Enterprise & Entrepreneuralism Essay, Research Paper

Enterprise & Entrepreneuralism

Bridgetown Newsagents – A Small Business Case Study

Introduction

Dillons newsagents is a late closing local shop with a ‘Mini-Mart’ service. The

‘Mini-Mart’ side of the business is franchised from Dillons to a registered

partnership: Mr Charles Pettifer and Mr Marc Devis.

Full services are provided in the shop, a paper delivery service is also

available along with the full complement of groceries, fresh sandwiches,

confectionery, videos, cigarettes and alcohol etc..

The newsagents is located in Stratford upon Avon, on the Birmingham road,

approximately half a mile from the town centre and situated within a very

residential area. Tesco’s are the immediate traders to the newsagents.

Nine years ago, the newsagents was expanded with the intention of providing the

local inhabitants with a friendly convenient service. Lack of competition at the

time provided excellent stability and potential for expansion which was enjoyed

until two years ago when a superstore was opened nearby offering a major threat

to business.

Business growth, structure, strategies and competition are to be addressed in

the following document. Entirety of information sources and research are

obtained from two year’s part-time employment at Dillon’s newsagents.

Growth of Dillons:

In 1988, Dillons employed Mr Charles Pettifer as the operational manager, from

this date the shop solely provided newspapers and magazines for approximately

eighteen months. During this period Dillons were developing their own ?Mini-

Mart’ theme and as such decided to expand the facilities to supply a range of

groceries and other common consumer goods as well as the usual news literature.

The shop opening hours were also increased from the regular evening licensing

hours of 5:30pm, to a more substantial one of 11pm.

At this point, Mr Pettifer decided to take on the shop franchise offered by

Dillons with the help of a silent partner Mr Devis. Mr Devis has shares in the

business, but does not have authority to make unsupported decisions.

The franchise resulted in Mr Pettifer being able to obtain many goods for the

newsagents at discounted prices. The entirety of the shop was responsibility of

Mr Pettifer provided that Dillons’ standards were not infringed.

At the stage of development outline here, it can be seen that Dillons newsagents

is akin to stage one of the business growth cycle.

Key Issues:

Mr Pettifer strongly believed in providing a personal and friendly service to

all customers and from the outset instigated this within the shop environment.

Recognition within the local community and attraction of regular customers

resulted from this and thus so did a modest, small shop turnover.

Management Styles:

The style of management was very individualistic; only Mr Pettifer’s wife,

Fatima was employed initially in running the shop (issues in employing family

friends and relatives are recapitulated later). Because of this, only limited

professional management skills were required.

Market Research:

This was initially achieved by close relationships with the regular local

customers, providing key information to a number of customer needs, although no

formal research was carried out.

Systems and Controls:

Due to Dillons’ requirements, the accountancy was in advance of a role model

stage-1 business, providing efficient systems and controls for Dillons’ auditing.

All secondary audits were made into a fully computerised relational-database

system.

Sources of finance:

A great boost for the business was the initial investment by Dillons, this was

followed by continued investments by the silent partner, Mr Devis, to enable

increased expansion of the store.

Major Investments:

At this stage, no further investments were made due to the limited product range

and turnover within the shop. Major investment here was therefore not justified.

Products:

The product range was initially limited due to floor space, and the occupying

range purchased, in bulk, at a recommended cash and carry outlet.

Dillons had now become a very stable stage-1 business due mainly to the support

and expertise of Dillons’ management. Also, the newsagent’s position was

integral to the initial success it achieved, being the sole organisation

providing the previously mentioned services in the local area. ((Both businesses

in the area also added tremendously to the custom in the shop.))

After one year, Mr Pettifer decided that there simply wasn’t enough room to

expand the shop product range to the domains revealed by his marketing strategy

(albeit a very limited one!). A proposal was made to Dillons’ management to

expand the shop premises approximately by four-fold. After the initial success

of the shop and the predicted potential, Dillons agreed to finance the expansion

and also improve the presentation of the shop.

Again, the improved video services aided to further boost the custom to the shop.

The shop now had the space to dramatically increase the product range as desired,

although with this expansion, stage 2/3 considerations of the growth cycle were

required at the very least to re-establish the business.

Key Issues:

Now, maintaining original customers and expanding the customer base was

imperative to ensure maximum stock turnover. Further resources could now be

exploited due to the expansion. Increased size and stock suggests that further

staff are needed.

Management Styles:

Due to employing more staff, a professional style of management should have been

adopted. ‘Friends’ were employed thus keeping the managerial position an

informal one.

Market Research:

Research techniques had not improved in any way from the original methods and

because of this (see later) a product stagnation was induced. Sales

representatives suggested leads and ideas, however, these ideas were instigated

for other reasons.

Systems and Controls:

The book keeping and control records were now of a very high standard with full

accounting systems in operation. The entire business system was professionally

audited by Dillons on a bi-yearly basis. Suppliers also checked control and

display systems on their relevant products.

Products:

The entire product range was now entering an established market in itself. Each

product was purchased from the main suppliers on a sale or return agreement

(this agreement was a key principle to Mr Pettifer entering a new product into

his range).

The shop had an impressive product range at this stage, the customer base was

well established and supplier relations were improving all the time. Bridgetown

newsagents now enjoyed economic success.

Personnel Structure and Culture

The following tree structure demonstrates the personnel hierarchy throughout the

newsagents: [diagram of management hierarchy goes here]

Explanation of the company hierarchy:

Dillons enforce company policies on all sides of the business. They deal with

all supervision of goods delivered and provide regular audits. Visits from the

area management are frequent and always stringent. Dillons also provide major

investments throughout the Bridgetown store.

