Marc Menendez 05260233
Social
- Luxury Boats Ltds’ products are perceived as a high status symbol which reflect the advanced social and economic position of the owner.
- Workers in rival organisations enquire about employment with Luxury Boats Ltd. This is not only sign of troubled competitors, but can also be interpreted as an indication that unemployment will continue to rise, as workers fear for their jobs.
- Consumer attitude and buying patterns regarding luxury goods in general is likely to change as a result of the economic factors affecting customers. The likely outcome of the current economic situation is that consumers will cut back on luxury items. This is due to economic factors affecting them at present and in the near future as well as the fear and economic uncertainty presented by these issues.
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House prices appear to be decreasing. The implications are that the typical customer may no longer have the option of purchasing a luxury boat as an additional item on the mortgage since the equity of the home has been reduced due to falling house prices.
Technological
- Specialist modern machinery
- Hugh Lloyd employed Trevor Sean, a computer expert who produced a programme that would allow vessels to be computer designed by the manufacturing department at Luxury boats Ltd. This is of great help to the sales department, who are able to accept orders by showing customers the exact image of the vessel, and production will know what is required, and the fact that that the particular combinations of options are feasible, as the computer has accepted the design.
Marc Menendez 05260233
SWOT Analysis
- Strengths
- Unique Selling Point: high quality products tailored to customer needs. Special, personalised service. This has the advantage of improved customer satisfaction and brand loyalty.
- Competitively priced in the market place
- Luxury Boats Ltd is respected as a good and caring employer.
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Well trained and experienced workforce. The Marketing department is efficient and provides high quality leaflets, sensible advertising in specialist magazines, stands at the adequate shows and an easily found Internet presence. Marketing reports the highest enquiry to sale conversion rate in the industry (%50). Staff in the Finance department are well trained and competent. Invoices are delivered fast and are pursued rigorously if unpaid. Andy Cambell possesses good negotiating skills when carrying out the Purchasing function. Mr. Cambell negotiates high discounts and lengthy credit terms ensuring Cash Flow is as positive as possible. Production department workers are trained to the highest standard. This is reflected in the excellent reputation of Luxury Boats’ tradesmen which, in turn, is seen in the long list of potential employees anxious to work for the company. Luxury Boats Ltd possess two nautical engineer experts in Henry Crabb and Hugh Lloyd
- Low Turnover means the business is able to retain an efficient workforce and in the long run save resources on both training and errors. Low turnover also provides Luxury Boats Ltd with invaluable experience and knowledge of internal procedures. Furthermore, keeping a low turnover prevents disruption of customer service, low morale, loss of corporate memory and absenteeism among remaining staff. However, a low turnover has negative implications.
- The introduction of the new programme allowing for the vessels to be computer designed which is a great advantage to both sales and production staff. Firstly, the new system will allow the sales department to become more efficient as they will be able to deal with customer enquiries faster. The ability to shorten the design process will arguably further improve the enquiry to sale conversion rate. Secondly, the improved service will lead to greater customer satisfaction, again resulting in improved sales figures. Thirdly, the production department will also save time and resources by knowing instantly what is required for each particular design and whether the design is feasible.
Marc Menendez 05260233
Weaknesses
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Very low turnover carries some negative effects. Firstly, employees tend to stay at the organisation which seems to have been growing steadily up until 2001. This means most employees will be at or close to the top of their pay ranges, resulting in high salary expenses. Wage costs have reduced profit. New employees provide an influx of fresh ideas, view-points, skills, and characteristics, preventing the company from becoming stagnated.
- The company is either over-staffed or is miss-allocating staff. This means the business is not using its employees to their full potential, as it has workers in areas where it does not need them.
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Average price of almost £100,000 means that the business is relying on the small customer base who can afford this price range. Luxury items are very dependent on general economic factors.
- Shortage of Capital. The company has a problem if it wishes to expand.
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The company is overly dependent on exchange rates with 75% of its raw materials coming from other EU members. This leaves the business open to all kinds of troubles which will ultimately result in reduced profits. This has been highlighted recently by the finance department who noted an increase in prices for raw materials. It would appear that this is a direct result of the weakening of the pound sterling against the Euro which makes imports from E.E.U. countries more expensive.
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Administration department appears to be over-stretched.
Opportunities
- The weakening of the pound sterling against the Euro means that any UK exports would now be more competitively priced in the European market. Perhaps another assessment of the international market could be made.
- Luxury Boats Ltd’s competition are in serious trouble. It would appear so far that Luxury Boats has been one of the companies least affected by the current climate. There is an invaluable opportunity to establish the company as a market leader by tackling rival companies while they are most vulnerable. If the right decisions are made, the economic turmoil that the market is suffering, could be the most beneficial event in the history of the company.
Marc Menendez 05260233
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If orders are for less expensive vessels, there is an opportunity to design a more economical budget version of the boats. These vessels could be given a separate brand name in order to avoid tainting the exclusivity of Luxury Boats Ltd’s product range. The elections of 2002 have returned a socialist government, determined to introduce policies of economic and social reform designed to assist the poorer citizens at the expense of the rich. This is only a threat if Luxury Boats Ltd does not address the issue. This new policy by the government offers the opportunity for diversification. If the government is going to cater for the poorer members of society at the expense of the rich, then it is logical that Luxury Boats Ltd offer the poorer sector of society a product that they can spend their new found economic gains on. Diversification has the added benefit of reducing risk, as investment is spread out.
- There is need for capital to finance development, this provides an opportunity for investors. Luxury Boats Ltd has the opportunity to attract investors and raise capital by entering the stock-market.
