Tài liệu Cyclermate

BEDFORSHIRE UNIVERSITY FOREIGN TRADE UNIVERSITY Faculty of International Education ************ Cyclermate Case study Subject: Applied Integrated Business Instructor: Cao Dinh Kien Student: Nguyễn Kim Oanh HANOI, NOVEMBER 2015 Table of Contents Executive summary.............................................................................................................................3 I. Introduction.................................................................................................................................6 II. SWOT analysis.........................................................................................................................6 III. Company issues and solution................................................................................................11 1. Production and operation......................................................................................................11 2. Human relation......................................................................................................................12 3. Marketing...............................................................................................................................14 4. Financial projections.............................................................................................................14 IV. Recommendation...................................................................................................................17 1. Short- term.............................................................................................................................17 2. Long-term...............................................................................................................................17 V. VI. Conclusion..................................................................................................................................17 References..............................................................................................................................18 Executive summary Historical background In 1988, Lewis Llewwllyn and Dai Amstrong were unemployment from the closure of their town’s steel works in south Wales. They decided to use their savings to set up a bicycle manufacturing business, given shared interest, and combined expertise. They selected a “ traditional” upright cycle segment with retro style. They believed that their factory would be development in ‘niche’ market. The beginning was smoothly, they had two order in the first week and the relationship with some bicycle store was set up. By the end of 1990, the business had grown to such an extent that they were unable to meet demand. They purchased a disused 15,000 square feet warehouse with an included 2,000 square feet of accommodation for £240.000. Over the next fifteen years, the business continued to expand. Despite little marketing, the demand still increase. The product had high quality, and wordof-mouth reputation seemed to be enough to maintain sales. By 2010, the business is in trouble. Costs are rising, the bank manager has expressed concern about the overdraft. Meanwhile, price have been reduced to maintain sales. The product caused mistake and had the Customer complaints. Production The products are mostly handmade and made in the open former warehouse. Dai himself still makes all the frames, using the original jigs constructed in his garage all those years ago. Steel tube stock is cut to size using an old automated tub cutting saw and an ancient but effective tube bending machine. He can make eight fames a day, but his other duties as factory manager and business director, it is too hard to keep up with the order. He want invest the merits of robotic flash butt welding machines with his colleagues, but they are not accepted because of the risk. Maldwyn Jones, also a former steel worker, paints frames as and when required. He was very active in the work and often helps other parts although not a member board of directors. Due to issues of quality paint, some frames were removed, some devices no longer use the well again and affect the environment. The problem arises here that need a large amount of capital to invest in machinery. Assembly process is relatively complex, take 2 to 3 hours for a complete assembly drawing frame assembly. Janice Jones and Ffred Gregory were responsible for this process. However, Fred is too young and does not have experience for this, and always make the process which was slowed. Job quality inspection and packaging proved to be unprofessional and inefficient. Wheels, mudguards, chain guards, stays and other necessary hardware are manufactured in parallel with the frames. Idris Pugh is a perfectionist, whose wheels are always absolutely true, and never the cause for complaint. But he have the health problems and the company sometimes must outsource with higher cost. Emlyn Morgan, he was a man skilled in plant maintenance. Also can add a certain number of jobs as steel pressing, painting or assembly when required. One problem in the production of factory inventory items too large while the material is still to enter. The only other employees are two part-time workers; Ianto Prichard works weekday mornings, as “odd-job” man and cleaner in the factory, and Gladys Wells cleans the office twice a week for an hour or so. Administration Friedra Scholock and Gwyneth Morgan were the people have the ability in financing. They manage the wages and salaries by a software package provided by the bank. Morgan is very concern about manage the inventory. Management and Corporate Structure Cyclermate Ltd has three shareholders, Lewis Llewellyn, Dai Armstrong and Linda Llewellyn. Shares are held equally between the three shareholders. But now, Lewis and Linda are divorced. She want return of her money. A former colleague of Dai’s, Geraint Williams, agreed to invested a long team loan for company with competitive rate of 10% per annum. Lewis and Dai have the equal salaries. Financial Matters Following the financial statements, total costs is more and more increase, while profit decreased and have no dividend for shareholders. The bank loans fall into the predicament. Clyclermate Ltd Present: Dai Armstrong (chair) Gwyneth Morgan (secretary) Lewis Llewellyn Frieda Schlock Maldwyn Jones Betty Barry (representing Cyclermate’s’ accountants – Davis, Davies and