Question One
- You should then summarize, in a short paragraph, which parts of the business you need to strengthen.
The business needs to strengthen its use of the website. They should try to make it an easy method of selling directly to customers. This will enable it to compete with their competitors in a better way. People love to visit the business -a business heritage-, however, it is costly to maintain and thus they need to break away from it. In addition, the business needs to uses technologically advanced production methods since, it still uses labour intensive methods of production. The business directors are young and inexperienced and there is need to add experienced personnel. Being the first female directors they thus, need to ensure they earn the respect of the other employees.
- Identify the factors that seem to be influencing the organizational culture of Merrythought and explain which of these factors seem most important in determining that culture.
We learn that this is family business since the start, the writer even says, “founded by the directors’ great grandfather.’ Essentially the business has been handed down to the young generation. We are also informed that in contrast to the current directors, the previous directors were as the business culture groomed for a period of at least ten years. However, he says, that Sarah,-a former PR and recruitment consultant-, worked with her father for just a single year. The business is also portrayed as one where the directors deal with all aspects of the business from production to marketing.
History, tradition and philosophy are the most important culture of the Merrythought business.
Technology and production
Merrythought is described as a labour intensive organization. Despite, being in the current century, it is still doesn’t use technologically advanced methods of production. The writer says that manufacturing has declined and thus, finding the much needed labour is very difficult. It shows that the business culture is rather in favor of labour intensive. She adds, “If we're going to survive for the next generation we've got to modernize.”
Customers, heritage and brand
The business organization prides itself in being purely English. Sarah says, “We’ve built our brand on being the quintessential English teddy bear –we need to produce that in Britain.” This shows the business has an established culture that is known and appreciated. In addition, we are told that they even got the Olympic deal when the event was hosted by England. It is even said to be British only remaining teddy bear factory. In the interview Sarah says that people love to visit and that it is an integral part of their heritage. This shows that the business has an established culture of not only producing in Britain but also allowing customers to visit their business premises.
Marketing
Merrythought prides itself in producing high quality. One of the directors says that she now understands why even the cheapest bear cost £50 but, that it was far better value for money than those made in the Far East since it did last a lifetime. She adds, “they are busy overhauling the marketing of the business,” despite their customer not wanting them to change their marketing approach, “understand it’s necessary.” Sarah says that in the past traditional companies like hers, used to be product led but now they need to be market led and that if they need to raise awareness among consumers.
Question Three
- Identify the main stakeholder of Merrythought and outline their interests in the business. Explain how these interests might be affected by Hannah and Sarah’s plan to increase production capacity (and the potential consequences of increased production and increased sales).
Employees
The employees are stakeholders in the business whose interest is job security, better working condition and appropriate remuneration. The directors plan to increase production disadvantages them. Hannah says, “we’ve got to modernize,” this spells out doom to the employees since it implies the business wants to be more capital intensive. She says production is very labour intensive and adds, “it’s by far and away our biggest overhead.” In addition, the two sisters are also inexperienced in managing a workforce hence when planning to increase production, hire and manage more employees would be more difficult. At one point Hannah admits, “something Sarah and I have never done is manage a workforce.” Moreover, training new recruits is financial expensive and takes a very long time –up to two years- for the recruit to acquire the required skills. This implies that the directors might be considering being capital intensive.
Owners
Merrythought business is owned and operated by the two sisters, Sarah says, “running your own enterprise.” Increasing production implies that more financial resources of the business will be put into production which might put the business in financial risk considering the fact that the Hannah concedes, “it is still difficult to make profit,” and it is until recently that the company’s fortune –revenue- has stabilized. The inexperience of the directors is also a concern since increased production implies more management responsibility. However, increased production might result in better future returns which would make the business strong in the future. Hannah says, “The potential to grow is there both home and abroad.” The owners may not get better returns now but there are poised for better returns in future.
Customers
They are the essence of the existence of the business and one of the most, if not the most, stakeholders. Teddy bears are very expensive which might be a reason of concern considering toys from the Far East are cheap. Nonetheless, the business prides itself in producing quality products. However, increased production might result in low quality products which would be detrimental to the future of the business. Increased production might lead to taking the business overseas to cut cost, like other companies, thereby losing their English brand and most importantly loyal brand customers.
- Identify the key costs that you would expect to find in a business like Merrythought and categorise them according to the impact that changes in level of production and sales activity might have on the company’s budgeting process. Discuss how these costs are likely to be affected by the circumstances faced by the business and the future plans to increase production and sales.
Fixed cost
The businesses fixed cost include factory rent, insurance and managing the website. These cost do not change with production but are rather fixed regardless of whether there is or there is no production. Increased production will not lead to increase in fixed cost.
Variable cost
In the event of increased production variable cost will increase. The associated cost include: wages on labour, cost of raw material and power. Increased production requires more labour to produce more goods which leads to more wages. It would also lead to more resources being spent on more working space, raw material and power. More labour translates to more money being spent on recruiting labour which Sarah says, “is very expensive.”
