For firms that wish to make significant strides, establishing a strategic business plan that provides the firm with a clear, unified direction and enumerates the steps necessary to get there is essential. It should convey a clear mission and vision statement, strategies, goals and future actions. Presently the vision Arran Aromatics has established is,
“Our vision is simple: to make the best products we possibly can in order to enrich the lives of the people who use them.” (Russell, year unknown, )
Thus Arran Aromatics positions itself upon the quality dimension and is their differential advantage.
The Business Planning Process (Hannon P.D, 1998) can work as a checklist in order to identify the current position, highlight the strategic issues and aid strategy development (Figure1). Thus serves three purposes.
(Figure 1. Hannon, P. D (1998) The Business Planning Process)
1.2.1.3. Planning Tools & Models
- Capabilities of the business (and its owners)
The competencies, skills, qualities and resources, as well as the maximum capacity of the business and owner should be stated. This can then be aligned with the future prospects of the business, to identify gaps and establish the scope.
- Understanding the environment it faces
A market analysis should be conducted in order to identify issues arising that can affect the business. Figure 2 encompasses the models of analysis hat can aid understanding.
(Figure 2: Compiled By Author Of This Report, Internal & External Environmental Models To Conduct Environmental Analysis)
The environment can be internal or external to the business which a ‘SWOT’ analysis acknowledges. The strengths and weakness reflect the internal state of the business, whereas the opportunities and threats are evident of the external environment.
To expand on the external environmental analysis Porter’s ‘STEEPLE’ analysis can be produced which is coherent in its approach. It analyses the external environment and organises the finding into broad sub-sections.
Although Porter went on to develop a more sophisticated approach to the characterisation of market structures and models of the firm, infamous as ‘Porter’s Five Forces’. This focuses on the interaction and intensity of external bodies upon the business and competitors that operate in the environment.The structure of competition in an industry can be described in terms of five major "forces", including:
- The intensity of rivalry among existing firms
- The threat of entry
- The threat of substitutes
- The power of buyers
- The power of suppliers
The interaction of the five forces combined together presents an impression of how attractive the industry is to the firms within it.
Peters & Watermans’ “Excellence” framework allows for detailed analysis of the internal business environment, through examining the following elements:
§ Strategy (current)
§ Structure (does it inhibit change/innovation?)
§ Systems (HR/Finance)
§ Staff (Are they motivated?)
§ Style (How do we do things? Could we improve?)
§ Shared values (Is the culture right?)
§ Skills (Are they appropriate? Do we share our knowledge?)
(, accessed 23/11/02)
However it must be heeded that any analysis is only worth conducting and will provide benefit if it is produced from an unbiased and broad perspective. Otherwise it is likely that components of the analysis will be underestimated, leading to ineffective departmental plans and could result in business failure or engulfing by competitors.
- Understanding of its customers’ requirements
McDonald (1984) stated “A matching of a company’s capabilities and the wants of customers in order to achieve the goals of the firm.” is important in applying the concept of marketing. (Carter & Jones-Evans, 2000:429) Hence understanding consumer behaviour is paramount. Consumers can be analysed through recognising the varying roles they play which should lead the firm to accurately targeting a wider customer base than originally decided. The roles’ customers play is:
- The initiator
- The influencer
- The decider
- The purchaser
- The user
Benefits, through an augmented product, can then be focused on meeting the motivators of the customer role.
(Hooley et al, 1998:132-133)
These are a set of statements with tasks, which are measurable and realistic, reflecting what the business wishes to achieve, given the market conditions. (Burns & Dewhurst, 1996:183-184) These are specific targets that aid the identification of progress the business has gained to achieving its goals. (Norton, 1999:18) They often stem from the mission statement the company advocates and drawn on the environmental analysis, as shown by Figure 3.