- Threats
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Unless adequate measures are taken in order to tackle the governments’ policy of introducing economic and social reform at the expense of the wealthy, Luxury Boats Ltd run the risk of a crippling and possibly deadly financial crisis. The business must accept the threat posed by the current government as a reality and must react to it swiftly.
- The fact that house prices have become static and have dropped in some cases, as a result of the introduction of VAT on property, carries the inherent threat that Luxury Boats’ current target customers will no longer see themselves in the financial position to afford an expensive luxury vessel. The reason for this, is they may not be able to add the boat to their mortgage if the equity of the house has fallen
- Interest rates remain high. This will increase the cost of mortgages and reduce demand for most types of housing, pushing house prices even further down. This was seen between June 1999 and February 2000 when increases in interest rates from 5% to 6% contributed to a slowdown in the rate of house price inflation during the summer of 2000 (Tutor2U, 2005). As a result, less target customers will be in the position to purchase Luxury Boats’ current product range. When interest rates rise the Effective Disposable Income of home owners with variable rate mortgages will fall resulting in reduced purchasing power. When customers are reasonably confident about their financial position will they are more likely to take part large scale purchases. A high interest rate will have a damaging effect on consumer confidence.
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- The Bank of England is pressurising commercial banks to maintain a rigid policy on business loans, which will make it harder for Luxury Boats Ltd to receive any additional loans. This is cause for concern, since capital will be needed.
- De-motivation. If the company announces redundancies, they will not only loose the good image they have as an employer, but they may destroy staff morale.
- Quality may suffer. Mass redundancies will eliminate the caring role the firm has towards its’ employees, which is regarded as a vital factor affecting quality. Furthermore, the de-motivation this policy would cause would almost certainly affect quality.
- Insolvency. At present, Luxury Boats Ltd are capable of meeting their financial commitments, if situation worsened this would not be the case.
- Although above average wages and a share scheme had, in the past, ensured staff loyalty and good motivation, there is a danger of becoming too fixated on the past. There is a serious danger that over-solicitous attention towards employees may lead to de-motivation and miss-allocation of resources. Luxury Boats Ltd. should “avoid rewarding employees for poor performance” (Keith Corkan, 2004, ‘Employment’ , Rosenblatt Solicitors, www.rosenblatt-law.co.uk ).
Marc Menendez 05260233
Conclusion and Recommendations
There are several contradictions in the information analysed. Firstly, while
the marketing department is regarded as an efficient section of the company, sales have been declining since 2001. There is a worrying contradiction if the marketing department is considered successful with statistics such as a conversion rate of enquiries to sales of over 50% yet between 2000 and 2004 the number of boats sold fell from 500 units to 420 units, resulting in a drop of sales revenue from £5.1 million to £3.7 million.
A further contradiction is reflected in the data when the fall in sales is linked to the new socialist government which came to power in 2002. Sales have been falling since 2001 at Luxury Boats Ltd. Therefore, government policies or the general economic climate cannot be the sole cause of the fall in sales. There must be another root cause.
In addition, it is stated that the company is efficiently capitalised and then this statement is contradicted by announcing that there is a need for capital and hence an opportunity for investors. The conflicting accounts are a worrying sign of poor communication between departments.
Furthermore, if new staff are only appointed when the trends suggested that the increased sales will be sustained, it must be questioned why the workforce continued to increase during the first years of the new millennium. Between 2000 and 2001 the number of boats sold dropped from 500 units to 470 units, resulting in a fall of sales revenue from £5.1 million to £4.8 million. This does not justify an increase in workforce during the first years of the new millennium. The question which must be asked is why did it take so long for the business to realise that there was over-staffing?.
The answer is there is no HR department to deal with such matters, just an over-stretched General Administration department. This view is further supported by Sheila Malker’s complaints regarding the increasing amount of time spent providing government departments with information about the social and personal background of the company’s employees and their contracts of employment and work practices. The Administration department is carrying out the functions of three departments at present, which can be both very confusing and burdening for staff. Dealing with contracts of employment, employee backgrounds and work practices is arguably a Human Resource area. Secondly, meeting and greeting customers and being the first point of contact for customers is a Customer service area. Finally, dealing with correspondence and ensuring the business is run smoothly is a General Administration responsibility. It is logical to state that if there is over-staffing in certain areas of the company and a miss-allocation of resources has been identified, the workforce resources should be redistributed more efficiently by creating a HR department and a Customer Service department. This step will increase quality throughout the company, increasing the long-term benefits of TQM.
Marc Menendez 05260233
Naturally, it will take a substantial investment to re-train staff and organise the changes, and business bank loans are increasingly difficult to obtain in the deteriorating economic climate at present. Entering the stock market as a PLC offers the improved potential for acquiring extra finance by issuing shares and through other
investors as its main advantage. There are several disadvantages of becoming a PLC which must be taken into consideration. There are expensive set up cost involved in becoming a PLC company. Due to public trading of the shares, the company would be more susceptible to a hostile take-over. In addition, there is a tighter level of regulation applied to PLC companies. Finally, owners with a small amount of shares will not have any control over the running of the company.
Once the company’s resources have been efficiently distributed ensuring quality throughout, it may be possible to diversify in order to reduce risks and appeal to a wider market. Luxury Boats could appeal to a wider group of customers without damaging its exclusive image, by producing cheaper, more standardised versions of the vessels under a new brand name.
Marc Menendez 05260233
References
Tutor2U, 2005, ‘Interest Rates and Economic Activity’ , www.tutor2u.net
Keith Corkan, 2004, ‘Employment’ , Rosenblatt Solicitors, www.rosenblatt-law.co.uk
Donald D. Bergh, 1995, ‘Academy of Management Journal’, ‘Problems with Repeated Measures Analysis: Demonstration with a Study of the Diversification and Performance Relationship’