Investing on the required technology “to modernize” in order to increase production would also be very costly in the short run. Increased use of machine would also lead to increase in cost of power.
- Imagine that Hannah and Sarah, in order to plan the future of the company, are trying to identify the most pressing human resource management and marketing issues of the company. Describe two human resource management and two marketing issues currently faced by the company.
Human resource
Inexperienced management
The directors at Merrythought readily admit to lack of experience in management of both the business and work force. Hannah says that unlike the previous directors who worked alongside their parents for at least ten years she worked with her father for just one year.
Skilled labour
Finding skilled labour is now very difficult since production decreased after companies moved to the Far East. Training the recruits, the only alternative left, is very expensive and recruits take up to two years to acquire the required skills.
Marketing
Poor website
The business website is also very complicated and needs a total overhaul to enable it facilitate easy access and selling of their products. In addition, most of the customers do not prefer a change of system although they admit it is necessary.
High Prices
Teddy bears are also very expensive compared to other toys from the Far East which might be hindering higher sales, revenue and ultimately profit. One of the directors, until recently, considered the price rather steep for a soft toy.
Question Five
- Explain the extent to which you think that Merrythought’s business is globalised.
Globalization can be defined simply as the process by which a company expands to operate internationally. Merrythought is also operating globally.
On the front of trade, the business has global operations; the bears produced have a worldwide market. Business revenue is projected at around one million pounds largely due to the Olympic deal and “strong export sales in Japan.” The business has international competitors who jumped ship and moved production to the Far East. The writer says, “we’re the only soft toy manufacturer of any scale left.” This shows, the business has an international market and thus operates on a global scale. Merrythought is also finding “new overseas market.”
Marketing is also of international level through website. The young directors, we are informed, are busy overhauling their website to enable easy access by customers. This will not only enable them to get international customers but also allow them to be known worldwide and receive orders from all parts of the world. Hannah says, “It’s another opportunity to sell but also to test new products and have a portal for people to ask about the business.” The business is also reported to be looking for new international market which shows it’s operating on a global scale.
Teddy bears, Merrythought products, have a global appeal. The Olympics deal shows that the bear is a global brand to the extent that it is given such a deal in a international event. The business has an international appeal since they are said to produce “quintessential English teddy bear.”
However, business production is not of global scale. The business still is employing labour intensive production methods and thus output might be small to cater for global interest. “Merrythought still uses roughly the same production technique as when it was founded by the directors’ great grandfather.” The writer says that manufacturing has declined and finding skill locally is difficult which shows production is not on a global scale. Hannah says, “the potential is there to grow the business both here and abroad,” which demonstrate that the business can increase production and grow to an international level.
- Evaluate the relevance of each of the four drivers of globalization to this case. Which do you think is the strongest?
Competition drivers
It entails, opening up of business and or economies creating an enabling environment in which more players either nationally or internationally enter the marketplace which results in increased competition as business attract consumers for their product and services internationally.
We are told that many of Merrythought competitors moved to the Far East to lower production cost which indicates that the industry is competitive. In addition, we even learn that most of the imported toys are cheaper. Nonetheless, even amid competition, the writer says, “but the company’s plans to capitalize on growing demand and find new overseas markets.” The writer tells us that the directors plan to overhaul the website to make selling directly to customers easy and raise awareness. Hannah says, “if we’re going to survive for the next generation we’ve got to modernize.”
Cost drivers
It aims at lowering the cost of service or production, and enabling a business to gain from this such as gaining from economies of scale.
Merrythought business does not benefit from cost drivers of globalization. The production methods are labour intensive and are the “biggest overheads.” In addition, we are informed that such business moved to the Far East in order to benefit from economies of scale. The company is also not benefiting from economies of scale we learn that there are only 25 staff members hence production is on a small scale. The directors are also considering moving to a more efficient factory space and modernizing in order to improve production and gain from economies of scale. Moreover teddy bears are very expensive and thus showing that the business is not gaining from economies of scale.
Market drivers
It aims in bringing development in world market which leads to changes in demand and tastes of consumers, increasing purchasing power of customers and increasing low cost travelling.
Teddy bears are an international brands which is demonstrated by they use in the Olympic, export to Japan and demand from companies such as Royal collection. Sarah says, “we’ve built our brand on being the quintessential English teddy bear.” However, the current marketing system is not efficient as the new directors plan to overhaul it and ensure a simple website that will facilitate easy selling to customers most of whom are collectors. Hannah says that they need to change from being product to being market led adding, “If we’re going to survive for the next generation we’ve got to modernize.”
Government drivers
Countries work together to increase the possibility of trading activities to create wealth and economic advantage.
Although, one of the directors points out to the fact that making profit is difficult, no mention of the government or any of its organ affecting or influencing the business.
Reference
Burton , Lucy (2011), Britain's Last Surviving Teddy Bear Factory [online]
http://www.bbc.co.uk/news/business-12523562 (accessed 1 Nov 2012).
Hurley, J. (2012) ‘Sisters Battle to Protect the British Bear’, The Daily Telegraph (London),
3 July.
