CONTENTS

1.Background

2.The Present Position

3.Strategic Statements for Sample Company

4.Your Strategic Strengths

5.Your known Weaknesses

6.Your known significant opportunities

7.The Threats you can see

8.Ratio Analysis, and Preliminary Financial Considerations

9.Key Elements of a Future Strategy

10.Action Record of Recommendations

1.Background

Sample Companyhas been established for some years, and has maintained its present address since its inception. The enterprise is privately owned, and is set up to operate as a partnership, with the present owners mr and Mrs Client.Ownership changed last year, as the present owners were looking to buy a buisness in the region, and the previous owner was prepared to sell.

The business may have been profitable during its years of operation under the previous owner, but is now trading with poor profitability, and it is likely always to have been so. The present owners understand the technical basis of enterprise, but are new to the retail focus of a high profile branded retail store like “Your Business”. In keeping with many small businesses, the profitability is not as high as required to provide a strong cash flow and yield an income proportional to the operating effort.

At this stage of development for Sample Company, new opportunities are being presented through the “Your Business” program of their major supplier, Supplier Company Corporation. This program offers a range of additional products, but at the same time makes merchandising and retailing demands on Sample Company which are challenging.

At this juncture, the owners are looking to consider several key points:

∙What steps must be taken to develop a level of profitability that would satisfy a corporate view of Return on Investment

∙What potential opportunities are available from the “Your Business” program

∙What steps must be taken in the immediate future to ensure the short term survival of the enterprise, leading to the longer term growth required

∙How each of these considerations impact on their requirements for the present retail location, and

∙What ways can these factors be harnessed to enhance the growth of Sample Company, while yielding a high quality lifestyle for the owners.

2.The Present Position

Sample Companysupplies a comprehensive range of goods and services for maintenance of home based products. In particular, these include" Supplier Brand" specialised products. It is now established as the local authorised dealer for “Supplier Bran”, enjoying the advantages that both that relationship and the “Your Business” program bring.

The market mix is made up of largely domestic customers, of which more than half are dealt with in the store. The balance of domestic sales are achieved by home visits, with the balance of overall sales being achieved through onsite service sales to local traders.

Overall investment has not been calculated, but stock has recently been reduced by return to supplier of many items, both to improve the cash position, and to reduce indebtedness to the major supplier. Other suppliers are being “managed”, so that overdue accounts do not bring about a payment crisis. For the purposes of the initial assessment and financial analysis, the total investment has been assessed as $160,000.

So far, sales have been achieved by front of house signage, including “Under New Management” signs, word of mouth referrals and some limited advertising. Some exhibition representation has been made, while detailed prospecting has been focussed on identifying owners or renters of houses jhavng relevant usability issues, as a source of service work.

The retail showroom is of a high standard, as it has recently been refitted ass a “Your Business” store with the “Your Business” fitout. Additional space is available on the roof for a permanent display centre for large products, subject to negotiation with he landlord. Such a set-up would provide the basis for "Your Business" becoming the major supplier of hte products for the local region.

Pricing is established on a “cost plus” basis, using mainly the supplier’s recommended retail price.

As for detailed financial management of the company, it is noted that there is no effective stock control program, no formal management of purchases or the cash position, no routine monitoring of performance, and no ready means of identifying the total cost makeup of various parts of the enterprise activity.

3.Strategic Statements for Sample Company

Sample Companyoperates within the following strategic considerations:

(a)The Vision - What do you want?

The vision that drives the enterprise is the view of a retail shop that is both growing strongly and highly profitable, so that the owners can enjoy a relaxed and satisfying lifestyle. In other words, the vision statement for Sample Company can be expressed as:

“Sample Company can generate a commercial performance which shows the owners to be excellent retaiol operators”

(b)The Purpose - What does the business exist to do?

At the same time, Sample Company identifies its operations as focussed on supplying home based equipment, along with the associated service activities. However, the vision of only providing products (which are themselves differentiated, but are in competition with commodity chemicals)and supporting services, is limited in its market potential. This leads to a suggested, purpose statement being expressed as:

“Sample Company creates comfortable home living for discerning buyers”

(c)Sustainable Competitive Advantage - What do you have

In addressing its key purpose to supply home care products and accessories, along with associated service activities, Sample Company is taking advantage of detailed product knowledge gained in other situations, and it processes that product knowledge into very effective solutions for client problems. The extended product knowledge means that the suggested solutions are tailored to suit the level of technicality required by the client.

