. This expansion can reduce production lead times, decrease shipping costs, and enhance the company’s ability to fulfill larger orders promptly.
  3. Preserving the Brand’s Image: Maintaining the brand’s identity and reputation is paramount. The company should continue to prioritize product quality and authenticity. This includes stringent quality control measures and utilizing premium materials. Additionally, safeguarding the British identity of the brand can be achieved by continuing to manufacture products in the UK.
  4. Raising Awareness About Fake Websites: To combat the issue of counterfeit products and fake websites, the company should launch awareness campaigns. These campaigns can inform customers about the risks associated with counterfeit products and educate them on how to identify genuine Cambridge Satchel Company products. Utilizing social media, email newsletters, and the company’s website for these campaigns can be effective.

By focusing on these strategies, the Cambridge Satchel Company can address its current challenges, expand its operations, and safeguard its brand’s integrity and long-term success.

Task 2

2.1 Addressing Counterfeit Products and Fake Websites

Cambridge Satchel Company faces a challenge with counterfeit bags being sold under its brand name. Over 300 fake websites have been identified, mostly run by small business owners who produce imitation leather bags similar to the company’s designs. These counterfeiters use cheaper materials and the Cambridge Satchel label for marketing. Some have even duplicated the company’s website for fraudulent online sales and transactions. Techniques employed by these counterfeiters to enhance online visibility include search engine optimization and using domain names resembling Cambridge Satchel Company’s. Customers often fall prey to these fake websites, unaware that they are not dealing with the genuine company. Consequently, either customers do not receive their orders or they receive low-quality products, leading to complaints against Cambridge Satchel Company. This situation negatively impacts the company’s finances and tarnishes its brand image, resulting in reduced trust among customers and a decline in online transactions.

To address this issue, Deane has engaged a detective agency to monitor fake websites and track counterfeit products across the internet. The agency is responsible for identifying duplicate labels of Cambridge Satchel Company and reporting them to the relevant authorities. Deane also contemplates outsourcing online sales, advertising, and promotion to an e-commerce platform with enhanced security features, reducing the risk of website duplication and counterfeit product sales.

2.2 Personnel Management Measures

  • To ensure the quality and integrity of its products, the Cambridge Satchel Company implements a range of personnel management strategies:
    1. Competitive remuneration for manufacturing employees: Acknowledging the pivotal role these employees play in crafting high-quality bags, the company offers competitive salaries and benefits to attract and retain top talent.
    2. Employee retention efforts: Recognizing the importance of skilled employees in maintaining product quality, the company focuses on retaining its workforce through incentives, training, and a positive work environment.
    3. Surveillance and monitoring of factory workers: To combat the common issue of theft of company labels associated with counterfeit products in the market, the company employs surveillance and monitoring measures to ensure the security of its assets.
    4. Enhancing website security: The company takes online security seriously by registering customers, issuing unique membership codes, and delivering registration details via mobile apps. These measures ensure secure online transactions and protect customer information.
    5. Utilizing liquid cash reserves: The company wisely utilizes its liquid cash reserves to expand manufacturing facilities and launch strategic marketing initiatives, thereby strengthening the brand’s presence and market share.
    6. Consideration of new manufacturing units: Exploring the establishment of new manufacturing units is under consideration to improve cost-efficiency and broaden its reach to meet growing demand.
    7. Hiring additional workers: To support expanded manufacturing capacity and meet increasing customer demands, the company plans to hire additional workers with the requisite skills.
    8. Exploring social media and e-commerce partnerships: In pursuit of cost-effective marketing strategies, the company is actively exploring the use of social media and mobile apps for marketing purposes. Additionally, forming partnerships with professional e-commerce platforms will enhance secure online transactions and promote cost-effective marketing efforts.
  • These multifaceted personnel management measures are integral to Cambridge Satchel Company’s commitment to delivering high-quality products while addressing challenges in its industry.

Task 3

3.1 Objectives of Cambridge Satchel Company

Julie Deane established the Cambridge Satchel Company with a clear set of objectives:

  1. Efficient Resource Utilization: Deane aimed to maximize the utilization of available resources while adhering to the constraints of the initial capital investment. This involved making strategic decisions to allocate resources effectively and ensure optimal use.
  2. Financial Resource Optimization: Given limited financial resources, Deane sought to maximize their utility. This included prudent financial management practices to make the most of the available funds.
  3. Cost-Effective Marketing: Deane recognized the potential of online marketing as a cost-effective method for achieving extensive brand exposure. This approach allowed the company to reach a wider audience without the high costs associated with traditional advertising.
  4. Cash Transactions: The company’s commitment to conducting business exclusively through cash transactions helped maintain financial stability and avoid credit-related risks. This cash-centric approach contributed to consistent cash flow.
  5. Avoidance of Supplier Credit: By refraining from extending credit to suppliers, the company maintained a cash-based operation. This approach ensured that the company had control over its financial resources.
  6. Minimal Operational Costs: To sustain high profits, Deane emphasized the importance of minimizing operational costs. This cost-efficient approach allowed the company to achieve profitability while offering competitive prices to customers.
  7. Quality Upholdment: The quality of satchels was considered a distinctive feature of the brand. Deane was committed to upholding this quality, which contributed to the brand’s reputation and customer loyalty.
  8. Preservation of British Identity: Deane was dedicated to preserving the brand’s British identity. This was achieved through various means, including manufacturing in the UK and hiring skilled labor to maintain product quality.
  9. Supply Chain Efficiency: Preventing material shortages and maintaining an efficient supply chain management system were crucial aspects of the company’s operations. This ensured a steady flow of materials and timely production.
  10. Diverse Target Segments: Deane recognized the importance of catering to diverse target segments, including schoolchildren, teenagers, and adults. This approach allowed the company to address a broad range of customer needs and preferences.

These well-defined objectives guided the strategic decisions and actions of the Cambridge Satchel Company, contributing to its growth and success as an SME.

Cambridge Satchel Company’s Business Plan:

During its early stages, the Cambridge Satchel Company operated under the following key characteristics:

  1. Minimal Investment: The company was founded with a minimal initial investment of £600. This demonstrates the company’s ability to start and establish itself with limited capital.
  2. Leaflet Advertising: Initial advertising efforts primarily relied on the distribution of leaflets for promotional purposes. This low-cost approach allowed the company to reach its target audience without significant advertising expenses.
  3. Limited Marketing Budget: Marketing expenses were carefully managed and restricted to ten percent of the total capital invested. This frugal approach ensured that the company maximized the utility of its limited financial resources.
  4. Online Marketing: Recognizing the cost-effectiveness of online marketing, the company utilized digital platforms for promotional activities. This strategy enabled the company to reach a broader audience and achieve extensive brand exposure without incurring substantial costs.
  5. Cash Transactions: The company’s operations were centered around cash transactions. Conducting business primarily in cash helped maintain financial stability and avoid the complexities and risks associated with credit transactions.
  6. No Credit Terms: The company strictly adhered to a policy of not supplying goods on credit terms. This approach aligned with the commitment to cash-based operations and ensured that the company received payment for products promptly.

These early-stage characteristics reflect the company’s resourceful and financially prudent approach to business operations. Despite limited initial capital, the Cambridge Satchel Company successfully leveraged cost-effective marketing and cash-based transactions to establish itself and achieve brand recognition.

3.2 Potential Changes to the Business Plan

Cambridge Satchel Company may consider the following potential changes to its business plan:

  1. Invest in Additional Manufacturing Facilities: Utilize the available cash reserves to invest in setting up additional manufacturing facilities. This expansion would allow the company to fulfill larger orders and meet the growing demand for its products. Increased production capacity can help capture a larger market share and enhance profitability.
  2. Explore Credit Terms for Larger Retailers: Consider extending credit terms to larger retailers or distributors. This strategy could potentially lead to increased sales volume, as it may attract larger business clients who prefer to purchase on credit. However, careful credit management and risk assessment would be essential to mitigate associated financial risks.
  3. Enhance Online Security Measures: Implement stringent security measures to safeguard online transactions and protect the brand against counterfeit products and fake websites. This could involve investing in advanced cybersecurity solutions, monitoring online channels more closely, and actively taking legal action against counterfeiters to protect the brand’s integrity.
  4. Diversify Product Line and Increase Marketing: Expand the product line by introducing new designs, styles, or product categories. Simultaneously, invest in larger and more comprehensive advertising campaigns to promote the expanded product range. This strategy can attract a broader customer base and increase overall sales.

These potential changes to the business plan can help the Cambridge Satchel Company adapt to changing market dynamics, capitalize on growth opportunities, and address the challenges it currently faces. Each of these strategies should be carefully evaluated and executed to ensure they align with the company’s long-term goals and financial stability.

Task 4

Cambridge Satchel Company’s Evolution as an SME

Cambridge Satchel Company may consider the following potential changes to its business plan:

  1. Invest in Additional Manufacturing Facilities: Utilize the available cash reserves to invest in setting up additional manufacturing facilities. This expansion would allow the company to fulfill larger orders and meet the growing demand for its products. Increased production capacity can help capture a larger market share and enhance profitability.
  2. Explore Credit Terms for Larger Retailers: Consider extending credit terms to larger retailers or distributors. This strategy could potentially lead to increased sales volume, as it may attract larger business clients who prefer to purchase on credit. However, careful credit management and risk assessment would be essential to mitigate associated financial risks.
  3. Enhance Online Security Measures: Implement stringent security measures to safeguard online transactions and protect the brand against counterfeit products and fake websites. This could involve investing in advanced cybersecurity solutions, monitoring online channels more closely, and actively taking legal action against counterfeiters to protect the brand’s integrity.
  4. Diversify Product Line and Increase Marketing: Expand the product line by introducing new designs, styles, or product categories. Simultaneously, invest in larger and more comprehensive advertising campaigns to promote the expanded product range. This strategy can attract a broader customer base and increase overall sales.