Davis) There have been many comments raised about the company is facing, there are solutions, ideas and thoughts of each member is given but is not yet a unified optimal solution for the company at now I. Introduction The report focus on the existing situation and cost and efficiency changes that could quickly be made in the coming months. Therefore, I deal with the financial problems and various other problems confronted by Cyclermate. The chief function of this report is to examine how the company could get out of the crisis and get back to the lost market share. I will use SWOT analysis to see the internal problems of company. From this, I forecast the situation of company in the near future. Besides, I also give some recommendation to find the best way for the survive of company. II. SWOT analysis Strength  Skilled workers  Possession of buildings and land  Handmade product  Staff is to express an opinion and join discussion  Direct Sales Channel  Simple corporate structure Opportunity  New staff are trained at low cost  Well known on the market products handmade bicycle  Attracting customers in making product category modern bikes  Start using advertising in business Weakness  Employees increasingly older  New employees also poor workmanship  Understaffed  Machines downgraded  Lack of funding  Do not focus on advertising Threat  Low productivity and not keep up orders  The company's reputation is increasingly going down  Intense competition with cheap foreign products of good quality  The staff started with the idea to leave the company  Strength  S1: Skilled workers:  Lewis Llwellyn and Dai Amstrong were the founders of the company and they have more than 20 years which worked in steel company in south Wales. Lewis had worked his way up from apprentice to be chief mill engineer, and Dai had progressed from “office boy” to a senior marketing post. So that they can manage employees to produce high quality products. They also have the capacity for people to listen to.  Maldwyn Jones, also a former steel worker, paints frames and have ability in management and production.  Idris Pugh is a perfectionist, whose wheels are always absolutely true, and never the cause for complaint.  Emlyn Morgan, also has the skills to undertake all of the factory maintenance, and he can turn his hand to steel pressing, painting o assembly when required.  Frieda Schlock and Gwyneth Morgan have skill on accounting and deal with others internal and external problems.  S2: Possession of buildings and land Unlike Cyclermate most of the companies don't possess either building or land and hence have to pay the heavy rents which adds to the cost but cyclermate can make any changes in the buildings and could capitalize in whichever way they wish to as they own it, which reduces the overall cost.  S3: Handmade product Almost the product of Cyclermate Company were made by hand with the little help of rudimentary machines. This will make their product are made carefully, drawing and painting nature of creativity.  S4: Staff is to express an opinion and join discussion Employees can play an important role in the overall development. The staff is available to companies that are creating new ideas worth exploring, they were learned the job from other parts and are considered comments by superiors.  S5: Direct Sales Channel Cyclermate has direct channels of sales with the direct sales and direct shops, hence intermediaries cost is largely eliminated. Reducing the cost of manufacturing could unquestionably help Cyclermate achieve a huge share of the market. As direct channels are in direct contact with the providers, thus, it could help in increasing in quantity or value of the sales and it provides a good opportunity to the providers to empathize the clients and could make required changes are per the requirement of the customers. (Jan, 2002)  S6: Simple corporate structure The number of employees and manager are small, they are easy to manage and arrange the work which conform with ability of each.  Weakness  W1: Employees increasingly older Besides age comes with experience, the issues of health and catch new technology becomes horizontal resolution. Idris Pugh is 70 years old and not in the best of health.  W2: New employees also poor workmanship Fred, who is 18 years old, is fairly new to the process, and training him has further slowed production recently  W3: Understaffed The company only has about more than 6 employees and managers. Sometimes, Lewis and Dai must do the work when work overload. The help of other parts will occur error because they do not have expertise.  W4: Machines downgraded Steel tube stock is cut to size using an old but automated tube cutting saw and an ancient but effective tube bending machine. The elderly compressor and extraction equipment will not adequately protect against the dangers of highly toxic paint materials.  W5: Lack of funding  The Company management are deeply concerned both about the loss of profitability, and, more urgently, the rapidly rising overdraft. The bank manager has indicated that increased overdraft facilities are not likely to be made available unless there is convincing evidence of improved trading conditions in the coming year. Unfortunately, the budget suggests that a loss is more likely.  Debts may difficulty to take on, individual issues of a shareholder to be a big trouble while need a large amount of capital to invest in machinery and maintain business  W6: Do not focus on advertising The company did not advertise on flyers, newspapers or magazines which only uses direct advertising and marketing orally with bicycle retailer. Therefore, customer brand known only in a certain range, and transient nature.  Opportunity  O1: New staff are trained at low cost The company has available a staff of skilled and experienced. Therefore, when the newly recruited staff will lose a small amount for training costs. The treatment is also less expensive.  O2: Well known on the market products handmade bicycle Since its incorporation in 1988, the company has built brand bicycle was processed by hand more than 20 years. It is also the strengths and opportunities for business development in the future. Since then, we try to limit the technical error in production to keep customers, while creating a new product line on the reputation already.  