BA30591E BUSINESS ORGANISATION CASE STUDY
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BUSINESS ORGANISATION CASE STUDY
In order for any business to be successful and economically sustainable, the organisational structure must be streamlined in order to achieve the objectives of the business. Additionally, the administrators of the business must be aware of the business environment the business operates in. This paper aim is to analyses the business of Mary Jones and Sue Jackson, more specifically the ‘Little Dessert Shop’. Furthermore, we aim to advice Mary and Sue in regarding the following business questions:
- Partnership as a type of business
- Analyse the position on the market through the use of Porter’s 5 forces model
- Perform an environmental scanning by using PEST analysis.
Mary and Sue’s ‘Little Dessert Shop’ is a type of business organisation classified as a partnership. This is where a business is administrated by more than one individual with shared investment capital, profits and responsibilities (Horton, Prain and Thiele, 2009). The partnership is created through an agreement between the different parties involved. In the case of Little Dessert Shop the business responsibilities are shared between Mary and Sue. They both invested an equal share of £30,000 which was used to secure a building lease and for operating costs. One advantage of a partnership is that it is easy to set up and more capital can be put into the business and hence more profit to be shared. Decisions that affect the company are also shared between the partners. However, due to the unlimited liability of this system, both Mary and Sue are liable for the financial risk and business liabilities. It is also necessary that they both agree on issues concerning the operation of the business to avoid possible conflict. This can be in form of written Partnership agreement, which may include:
Money deposited from each side
Roles and responsibilities for each of the partners
Conditions for partnership dissolvent
Income (or loss) distribution (Skripak, Cortes, and Walz, 2016).
Through the partnership form the business may easily attract investments into the business, thus the ideas may be realized much easier and faster.
- Porters 5 forces
Porter’s 5 Forces theory is a business tool used to evaluate an organisation’s competitive position in the market. It is used to investigate an industry’s profitability and attractiveness (Isabelle, Horak, McKinnon and Palumbo, 2020). Business owners like Mary and Sue can benefit from using Porter’s five forces to determine the potential profitability of new services and products. Porter’s theory can also be leveraged to identify a business’s weaknesses and strengths. The first force is the threat of new entry. Little Dessert Shop’s position can change depending on people’s ease to enter the same market. New entrants are attracted by profitable markets which in turn leads to diminishing profits https://www.youtube.com/watch?v=2VgbmH8rOgY&feature=related (PLS CITE THIS YOUTUBE SOURCE INSTEAD).
Threat of new entry
Mary and Sue’s shop is located in a large and well-known shopping centre amongst numerous other food venues. This means that it is relatively easy for new entrants to join the food industry market. Despite not having an accurate time frame, Little Dessert Shop was once a new entry and in a short while has broken even with revenue growing under the management of Mary and Sue who had no earlier experience running a business. Anyone with the capital can open up a similar store in the same location and compete efficiently which will eventually drive the “Dessert Shop” profit lower. The food industry has a few manageable regulations which only makes it easier to new entrants. Mary and Sue don’t have any strong barriers to entry on their side. The capital requirements are not too high to discourage new entrants and there are not any patents or proprietary technology or exclusive supplier rights.
Threat of Substitutes
The second force in Porter’s theory is the threat of substitutes. This refers to the probability of consumers finding other alternatives or replacements. The “Dessert Shop” operates in a Shopping Centre with a number of similar businesses. Starbucks, Costa Coffee and Chatime are offering a range of similar products that can be a substitutes to the “Desert Shop” (Bullring, 2020). Mary and Sue also get all their products from a local store accessible to their competitors or anyone else for that matter. They need to be unique in the products they sell otherwise their customers may be tempted to shop from their competitors or even make the products themselves. One way to address this threat would be to switch to fresher organic premium products. By doing this, they limit the number of available substitutes for their product since it is not as easy to produce cheaper substitutes. However, the risk of locking out potential and existing customers due to the inevitably increased price exists.
The third force is the buyers’ power. This is concerned with the ability of buyers to push prices down. Some factors which affect buyers’ bargaining power include, the number of buyers, the cost of switching to another supplier for the buyer and the status of individual customers to the business. Mary and Sue’s business does not have buyers who are powerful enough to dictate prices. In the busy shopping centre, the business has a lot of buyers including workers, teenagers, children and young adults. Due to the large number of customers, Little Dessert Shop has the power to dictate terms on their side. Nevertheless, it wouldn’t cost their customers to shift to their buying power to other easily available rivals. In order to retain their customers and be in a position to compete, Little Dessert Shop should look into selling a wide range of products. For example now with the increased number of people who suffer from lactose intolerance, the shop should offer a range of lactose-free products.
It is the degree of which the suppliers have power to dictate prices. Some factors affecting suppliers’ power include the number of suppliers available, product or service uniqueness, position of the supplier and the cost incurred from switching suppliers (Grundy, 2006). Mary and Sue currently get all their stock from the local cash and carry. This puts them at a disadvantage as the supplier dictates the terms. Fewer suppliers means that the business relies heavily on them, thus strengthening their position giving them power to charge more which puts a dent on your profits. Mary and Sue need to find multiple suppliers which will enable them to switch to cheaper options. Buying from a local organic farm would be a good start to broaden their options despite coming at a higher product price. They can counter this by also finding more farms to supply their products after ensuring that their customers are still able to pay for the higher priced products so as not to interfere with their margins. In future they may use the economy of scale and so agree better prices with the increase of the volume.