A characteristic of this approach is that the sustainable competitive advantage is readily copied by others, and so loses its sustainability as a competitive edge. Others can copy this attention to technical detail. A competitive edge is more readily maintained against competition by adopting and developing a strong “customer focus” approach. Taking these considerations together leads to a future statement of the sustainable competitive advantage for Sample Company as:

“Sample Company provides prompt, personalised solutions that regularly exceed clients’ expectations”

(d)Unique Selling Proposition - What the customers get

For customers, the question is asked “Why shop at Sample Company?” In light of the detailed technical knowledge applied at Sample Company, and taking into account the proposal to develop a strong customer focus, it can be said that customers of Sample Company will find surprisingly simple and effective answers to all their equipment questions. On this basis, the unique selling proposition for Sample Company can be expressed as:

“Sample Company relieves the worry, and provides exceptional satisfaction for home owners”

4.Your Strategic Strengths

Discussions with Sample Company revealed a number of strategic strengths in the company. These strengths include:-

∙Quality Products: The position of Sample Company as authorised dealer for recognised “top shelf” brand name lines, ensures that the products on which the retail service offer is based are capable of supporting the claims made by the company.

∙Long years of Experience: Having worked in the industry for a considerable number of summer seasons, the owner/operators of Sample Company can supply customers with solutions toproblems that understand and reflect the local conditions.

∙Honest and Reliable: In contrast to others in the field,the advice offered by Sample Company is based on the customer's minimum requirement for successful operation.

∙Backup Service: Local people are available at short notice when problems arise, and Sample Company ensures that its customers are well supported.

5.Your known Weaknesses

Against these strengths readily identifiable for the client, several weaknesses have been identified. These include:-

∙Lack of a sales profile in the region, and only slow recognition of the strengths through “word of mouth”

∙No Planning: Pressures of day to day survival mean that planning for the future development of the business is not undertaken on a regular basis. As a result, outcomes happen, and the business results reflect outside influences, rather than the objectives and work of the owners and staff.

∙No Budgeting: This weakness is a “subset” of the lack of planning referred above. Planning the growth and development of the business needs to be translated into financial terms to ensure that funds required to grow the business as strongly as the market allows will be available when required.

∙Working “in” the Business, Not “on” the Business: Pressures of the present position make it next to impossible for the owner/managers to give the attention needed to provide adequate management for the business, and as a result, the business is under managed.

6.Your known significant opportunities

While the internal strengths and weaknesses are understood well, the opportunities for new growth are more difficult to define. These new opportunities are recognised:

∙An Established, but Under-serviced Market: The local region has a history long enough to create a substantial list of installed equipment needing the products and services supplied by “Sample Company”. On the other hand, there is no local history of how good a "Your Business" shop can be in helping owners maintain their equipment in top condition.

∙Sale of Large Products: Largeproduct sales are presently running strongly, and there is no immediate local competition to Sample Company in developing a reputation as the regional supplier of htese products

∙The Red Zebra Program: In introducing the “Your Business” program, Supplier Corporation have provided business management support for the dealer network through the retaining of a management consultant to provide business support for dealers who select the service

∙Reconditioning: With such a number of established homes in the region, the number of homes which would benefit from reconditioning their large items can be expected to be significant. This will present an opportunity for a new facet of services provided by Sample Company.

7.The Threats you can see

Four major threats are identified by Sample Company, namely:

∙Inability to generate new sales: The present financial operations of the store are unstainable in the medium and longer term. Only new sales can save the present position and create the conditions for continuous, solid growth. A key issue here will be the extent to which local media are effective in carrying advertising messages with enough reach and frequency, at rates affordable by the Client.

∙Difficulty in developing a large product display area: Effective sale of large products requires extensive display area, and the present retail area is too small for this purpose. A proposal is to develop the roof area for this purpose, and the additional area is essential to maximising the effectiveness of large product sales.

∙Supply problems arising from cash limitations: Supply is critical, and any “glitches” in the supply line will be very difficult to overcome. Supplier payment plans will be important in avoiding this difficulty.

∙ large product supply problems: With large products being the most fruitful source of new, rapidly achievable, high gross profit sales, any problems with large product supply will create difficulties with achieving new growth. Ability to supply is then, a critical consideration in selecting and working with, a large product supplier

8.Ratio Analysis, and Preliminary Financial Considerations

This important part of the “BizLine®” Baseline Assessment has not been completed, because the balance sheet data is not available, and some of the profit and loss report figures require discussion and analysis. This will take place during the next consultation.

9.Key Elements of a Future Strategy

In reviewing the information provided during the “BizLine Baseline Assessment” discussion, the following suggestions for a future strategy are derived. Each of these points can be addressed within The Red Zebra Management Program:

(1)Establish a consistent merchandising presence in the prime sales opportunity territory in the region

(2)Use a combination of local press advertising, and database marketing to generate awareness of merchandising offers

(3)Create strong merchandising offers using pricing strategies developed in “The Red Zebra” program

(4)Create a plan to ensure a scheduled, timely, and sustainable payment program to suppliers

(5)Maintain a keen eye on orders, sales, stocks, debtors ands cash flow to ensure sufficient funds reserves are being generated and retained in the business

(6)Use every means available, including gaining access to, and use of, the roof area to develop the “Regional Centre” concept, and capitalise on sales opportunities with effective “leader lines” and high margin“aspirational” products to which staff can “sell-up”.