It is obvious that shambolic production process has heavily damaged the sales and profits gained. Unsuitable roles and duties division can be blamed for this problem. Some have to manage so many duties and tasks while others own so much spare time. Furthermore, the aging workforce endangers the productivity level. Another obstacle worsens the condition is the weak training system. Fred, who is 18 years old, is a new worker in the field so it takes so much time to train him which also harms the production recently. Also, old machinery such as traditional spaying technique, painting and low-quality stock control technology needs updating as soon as possible if the business hopes to improve the production and sales in the coming time. Moreover, decline in sales show that marketing strategy of this company has problems.
Apparently, it should be considered to be changed to online selling or online promotion immediately because globalization is widespread and making use of cyberspace is not a bad idea at all, in fact, many companies mostly succeed thanks to effective marketing campaign and successful advertising methods. Traditional adverts on national papers are no longer popular in our modern times. Besides, the managerial system also has matters. The managerial system inside the company such as company cultures, employee behavior, etc requires strict control, however, Lewis Llewellyn focus more on production issues and Dai on external relations. Obviously, the company is in serious shortage of labor and executive managers. Lastly, financial matters such as loss of profitability and rising overdraft are causing bad reputation and rapid fall in the share price.
The product they selected was a traditional upright cycle, following a design typical of the 1940s and 1950s which created a strong niche market for this such product and would be given the upsurge in interest in cycling and the increasing consumer interest in retro styles. Another opportunity is that there would be a strong growth in their business because of the decrease in the number of people using cars. The opportunity created from the meeting between Amstrong and Owen helps him to have some expertise in new technologies that might be an interesting way to develop product. The upcoming changes in human resource, followed by Mr Jones who interjected that the quality problems could probably all be solved if the directors would allow the employment of more staffs in the factory and the plans for future directions, including development of the product range, and the introduction of new ways of working, new materials and possible outsourcing of manufacture parts of the product manufacture point out the new development of their business.
It can be seen that the biggest trouble Cyclermate is facing is their bad credits toward the bank. In 2010, the business is in trouble, the demand keeps going down despite the price reduction. This significant decrease in sales together with the increase in costs may last for the coming year. Therefore, Cyclermates overdraft is now becoming the major concern of the bank manager. So far, it is not easy for them to borrow money and this cause a lot of problem especially when they really need money to save their business. Besides, they also need to deal with their sales. Their customers demand high quality products and to meet this, they have to upgrade their producing system which will cost a lot. But, as the fact that they almost depend on their world-of-mouth reputation so it may be completely strange and challenging for them at first.
2. PEST analysis
A. POLITICAL FACTORS
Strict safety standard and consumer protection laws are Cyclermates priority. By 2010, their products continuously cause accidents. Customers keep complaining about the quality and faults in the products. One even got risk and intends to sue the company due to an accident purportedly caused by incorrectly assembled front brake. These mistakes made Cyclermate become a target of health and safety agencies. They have to improve the quality or else they can be stuck in authorized issues. On the other hand, they also need to achieve higher standard in manufacturing to meet requirements of the market, especially foreign markets.
B. ECONOMIC FACTORS
In a condition of high petrol prices recent years, many entrepreneurs find difficulties in producing and running their own business. Electricity is not an exception. Moreover, with the high cost in during manufacturing such as materials, facilities, the cost of products in the market does not avoid increasing. That is also the essential reason explaining the consumption in the world is in downward trend High costs also influence on delivery of this company, it prevents to expand the brand name and products to customers who live far away. Furthermore, it also interfere the import or export process because of tax, and ship costs. Finally, after wasting much money to purchase materials, or investing facilities and technology, spending on marketing or delivery and paying salaries for their workers, the last profits of Cyclermate Ltd cannot be good and high. If the sales of this company are not able to improve, the worst case will happen is to go bankrupt, seriously.
Cyclermate Ltd receives high competition from market because many rivals open more and more factory to produce bicycles in England, such as Carrera, Charter Lea¦. The competitiveness is higher and higher when there are new styles, color and reasonable price from competitors. The customers have lots of choices to select and purchase a bicycle which is stylish and suitable price. Another factor in economics that affects to the development of Cyclermate Ltd is labor. The unemployment rate is increasing, therefore, this is a good chance for this company to choose worker more easily, and employ them easily with affordable price.
C. SOCIAL FACTORS
High-speed innovation as well as the increasing demands of consumers requires Cyclermate to change and improve every day. Firstly, living standard of clients can affect to their choices. The higher income distribution they get, the higher demands they require. For example rich people want to ride an expansive and showy retro bicycle, but another client with medium wages just want to ride a nice quality bicycle. This point makes Cycler mate to diversify their price which is suitable for everyone in this communication. Besides price, design and color could be elements would make people to buy Cyclermate bicycle. The variation in design as well as color will attract children and teenager and give clients more options. Moreover, helpful accessories and functions are also important things that will affect to the survival of Cyclermate. A useful bicycle which is light and keep money in or save space in house will be the best choice for everyone. In addition, a friendly-environment Cyclermate bicycle will be more popular and keep up with the friendly-environment trend in the world.