This is the assessment of the strength and number of competitors in the market (https://www.youtube.com/watch?v=2VgbmH8rOgY&feature=related).
Little Dessert Shop has a lot of competitors in the same location offering similar products which lowers market attractiveness. This also makes it easier for customers to go elsewhere for the same services and products in case of any minor inconvenience. To counter this, organisations can appeal to customers with low prices and strategic marketing campaigns. To this end, Mary and Sue’s idea to invest £20,000 into promoting the business and developing new products would be a welcome suggestion. Promotion will help the company to reach potentially new customers while investing in new products differentiates the business from other rivals thus putting the business in a strong position. This strategy is also useful for managing price wars initiated by existing or new entrants in the same market. The shop could start using the social media more and share videos of the production process on a daily basis. This will enhance the brand image.
- Macro Environmental factors – https://www.pearson.com/uk/educators/higher-education-educators/program/Boddy-Management-An-Introduction-7th-Edition/PGM1264842.html please use this book for all citation here! (Boddy, 2017) pages 86,87,88
The macro environment comprises of forces that determines how the business operates and also the threats that the business faces.
PLEASE REFER TO ONE OF THE PEST FACTORS (POLITICAL, ECONOMIC, SOCIAL, TECHNOLOGICAL) One macro environmental factor impacting business is the demographic force. This is concerns itself with human population aspects such as age, density, occupation and gender. Business managers must analyse their demographic because people are the major driving force for market development (Partal and Dunphy, 2016 – pls swap this with the above given reference). Huge demographics mean more opportunities and more obstacles for businesses. The large volume of consumers at the shopping centre where Little Desserts is located means that Mary and Sue have a wide array of potential customers to market and sell their products to. The demographic of their customers when it comes to age varies from children, teenagers, young adults and workers in the area. This means that Mary and Sue can focus on specific products that are attractive to the different customers. For example, during the day when young children make up the most numbers, the business can offer different flavours of ice cream which is irresistible to most kids. During the weekends when teens and young adults frequent to chat, Mary and Sue can focus more on combo meals or desserts that can be shared by a large number of friends. It is also beneficial to note that most of their customers are relatively young and thus have limited spending power, when doing their product pricing. By catering to demographics, Mary and Sue can maximize profits by tailoring their products to fit with the needs of the different demographics.
Socio-cultural forces also have an impact on the business. These are aspects that affect society’s behaviour, preferences and values. For instance, society is moving towards a trend of healthy eating as they become more aware of the benefits of a healthy diet and to avoid the lifestyle diseases that come with unhealthy living (de Ridder et al., 2017). This growing demand for healthy products is an opportunity that Mary and Sue can take advantage of. By introducing healthy desserts, Little Dessert Shop can differentiate themselves from the numerous food outlets surrounding the shopping centre. Society also tends to consume different products in different seasons. Mary and Sue are aware that desserts do not sell as much during winter. Therefore, in anticipation, Mary and Sue should develop products that are in demand during the cold season in order to keep their customers throughout the year.
Finally, technological forces are a vital factor in the macro environment. These are factors that take advantage of technology to introduce new market opportunities and products (Pallapothu and Krause, 2013). Marketers must be on the look out for technological developments and adapt in order to stay competitive and avoid being outdated. If successful, the £20,000 loan that Mary and Sue are trying for could be used to leverage technological platforms that will lead to greater revenues. For example, they could invest in a delivery app where the customer can buy a product and get it delivered in time. Promotion on the main social media platforms could also go a long way in widening their product reach and attracting new customers.
Pls add a short conclusion (50 words max)
de Ridder, D., Kroese, F., Evers, C., Adriaanse, M. and Gillebaart, M., 2017. Healthy diet: Health impact, prevalence, correlates, and interventions. Psychology & Health, 32(8), pp.907-941.
Grundy, T., 2006. Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), pp.213-229.
Horton, D., Prain, G. and Thiele, G., 2009. Perspectives on Partnership: A Literature Review. [online] pp.9-12. Available at: <https://www.researchgate.net/publication/236965145_Perspectives_on_Partnership_A_Literature_Review> [Accessed 6 November 2020].
Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C., 2020. Is Porter'S Five Forces Framework Still Relevant? A Study Of The Capital/Labour Intensity Continuum Via Mining And IT Industries. [online] Doi.org. Available at: <http://doi.org/10.22215/timreview/1366> [Accessed 6 November 2020].
Pallapothu, M. and Krause, J., 2013. Strategic Macro-Environmental Factor Analysis for Entry into the Fish Vaccines Market in India. International Journal of Business and Management, 8(3).
Partal, A. and Dunphy, K., 2016. Cultural impact assessment: a systematic literature review of current methods and practice around the world. Impact Assessment and Project Appraisal, 34(1), pp.1-13.
Skripak, S.J Cortes, A and Walz, A, 2016, Fundamentals of Business. Chapter 5: Forms of
Business Ownership. Retrieved from
https://www.pearson.com/uk/educators/higher-education-educators/program/Boddy-Management-An-Introduction-7th-Edition/PGM1264842.html pls reference this as it is the main book to be used!