(Figure 3: Adapted from Burns & Dewhurst, 1996:181, Factors Impacting On Business Objectives)
- Tactical plans for achieving objectives
These draw on the main elements from various functions’ departmental plans. Hence a business will not only possess an overall business plan but also individual; financial, operations, marketing and human resources plans which are constructed in alignment with the business objectives and goals, but specific to the function. Nonetheless departmental plans will also have in addition to being more detailed, specific goals set to attain, negotiated by; the owner, departmental manager and team members. The departmental plans provide a blueprint to allow execution of the business plan. (Malburg, 1993:15)
This states the requirements the business desires from external financial sources and has is composed of a financial plan, financial highlights, risk and assumptions as well as funds requested. Its purpose is to outline the financial position and structure of the business as well as offer collateral to potential investors via projections and financial calculations. Typically the flowing is included; profit/loss estimates, cash flow analyses, equity and balance sheets. Calculations incorporated are usually; contribution, gearing, and break-even. It is integral to support these with qualitative reasons and state assumptions. (Burns & Dewhurst, 1996:191, Norton, 1999:19)
1.2.2. Part 2
1.2.2.1. Key Environmental Elements
Environmental analyses can be performed through the use of three models, namely the SWOT analysis and PEST analysis. However the PEST analyses focuses on the macro-environment, whereas SWOT combines an internal (business environment) and external perspective of the environment. Porter’s five forces can also be employed for an industry specific analysis, which is the micro-environment for Arran Aromatics. For a detailed examination all three could be utilised.
(Figure 4: Compiled By Author Of This Report, SWOT Analysis)
Figure 4 illustrates the SWOT analysis on Arran Aromatics. On an internal perspective the weaknesses out number the strengths, thus it can be appraised that improvements to eliminate weaknesses are required, which in turn could be transformed into a strength. There with the market place it seems Arran Aromatics has a number of opportunities to pursue, however this should be analysed with respect to Ansoff’s product/market matrix and to ensure a balanced product portfolio results to maintain business longevity.
Figure 5 indicates the PEST analysis of Arran Aromatics over its history and present situation.
(Figure 5: Compiled By Author Of This Report, PEST Analysis)
The PEST analysis allows for identification and organisation of macro-environmental factors affecting and interacting with the business. This can used prepare for, react to and minimise impact or maximise benefits of the issues concerned.
1.2.2.2. Effect On Business
Mr Russell’s incessant frustration and non-compliance to authority saw the rise of what is now a lucrative business. The risk-bearing trait and intuitive approach of Mr Russell enabled the eventual emergence of Arran Aromatics, as well as the Russells’ move to Arran. Despite the weakness of relationships with craft workers on Arran, the opportunity that arose through closure of the important supplier initiated a crucial chapter in the business. Ultimately the financial resources made available through grants and catering for the American market enabled the business to become change from being stead-fast to growing. The hurdles such as management buy-outs that the business faced steered it into extending its product line or diversifying. However the interplay between the business and external funding bodies to a certain extent dictated and set boundaries as to the full opportunities and ideas that were available and that Mr Russell wished to pursue. Ironically the location of Arran which enabled delivery of Arran Aromatics has hindered its take-off due its infrastructure.
There exists fewer weaknesses than strengths for Arran Aromatics; however the weaknesses have resulted in a stronger impact over the business. There are many opportunities that have arisen for Mr Russell with more available to execute, some of which would balance and eliminate a few of the threats on the business.
The economic impact on Arran Aromatics would have been negative and substantial as prior to the Terrorist attack the business was heavily reliant on the American and British markets, which have experienced downturns in their markets. The political factors identified have also played a considerable role on the business and is one that has caused frustration as well as aiding the start-up of the business. Although some technological factors have allowed for a differential advantage and a partial solution to labour problems, it is imperative modernisation still occurs to meet customers’ lifestyle changes by exploiting the use of communication technologies. The sociological element has concerned the relationships of Mr Russell with many stakeholders, which if thoughtful concentration is given upon could be improved and/or maintained to work in his favour.