O3: Attracting customers in making product category modern bikes Currently, the traditional bicycle market went down, the company should catch up with the trend to produce modern bikes. This opportunity should be integration trend of the world market.  O4: Start using advertising in business Since its inception, the company does not focus on ad. Now is just the beginning for this. We advertise the existing products as well as upcoming products and to use reasonable funds for this phase.  Threat  T1: Low productivity and not keep up orders Because of the company's products are mainly by hand, too little staff numbers, health problems and ability to work so sometimes companies do not keep order. Outsourcing also apply when this happens but far more costly and with fewer orders in the future, then it is no longer effective.  T2: The company's reputation is increasingly going down The complaint about the causes of accidents and affect human health has made the reputation of Cyclermate significantly diminished. The product testing also become tougher but by machines increasingly degraded and the products removed also increasing.  T3: Intense competition with cheap foreign products of good quality On the bicycle market in Europe is no longer the exclusive nature, economic integration has brought competition to the products bicycle Asian countries, especially China and Taiwan where the labor force upholstered, low-cost but quality assurance.  T4: The staff started with the idea to leave the company The poor development of the company is the main reason causing the problem of employees want to leave. Also, some people think that they have not been properly evaluated its capacity caused no consensus on the job. III. Company issues and solution 1. Production and operation 1.1. Technology  Problem  The machines used in the factory are mostly those that have had a long period of use as the use of jigs originally built in the garage all those years ago.  They do not upgrade a robotic flash butt welding machine because they could not justify the investment risk.  Until recently a “traditional” cellulose spray technology was used but it is showing signs of deterioration and substandard.  Consequence  Not guarantee about quality (so many complaints recently have been about paint quality)  Not guarantee about quantity (have to work overtime to ensure that orders are met on time; commissioned a cycle shop in Cardiff to build the wheels)  Reduced sales  Solution  The imperative now is technological innovation to product quality is guaranteed, the order is now not so much as before so to retain the existing customers. 1.2. Method:  Problem  All production processes are using the classical method ( use manpower )  The products in Cyclemate mainly processed by hand, the division of labor is not fair that some people work too much while others do not have work to do.  Consequence  Waste of time: Workers often have to work overtime, each step it takes 2-3 hours for a product  Low productivity: For instance 8 frames of a cycle are produced each day with labor but if new technology is implemented then 25 or more frames would be produced each day.  Errors: The delay in making the job orders become quick and error rates is higher  Solution:  Need to replace human labor with machinery, people just set up, install and test the process, the rest will come from machinery to undertake. 1.3. Human resouces  Problem:  The number of workers too little to cause a shortage of personnel in the stages. For example, the product testing conducted by a novice with no experience work while it is an important step to assess a product. When Idris sick, no one replaced in making tires. No specific personnel in the packaged product  Consequence:  Many complaints in car quality  We spend a larger amount than the original to outsource by Cardiff. Solution:  Training more skilled workers generation  Always ready with a replacement when the problem of unwanted happens  Delay orders 1.4. Inventory materials  Problem:  There are too much raw materials  Consequence:  Materials will be depreciated over time while the company does not have the capital to the business. It's too big waste. Solution:  The company may sell some of this material to another company or receive extra work to earn additional income. 2. Human relation The staff does not meet the needs of the job  Idris Pugh is over 70 years old, he always cause the health problems, Dai can meet the demand skills necessary but not always he is free. Therefore, the firm has commissioned a cycle shop in Cardiff to build the wheels for it; these are of reasonable quality and are always delivered quickly, although the direct cost is somewhat higher than the materials and components used by Idris.  Fred, who is 18 years old, he has not have experience in the job so often causes slow production. In addition, he also is responsible for product testing after being completed, it is not efficient and it is evidenced by complaints from customers about the quality of products. Individuals do not have responsibility for the development of the company Besides the enthusiasm and his dedication to the company as Dai Armstrong, the company remains the only worry for the personal benefit of himself:  Lewis Llewellyn, he is one in two the head of the company, Mr Llewellyn is less optimistic than Mr Armstrong about the Company’s future. He feels that the time has come for the Company to recognise the inevitable and either simply close down, or try to sell to one of the other UK firms that manufacture or assemble cycles. Mr Llewellyn also noted that he finds his work increasingly tiring and stressful, and that he would be happy to retire.  Linda Llewellyn, she was Lewis’wife, but now they are divorced. She does not take part in the running of business, she only invested a legacy from a family member, was given shares in return. But now she want return of her money while the company is difficult.  Maldwyn Jones, he is thinking that he will leave the company to a Chinese company or Taiwan.  