D. TECHNOLOGICAL FACTORS
In parallel of development of economics, high technology involves specifically the Internet. The Internet is used worldwide and it becomes a necessary tool for many customers to order online. It is extremely convenient and quick to book or order in the Internet instead of calling or going directly to offices. Cyclermate Ltd is using the oldest way to advertise their products by posting advertisement in traditional newspapers. It has limited their goods to the customers. Instead, this company can set up its own website. They can post products, events, activities of company in to that page in order to customers following easily. Facebook is the possible choice of any entrepreneurs, because the customers can catch the new trend in this page. Moreover, the Internet is the cheapest method for advertising. More and more clients require high quality of products. Therefore motivation or investment money on modern manufacturing system is extremely important. It reflects not only the assurance about quality but also confirm the level position of company. With high level and the most modern machinery, the company will surely create trust to customers. 3. Financial Ratios Analysis
A. THE DIFFICULTIES:
Liquidity and debt ratios:
¢ Current ratio = Current assets/Current liabilities =0.85 ¢ Quick ratio = (Current assets Inventories) / Current liabilities = 0.76 ¢ Debt ratio = Total debt / Total assets = 0.38
By analyzing the financial ratios, it is easy to recognize that the quick ratio is less than one, which means the chance that the company can pay off its debt by using most liquid assets is quite low. Besides, it shows that the majority of inventories are stored and not effectively managed, that is why current ratio is at such high level, which also means low sales and low revenue gained. Moreover, the company relies on the bank loan as the main monetary support.
First of all, there is one obvious answer to the financial difficulty is that Cyclemate Ltd can lease or mortgage their freehold land costing $160,000 to gain more money and solve the situation right away. Therefore, it can prove their strength to survive in the future so the company gain more trust from the bank for future investment. Secondly, the company is in severe lack of cash (only $675 left) so of course any borrowing loan from the bank could easily turned down. The solution to this issue is that they should strictly resolve and for the trade debtors to repay the loans as soon as possible. The amount of $200,571 would help the financial situation better in the coming time. Once their assets are raised through and their liquidity are proved to be valuable enough to afford the loan, it will be beneficial for them to borrow money from the banks.
Additionally, cost in selling and distribution could be possible declined to save more money for the company such as cutting cost for postage and courier charges by substituting by cheaper service, as well as the travelling and hospitality. Those indirect costs contribute such high cost to the manufacturing of the cycles, restricting them would help boost the sales with cheaper price. Last but not least, the aging workforce is also another worry. If we can lay off some workers and hire cheaper labor for cleaning and other odd activities, it could save money for paying wages. In the meantime, experienced workers still remain the same with appropriate amount of salary; no necessary change should be applied.
4. Manufacturing procedure and improvements
A. IMPROPER WORKFORCE IN MANUFACTURING:
Unreasonable workforce division is one of the most serious problems of Cyclermate Ltd. Besides, lack of experienced employees and the aging workforce are worrying the production process and raising a big question for a more effective training system. First of all, the inappropriate division of duties obviously had made such a burden on many workers. In particular, Dai Armstrong has to deal with many tasks such as making all the frames, factory manager and business director at the same time. He himself also finds it hard to keep up the level of production (approximately 8 frames/day) because it requires the harsh physical demands. Moreover, assembly is a complex process, which takes 2 or 3 hours for one person. Janice Jones and Ffred Gregory often have to work overtime to catch up with the progress. As a result, their health and time issue could be heavily damaged.
Also, packaging is not responsibility of certain worker, anyone who has spare time can do that. If nobody has to complete their own part, without any time to do this, the packaging wont be accomplished on time. â† A good answer for this problem is that the company should require clear division to who is able to undertake and separate arrangement of duties. Specifically, assigning other qualified person on frame-making position so that Mr. Dai could concentrate and dedicate himself to external relations business only. Assuming that the financial situation of the company gets better, the company should consider hiring more experienced labor for assemble line and frame-making because Mr Dai can no longer put up with the physical requirement of the task. With those simple tasks like packaging, it is acceptable for free hand employees to help out, but only when they finished all their tasks. Besides, the fact that workforce is getting older is also causing big troubles for the company because the manufacturing requires adaptation to changes and new demands every single day.
Meanwhile, some workers are close to retired age. For example, Idris Pugh undertakes wheel manufacture; however, he is now in his seventies. Therefore, low efficiency always appears in the factory even Idris is a perfectionist, whose wheels are always absolutely true, and never causing any complaints â† In this case, the company can consider employ cheaper labor that are suggested by Maldwyn Jones: Chinese or Taiwanese labor to make the machine for them- much better quality but half the price and move Idris Pugh to higher position as a supervisor for the whole wheel-making process. Last but not least, the training system creates such obstacles for the assembly process.
Typically, Fred, who is 18 years old, is a new and un-experienced person, the training for him is necessary, however, not easy at all. It takes so much time to instruct Fred in traditional way which is apparently the cause of slow production recently. â† In order to solve it, Fred needs to be on-the-job trained and separately from working hours. Perhaps letting Idris Pugh to be a trainer for Fred is the best measure to take because with such experience, he can taught Fred who is 18 years old and save time for others people focus on completing their own tasks. By doing this, assembly area could be worked with maximum speed and capacity without interruption. Production activity can maintain its working pace.