These potential changes to the business plan can help the Cambridge Satchel Company adapt to changing market dynamics, capitalize on growth opportunities, and address the challenges it currently faces. Each of these strategies should be carefully evaluated and executed to ensure they align with the company’s long-term goals and financial stability.

Cambridge Satchel Company began as an SME at Julie Deane’s kitchen table, and today it is a multi-million-dollar enterprise. Its success was not instant but a result of strategic operational changes made over time. In its initial phase, the company adhered to certain policies: Commenced with a meager investment of £600. Promoted the business through leaflets in the pre-launch phase. Allocated only ten percent of capital for marketing expenses. Leveraged online advertising for brand promotion. Conducted all business transactions in cash. Avoided extending credit to customers or suppliers. As the business flourished, operations evolved: Established a website for Cambridge Satchel Company. Introduced online transactions, enhancing customer accessibility. Utilized social media networks, such as Facebook and Twitter, and engaged with celebrities for marketing. Maintained the British identity of the brand. Established a manufacturing facility in Leicester, maintaining control over product quality. Hired skilled professionals to ensure top-notch quality. Julie Deane’s use of online marketing and judicious resource allocation contributed significantly to the company’s growth. However, the company now faces the challenge of counterfeit products and fake websites, threatening its brand image and sales. To address this issue, stringent control measures are essential to ensure the authenticity and security of online transactions. Additionally, Cambridge Satchel Company should consider expanding its manufacturing capabilities to meet growing demand.

 The Cambridge Satchel Company’s journey from a small kitchen table start-up to a multi-million-dollar enterprise is a testament to effective entrepreneurship and strategic adaptability. The company’s evolution can be summarized in two key phases:

Initial Phase:

  1. Limited Capital Investment: The company began with a modest initial investment of £600, demonstrating that substantial capital is not always a prerequisite for success.
  2. Cost-Efficient Marketing: In the pre-launch phase, the business relied on leaflets for promotion, showcasing a commitment to cost-effective marketing strategies.
  3. Focused Marketing Spending: Allocating only ten percent of the capital to marketing expenses reflected a prudent approach to resource management.
  4. Embracing Online Advertising: Recognizing the potential of online marketing, the company leveraged online platforms to promote its brand, reaching a wider audience efficiently.
  5. Cash-Centric Operations: Conducting all business transactions in cash showcased a cash-centric approach that minimized financial risks associated with credit.
  6. No Credit Extension: The company’s decision to avoid extending credit to customers or suppliers further ensured cash-based operations and financial stability.

Later Phase:

  1. Digital Presence: The establishment of a dedicated website expanded the company’s digital presence, enhancing accessibility for customers.
  2. Online Transactions: The introduction of online transactions streamlined the purchasing process and accommodated changing consumer preferences.
  3. Social Media Engagement: Utilizing social media networks and collaborating with celebrities for marketing demonstrated an agile response to evolving marketing trends.
  4. Preserving Brand Identity: Maintaining the British identity of the brand upheld its unique positioning in the market.
  5. Manufacturing Control: The establishment of a manufacturing facility in Leicester allowed for greater control over product quality, a crucial element in maintaining brand integrity.
  6. Skilled Workforce: Hiring skilled professionals emphasized the commitment to delivering top-quality products.

The challenges posed by counterfeit products and fake websites require a proactive approach to protect the brand’s image and customer trust. Implementing stringent control measures, both online and offline, is crucial to maintaining authenticity and security.

Additionally, considering the expansion of manufacturing capabilities will help the company meet growing demand, ensuring that it can capitalize on its well-established brand reputation.

The Cambridge Satchel Company’s journey serves as an inspiring example for aspiring entrepreneurs, showcasing how strategic decisions, adaptability, and a commitment to quality can lead to long-term success in the business world.

Conclusion

The case of Cambridge Satchel Company serves as a valuable study of the critical success factors for SMEs. It highlights that significant capital investment is not always the primary requirement for launching and sustaining a successful business. Instead, effective resource utilization, meticulous planning, target market selection, and understanding customer needs are key factors. Furthermore, the case underscores the power of the internet as a cost-effective marketing tool but also warns of the risks of counterfeiting that can damage a brand’s identity and sales. Therefore, SMEs must implement control measures to prevent the sale of counterfeit products and the proliferation of fake websites. Julie Deane’s journey with Cambridge Satchel Company exemplifies the importance of preserving brand quality and identity while scaling operations, demonstrating a clear roadmap for effectively managing and growing an SME.

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