Staff not find out the problem but only give theoretically solved. Therefore, when not enforced the idea they think their qualifications were not assessed properly. This is expressed through the thinking of Morgan. No specialization at work  The parts that have not been assigned correctly, the phenomenon still understaffed and do not correct professional work. Therefore need to retrain all workers are properly written and its expertise to the work of high quality. Lack of motivation at work  While the company is having problems, it feels vague and lack of motivation is understandable. But companies can overcome it, the tight discipline, create rules reward and punish is a logical necessity. Employees need to understand their capabilities, and also should not be underestimated it. 3. Marketing Importance of Marketing has not been appreciated. The company only uses word of mouth and direct sales to advertising companies. It will not work in this tough market. The company should study and provide timely forms of advertising in this time and develop it as a key tool to increase sales. 4. Financial projections  Problem As can be seen that any company need a large amount of cash to perform its operations. But Cyclermate has only £675 in the bank and running expenses of more than £110k each month. The main problem that company is in this situation is because of the uncontrolled cost and mismanaged budget. The costs are increasing yearly with the sales and selling price of the products going down. The company is going through the financial crisis. Income statement over last five year 1,800,000 1,600,000 1,400,000 1,200,000 £ 1,000,000 800,000 600,000 400,000 200,000 0 30/09/2006 30/09/2007 30/09/2008 30/09/2009 30/0/2010 Years Tota l revenue Tota l costs Profit reta i ned  Companies are to pay for Linda Llewellyn while the company has no dividend for 2010. Therefore, Lewis would have to mortgage their shares to pay for his wife.  Wages of workers while increasing profits for the year went down.  Acid ratio for the company is 0.76:1, which shows the company is unable to meet short terms obligations, i.e. the company won't be able to meet any financial problem occurring in future.  Asset turnover ratio is 2.06:1. This indicates that the profit margins for the company are very low that's why the ratio is so high. We can also conclude from this that the company's pricing strategy is not effective leading to lower profits.  Return on capital employed - The Company is just getting a return 0.11 on the capital employed. Far too less than required.  Debtor days - 115 days. So it will take approx 115 days to receive back money from debtors  Creditor days - 24 days. So the company has to pay back it its debtors in 24 days and it is just left with 675£ of cash.  Solution  Dai is looking for investors for the company: friend from Liverpool want to retire in Wales but also looking forward to a job here.  Mortgaging the freehold land - The Company has a free hold land £160,000. It can mortgage the same to the bank for an agreed period of time and raise out funds. Even after the revaluation and charges from the bank they still may avail estimated £150,000 of cash. This way of bank loans will be much, but parallel to it, the company must pay more interest. Besides, we can lease the land and take money periodically.  Debtors - The Company has debtors of £200,571. The company can have word with the debtors and try and explain them the current scenario of the company and convince them if they can release some of the payments in advance. Even if they don't agree for releasing the payments, the company can exchange bills with the bank in return of some cash. Bank may check the credit history of the debtors of cyclermate and will deduct its charges; they can still raise estimated £185,000 from these bills.  Creditors - The Company is liable to pay £87,500 to the creditors and if they don't so a legal action may be taken on them which are not good for company's reputation. They may talk to the creditors and ask for an extension in time for payments as they are going through financial crisis and don't have money right now to pay back.  Wages - Wages are increasing year after year though the sales are going down. So in order to enforce cost cuttings the wages should also be decreased. Though it has just occurred once in history of United Kingdom that the workers agreed for a wage cut, but still the managers can try and talk to the labourers for decrease in the wage cut and reduce the working hours so that there is no over production as we see now. Managers may promise than increments once the company is stabilised again. This is the first application with Dai Armstrong that he take a salary to work in the future and when the company makes a profit he would receive salary plus percent dividend.  Sale of materials and inventory. Signing the contract performed part machining for a large company to get more income IV. Recommendation 1. Short- term  Conducting discussions with creditors and debtors to claim the debt and extend repayment date.  Mortgages unused land to the bank to obtain investment capital  Signing a contract with a major company to become a part of the processing (how this is carried out in a short time to earn extra income is just to learn new technologies)  Conduct a simple advertising leaflets (matching state budget less)  Open vocational training courses to recruit workers without any extra cost (extra part of training funds)  Reducing short-term wage workers and salary percentage increase in future  Set the rules, assign work according to expertise, rewards and punishments prescribed  Increased product quality, safety checks to avoid complaints and belittling.  Research to develop new products 2. Long-term  Renting land, after the company stability and development, the construction of a large-scale factory  Proceed to the modern bicycle, remain traditional bicycles but with a smaller number  Develop marketing through leaflets, on magazine ads, TV  Continued development of vocational training  Buy more new machines to replace the machine was used for too long, to learn the skills to make products such modern bicycle wheel drive, mountain bike, electric bike. V. Conclusion This report are given for reference and together discuss. Although there are some minor flaws, but they were understanding and analyzing very carefully through the issues that companies face. VI. References - Problems Confronted By Cyclermate Commerce Essay available at http://www.ukessays.com/essays/commerce/problems-confronted-bycyclermate-commerce-essay.php#ixzz3sPjloEDV assessed on 30-11-2015 - Financial And Other Problems Faced By Cyclermate Finance Essay available at http://www.ukessays.com/essays/finance/financial-and-other-problemsfaced-by-cyclermate-finance-essay.php#ixzz3sy4isXDQ assessed on 30-112015