Mr Pettifer works a typical day between 9am and 5pm, provided there are no

anomalies. He is solely responsible for book keeping, reports, control systems

and ordering of tobacco, alcohol and video supplies. Being the operational

manager, Mr Pettifer is continually managing and assessing the store.

Fatima Pettifer works similar hours to her husband and is responsible for all

stock orders except the above mentioned. General shop maintenance is also an

ongoing task.

There are shifts designated to each of the workers:

5am – 11am11am – 5pm5pm – 11pm

The above shifts were maintained so that someone was constantly available to man

the shop. Employees are expected to work beyond their shift time occaisionally

in the event of a subsequent shift worker not being on time. Each shift is

covered seven days a week, with the exception of Christmas day. The labour

involves till-operation, re-stacking shelves, petroleum regulatory checks and

general shop duties.

Shelf stackers are generally employed together to ensure that all stock is

efficiently replaced. Both work six evenings per week and are responsible for

re-stacking the enirety of the shop.

Due to the individualistic style of management, problems arose when Mr Pettifer

was not present within the shop (anytime between 10am and 5pm daily) since no

management issues could be delegated to anyone else. Any sick or holiday leave

would result in a further backlog of paper work and reduced stock in the areas

for which he was concerned.

As previously stated, all the personnel employed were family or friends. This

greatly helped in promoting a friendly shop environment for the customers; good

working relationships prevailed and common interest in the success of the

business was reflected in the workers’ attitudes. Although this method of

employment assisted in creating a friendly atmosphere, the following internal

management problems soon became apparent:

Exploitations of relationships between manager and personnel was intrinsic in

many staff related issues, e.g., salaries, hours worked, holidays etc..

Till and cashing-up procedures were informal due to the trust between employees.

This may have proved to be a dangerous operation because of the liberation of

that trust, i.e., opportunities were made available to all employees

disregarding their status.

Overlapping the boundaries between personal life within the family and business

life were often perceivable since husband and wife were working within the same

environment. Although this situation was occaisionally embarrassing and no doubt

detremental, the shop definitely benefitted overall by the traditionality and

local friendliness.

No formal business strategies were evident to cater for family integrations and

because of this a unique, informal shopping environment was created but it was

inefficient and poorly structured; small problems continuously plagued Mr

Pettifer, drawing him away from managerial responsibilities that were

consequently not being dealt with effectively.

Competition:

Although the above problems prevailed since the expansion of the shop,

Bridgetown newsagents were still economically successful until the introduction

of competition in the local market.

As Dillons was the sole convenience store within the local area, prices tended

to be expensive because of the lack of price wars with competition. This proved

to be an almost fatal error when the competition entered as they were able to

effectively compete with all of Dillons’ price range.

In the early stages of 1996 a Tesco superstore opened less than a mile along the

same stretch of road as Dillons. Since Tesco is an extremely large shopping

chain (and not a small business), large financial backing was employed and the

product range was undoubtedly greater. Prices considerably undercut those

presented by Mr Pettifer, drawing away regular shoppers and leaving mainly those

who frequented the store even before it was expanded.

Tesco opened during Dillons’ most profitable times (i.e., 7-10am and 4-7pm), and

this reduced a high percentage of custom from the shop, threatening the profit

margins that had been developed.

Within six months of operation, major recruitment of captial was required by

Dillons just to help the business survive. Mr Pettifer was forced to reduce all

staff salaries (including his own) dramatically.

Business Life Cycle:

Applying the business life-cycle to Dillons newsagents, it can be seen that

progression from the Inception stage to the Expansion stage was unnaturally ???

and only certain key elements of the life cycle were addressed or implemented.

During Inception, Dillons was actually similar to the life cycle model, with

products tending towards expensive so the company would gain more profit. This

point is re-enforced seeing that the business opening hours were 5am to 11pm

during all days of the week; not taking into account ?overtime’, it is obvious

that the newsagents is already a very large commitment for Mr Pettifer.

Dillons soon drifts from the business theory since there was very little time

spent in the survival stage. Here, the business structure should be improved and

strengthened, but as no survival issues were presented to Dillons, this vital

stage of the life cycle was missed presenting future problems.

Even as Dillons grew and expanded into new markets, no new competition was

encountered thus diverging further from the life cycle and making the

organisation even more fragile and vulnerable.

Management did not develop at all throughout the life cycle and remained

individualistic and supervisory instead of developing towards a more distanced

and decentralised managerial operation.

Conclusion:

Currently Dillons is still under major financial threat and business is not

returning since the introduction of the Tesco store. In analysing the structure

of the business it can be seen that very little long term strategies were

employed and no foresight of major competition was predicted, although this

seemed inevitable.

The original success of the business seems to be largely due to the major

investments made by Dillons management, location of the shop and the lack of any

similar shops in the local environment.

At all stages of the business life cycle it appears that there is never a great

financial threat to Mr Pettifer. During expansion, nearly all the risk involved

was presented to Dillons management and Mr Devis in their capital investments.

After expansion, good trading and a good relationship with the priciple supplier

of the shop’s products enabled a sale or return method on all products (within a

reasonable time period). This method proved ideal since it diminished any

anxieties in regard to development of the shop’s product range and ensured that

there would be no profit loss on over ordering of goods, reduced slaes or

changes in the market culture.

Pricing strategy was governed by the motivation of increasing the profit margins.

Short term risks such as the time to acheive profit on turnover were reduced

whilst the risk of being dramatically undercut and pushed out of the market was

increased exponentially. Ironically, this risk factor being the single largest

reason for crisis was not recognised. External issues exasperated Dillons due to

the neglect of any long term planning.