1.2.3. Part 3
1.2.3.1. Growth Strategies & Models
It can be deduced that Mr Russell has unconsciously been following organic growth whereby growth is conducted within the firm, despite the fact that Arran Aromatics has been subject to a number of non-organic growth strategy by those who sought to them buy-out, which Mr Russell only succumbed to once.
The changes the business has been through is in alignment with two stage models of growth, which enables the manager to match the skills required to progress with the needs of the business according to its stage. Theses models take a life-cycles perspective on the growth of a firm, some stages of which are akin to the product life cycle.
Arran Aromatics appears to be close to entering stage four, the taking-off stage, in Churchill and Lewis’ (1983) Five Stages of Small Business Growth model. Thus is on course of the route the entrepreneurial firm follows. The next stage predicted by this model that the business will take is stage five, called maturity. A return on investment strategy is stated to the major strategy. This would require Mr Russell, to temporarily disengage himself from pursuing his tangent ideas in order, to extend the formal systems in operation and implement a line and staff management style.
Conversely Arran Aromatics has only managed to reach phase two, the direction stage, of Greiner’s (1972) model of firm growth. This is due to a number of reasons. Maximisation of the capacity of the machines and processes is the current management focus by Mr Russell. The behavioural aspects of Mr Russell unable him to overcome the crisis of autonomy problem in phase two. Finally there is an inability to attain the change the organisations structure to geographical required in phase three, unless more factories are set up in different locations.
Predictive models on the other-hand are depicting the characteristics and the identification of variables to predict success. Storey (1984) identified three contributors which influence growth:
- Attribute of the owner/entrepreneur
- Attributes of the firm
- Attributes of the strategy being pursued
If all attributes are positive, growth for the firm is ascertained. Storey places less emphasis on the personality of the entrepreneur per se than those personal characteristics that influence the accessibility to resources (Carter and Jones Evans, 2000:413). Mr Russell exhibits a few attributes which are positive as an entrepreneur: motivation, gender and some management experience. The attributes of Arran Aromatics in favour are: the age and life-cycle stage of the firm (according to Churchill and Lewis’s 1983 model of firm growth) as well as the sector in which they operate sector. Although there is no clear strategy being implemented it can be construed that customer concentration, exporting and to a lesser extent technological sophistication has been taking place. Hence although the latter two attributes have a stronger positive impact than the attributes of the entrepreneur, overall great success according to Storey is not probable. This is due to the latter two attributes’ dependency on the attribute of the entrepreneur, which is not strong. (Lecture notes, 22/10/02)
Growth strategies through a marketing outlook can also be found, predominately using the Ansoff’s Matrix in Arran Aromatics case. It a useful way of looking at growth opportunities that combines present and new products with present and new markets, in a 2x2 matrix, revealing four product strategies for growth Figure 6 shows the available opportunities to enable growth.
(Figure 6: Adapted from Jobber, 2001:260, Principles & Practices Of Marketing)
Arran Aromatics could consider any of the four strategies. Market development encompasses promoting existing products into new segments. Hence development into the European market and overseas market is a viable option with average risk. Experience of serving the USA market can also be transferred across. Benefits could also be reaped as the UK is part of the European Union, thus the pricing strategy can be competitive. It would also be in their interests to pursue a market penetration by winning competitors customers, as opposed to buying the competitors. Customers can be targeted using the differential advantage and quality dimension of their products in combination with place and promotion strategy. Arran Aromatics seeks to improve the esteem of their customers through their toiletry products. Extending their product line by using a product development strategy will provide greater choice for their customers, and improve their esteem by providing more experiences. An example would be candles to create an atmosphere for customers and can compliment and enhance their existing products, without risking cannibalisation. Finally a diversification strategy would entail entering new markets with new products. This is the riskiest option especially when entry strategy is not based on core competencies. Mr Russell’s venture in to a micro-brewery would be just that. If any of the creative tangents were to be implemented then the ice-cream parlour would reflect the competencies of the business, due to prior involvement and experience in the food sector, more so than the micro-brewery. (Jobber, 2001: 260-262)
