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Research on a very small company based in Middlesex, which has been in business for a little more than 3 years - Impressions India Ltd.

Extracts from this document...

Introduction

1.0 Introduction I am doing my research on a very small company based in Middlesex, which has been in business for a little more than 3 years. Impressions India Ltd is a private limited company, which started trading in 2001 by importing and selling Traditional Indian furniture in the UK market and had a very positive response. Over the years the company traded all over the UK and had made very good relationships with their customers. Impressions India is a company, which wholesales furniture at very low prices, and has grown to become a major importer and distributor of the most innovative and exiting range of giftware currently available in the UK. During such a short span they are already supplying products to big names such as Harrods and House of Fraiser. Impressions India is a Market Oriented business, which produces goods according to their customer needs. It employs a part time staff of 2 who work in all the different parts of the business. Nature of the problem: At the very moment Impressions India Ltd is having a number of problems in the Finance department. Even though there is a lot of demand for their products, they are facing some financial difficulties, which are causing problems in their day to day running of the business. They are experiencing working capital problems, which limits the business to pay off its suppliers and creditors. This problem is also stopping the business to work at its maximum capacity as the company usually runs out of cash to meet its day-to-day expenses. Also this problem is causing their suppliers to loose trust in them, as their repayments are usually post dated. The company is currently operating under loss and is facing a very high liability. Choice of Business: I have decided to choose this business because of its relatively smaller structure, which makes it easier for me to access its resources to research about the problem. ...read more.

Middle

Around 27% of the respondents replied that they got aware about the company through Brochures (Direct mailing). * This question had quite a positive response as nearly all the customers replied that they were quite happy with the products. Quality to them was the main issue and they said it was clearly met and was evident in each individual product. * Price wasn't a main issue for the customers as they were happy with the prices. Some people also said that since the prices are so reasonable, it encourages them to reorder more often. * Reordering was completely on the basis when the customer runs out of the current stock. However some customers said that they reorder every 2 months to try out the new product range where they sell their old stock at clearance prices. So each customer had a different reordering period therefore the above graph has been drawn by estimation. The graph clearly shows that the majority of the sample was not sure about their reordering period but 30 % of the customers said that it was every three months. * The people were very sure about this question and replied very confidently. 67% of the customers replied in November and December because of Christmas. However some said that they get high sales in the months of April near Easter. This entirely depends on the area where the customer is based as Customers in Central London face an increase in demand around summer months, because of the number of tourists visiting the country at that time. * Majority of respondents said that they pick most of their contacts through Trade fairs as they get a chance to feel the products before they order anything. Also it allows them to discuss a product with members of the management team. However some customers do read some quality furniture magazines to get new ideas and contacts. Internet is another way of finding required products, which can be searched for on search engines like google. ...read more.

Conclusion

3. Overtrading is another cause, which has lead to this problem. In year 2003 the company spent a lot on advertising therefore increasing their operating expenses. They also moved into new premises, which also increased the costs. (Refer back to the Profit & Loss Account appendix ). However this might have been the main reason of growth in sales but taking an early action and spending a larger amount on advertising wouldn't be considered as a profitable expense. 4.6 Proof that the problem stops the business from achieving its objectives In my Questionnaire that I used for the Interview, I asked the Managing director of this firm about how this problem is stopping them to meet their objectives. He replied that this working capital problem is not allowing them to generate enough cash to pay their debts. However since this has been happening for the last three years the creditors somehow are losing trust in the company and have become very strict about the credit terms. It has also resulted in delaying of their shipments, which has disturbed their lag times of processing the orders. The customers are not happy with this outcome and some of the orders were cancelled, as the requested goods weren't delivered on the right time. The manager also said that since the profit is going down each year it is really hard for them to convince potential investors to invest in their company even if they consider selling their shares. 5.0 Conclusion In my Primary and Secondary research that I carried out I looked at the problem in depth and have analysed each issue of the problem in quite detail. The following were the key issues, which must be dealt with, in order for me to Proposes Solutions, which would help the business, to recover from these liquidity crises. * After the Research I proved that Overtrading, Stockpiling and Seasonal factors were the causes of this Liquidity problems (Refer back to Section 4.5). However these are key issues that must be acted on and my solutions will be based on these. ...read more.

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