1.3. Question B
1.3.1. Memo
MEMORANDUM
TO: Colleague
FROM: Miss Bhavini Vasanji
DATE: 5/11/02
SUBJECT: Mr Iain Russell’s Attriibutes
Mr Russell exhibits a number of attributes that are classically associated with that of an entrepreneur:
- Innovative (Helpful)
- Independent (Helpful)
- Frustration (Hindrance)
- Risk-bearer (Helpful and a hindrance)
- Determination (Helpful)
- Intuitive (Helpful)
- Opportunist (Helpful)
- Faith (Helpful)
- Attention to detail (Helpful)
- Confident (Helpful)
- Inspirational
- Creative with ideas (Helpful and a hindrance)
- Dissatisfaction (Hindrance)
- Extrovert (Helpful)
- Indecisive (Helpful)
- Non team-worker (Hindrance)
- ENFP Myers-Briggs Indicator
The majority of the attributes are and have been helpful in allowing the firm to reach the position it is in, growing. However the risk-bearing and large creativity has been somewhat of a hindrance, in that it has caused him to go off on tangents and distract him from the concentrating and focusing on the business as well as under estimate the risks involved. This has contributed to the reason why the capacity of the machines has not been maximised and attended to sooner. His indecisive nature has helped in that it stalls the implementation of his ideas, to allow him time to consider and give thought to his actions. However it is obvious that he does not plan, which is why his indecisiveness is more helpful than being a hindrance.
In addition his innate dissatisfaction and long for independence stems from his character. The dissatisfaction only spurs him to go off on tangents, and provides a degree of instability in times when the business is facing problems. The extroversion in the meantime enables him to forge relationships and participate in effective networking, which counter-balances his quiet nature. However his low preference for team-working is a hindrance, as small businesses relies on good team-work to produce results.
The Myers-Briggs Type Indicator (MBTI) was founded on the work by Carl Jung and the four dimensions of personality were defined. This reflects one’s personality than just a preferred learning style and provides a useful tool for investigating how different learners develop learning strategies. The four psychological dimensions are energising, attending, deciding and living. The eight preferences, which are often referred to by the capitalised letter, are Extravert and Introvert in the energising dimension, Sensing and iNtuitive in the attending dimension, Thinking and Feeling in the deciding dimension and Judging and Perceiving in the living dimension. (, accessed 05/12/02)
Mr Russell is classed as an ENFP. The MBTI is used in business to explore leadership styles (Hirsh and Kimmerow, 1990). Thus Mr Russell is suited to occupation in management and the opportunity to take on challenges continually. This explains his constant creative ideas as he seeks to find and fulfil new challenges once he has pursued one. (, accessed 05/12/02) It is recommended however that he follow through each idea before moving on the next, to ensure stability of the business.
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CARTER, S & JONES-EVANS, D (2000) Enterprise & Small Business: Principles, Practice & Policy. Financial Times Prentice Hall.
HOOLEY, J. G., SAUNDERS, A. J & PIERCY, F. N (1998) Marketing Strategy & Competitive Positioning. Financial Times Prentice Hall.
JOBBER, D (2001) Principles & Practices Of Marketing. Mc-Graw Hill.
MALBURG, R. C (1993) Business Plans To Manage Day-To-Day Operations: Real-Life Results For Small Business Owners & Operators. John Wiley & Sons Inc.
NORTON, BOB (1999) Small Business Management. Institute of management, GreenGate Publishing Services.
RUSSELL, A I (Year Unknown) Arran Aromatics Website. Available from: . Accessed 23/11/02.
LECTURE NOTES (22/10/02) Small Firm Growth. Small Business Issues Module. Loughborough University at Peterborough
Engineering Management Partnership. The Business Environment & Engineering. Available from: . Accessed 23/11/02.
Strathcylde University. A Strategy for Studying Learners Using Advanced Learning Technologies. Available from: . Accessed 05/12/02.
University Of Texas At Arlington. Myers-Briggs Type Indicator. Available from: . Accessed 05/12/02)
Small Business Issues Page of