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INTRODUCTION
The purpose of this report is to determine and consider the aims of Blue plc and in turn try to achieve a number of objectives. These objectives are to try and improve profitability, addressing stakeholder expectations, expanding the market for Blue plc, outline potential benefits that expansion would bring to stakeholders and also to try and investigate how production could be achieved. This will be done by detailing, step-by-step, the different aspects of the business and how each aspect is achieved at present and how it can be improved.
The Mission Statement is a crucial element in the strategic planning of a business organisation. Creating a Mission is one of the first actions that a business should take. This can be a building block for an overall strategy and development of more specific functional strategies. By defining a Mission an organisation is making a statement of organisational purpose. The specific definition of a Mission Statement is
“A mission statement is an enduring statement of purpose for an organisation that identifies the scope of its operations in product and market terms, and reflects its values and priorities.”
A good mission statement captures an organisation’s unique reason for being and encourages stakeholders to pursue common goals. Every company, whether big or small, needs a mission statement. Blue plc’s Mission statement has to reflect the goals of the company accurately as well as summarising it into one or two sentences.
Blue plc’s Mission Statement would therefore be
“ The aim of clothing company Blue plc is to become the leading manufacturer of high quality sports wear to the major retailing companies within the UK and eventually the worldwide market.
The overall objective is to increase product sell-through at retail, strengthen our retailer relationships and enhance and strengthen our brand image and visibility. By doing this, Blue plc will gain a formidable reputation and ultimately increase financial returns for our stakeholders.”
The definition of a stakeholder is
“ An individual or group with an interest in the success of an organisation in delivering intended results and maintaining the viability of the organisation’s products and services.”
Stakeholders play a very important role within the organisations that they have an interest in. They influence programs, products and services. The stakeholder theory states that, for a firm to remain viable it needs to satisfy all stakeholder groups’ interests. The main stakeholders within Blue plc can be split into two different groups. These groups are internal and external stakeholders. Below is a table categorising the two groups and identifying which stakeholders belong to them.
INTERNAL STAKEHOLDERS EXTERNAL STAKEHOLDERS
Shareholders Customers
Company Directors Society
Managers Government
Employees Suppliers
As with all stakeholders, there will be conflict between the different stakeholder groups. For example, managers want the highest possible price to sell their goods in order to make a substantial profit, however consumers want value for money and therefore the lowest possible price.
The stakeholder theory suggests that when setting objectives, the needs of all stakeholders should be considered. Stakeholders vary in their own aims and in their relative importance and influence on the managers who set the objectives. This can lead to conflict of interest.
It is therefore important to realise what each of the different stakeholders expectations are. This will enable a coalition of all groups and provide a common goal amongst them.
The main interest for shareholders would be to get maximum and increasing profits year on year, therefore increasing the financial return that they would receive in dividends. As sales have stagnated in recent years for Blue plc, and the fact that profits have dropped £0.8 million from 001/00 to 00/00, the main expectation for shareholders is to see a rise in profits for the following year. It is up to management to regain the increase in profits and reassure shareholders that the fall is only temporary. If management fail to do this, then shareholders may opt to cash in their shares and remove their interest from the company. This would ultimately have drastic consequences for the company and it is their aim to prevent this.
Directors within the company will have a similar expectation to the shareholders. They will also be concerned with the fall in profits and it is their job to address why they are falling and how to deal with it. It is their duty to devise an action plan that will turnaround the fall in profits and regain an increase in the sales.
It is thought that expanding the company into the continental European market will be the best solution to increasing sales and profits for the company. However, it is believed that such an expansion would not be viable unless the company was able to double its sales and take advantage of economies of scale. It is therefore the Director’s duty to try and convince all stakeholders that expansion will secure the future of the company.
The managers within the company are basically there to ensure that the business ideas will work efficiently and to plan. For example, the plan to expand into the European market will have to be thought through very carefully and strategically, and it is the mangers’ jobs to ensure that this happens. Their expectations are generally the same as the Directors as the future of the company will also determine their own futures.
Employees within company should also fulfil their respective roles to their maximum potential in order to maintain an efficient running on the business. Their expectations of the company is synonymous to that of all internal stakeholders and how they perform their tasks will determine the successfulness of the business.
Business has always had a social dimension also. The concept is based on two key ideas- the moral and ethical responsibilities of businesses, and the benefits of enlightening self-interest. Society allows businesses to exist; therefore businesses have a moral obligation to give something back. Ethics is doing the right thing, but is doing the right thing for one however, the right thing for another? This is the main reason why Blue plc must develop a common interest and goal to both internal and external stakeholders. By keeping everyone happy, then the future of the business is promising. Expanding the business into the European market is in everyone’s best interests as it will bring the business to a new customer market and also increase the profits for the company.
In order to expand into the continental European market, there must be funds available to achieve this. It is generally a common thought that one must spend money in order to make money. Blue plc must raise the capital in order to expand into the foreign market which is estimated to be between £10 and £1 million. A very large and powerful company, for example Microsoft, would have no problem in finding the funds needed. However, for Blue plc, even though it is a profit making business, will need to find other sources of funding for the venture.
There are many sources of financial assistance available to the business. Below shows the main sources of funding that Blue plc could consider. They are split into public sector bodies that support local development and also private sector organisations.
Public Sector Bodies Private Organisations
Government Grants Banks
Increasing No. of Shareholders
Attract more Investors
Businesses looking to seek and obtain Government funding may encounter a number of difficulties. The reason being because the Government tend only to give funding to non-profit organisations for programs and services that benefit the community or the public at large. Companies also cannot apply for Government assistance whenever they please. They must wait until they are announced by a Government agency. However, there is Government agency in Northern Ireland that Blue plc could look to for financial assistance. This is Invest Northern Ireland, a public body that has replaced the Industrial Development Board for Northern Ireland (IDB). There are a number of services that it has to help a business achieve what it is set out to do. In relation to Blue plc, Invest NI would be a good source of financial assistance, however they may be unlikely to provide the capital that Blue plc is looking for, as they are already a considerable profit-making organisation.
Banks are probably the most popular sources of financial assistance for most companies. The reason being is because banks obviously have vast amounts of readily available funds. However, a bank will only provide funding to a business if it sees that it will be able to pay back the money in the future. This therefore means that companies who are looking to a bank for funding must be able to convince the bank that the capital will be used for a successful purpose and that they will be able to payback the interest rates that the bank charges. Interest repayments are one of the reasons why most companies would be put off in applying for a loan from a bank, especially when it is a large amount of money that Blue plc needs.
Another source of financial assistance is to increase the number of shareholders that the company has. One way of doing this is to inform all the current shareholders that the business is planning to extend the company into Europe, and if they invest in more shares, then they will receive a larger dividend in the future. Even though this is a very good way of raising Capital, it may not be enough and other financial assistance must be sought elsewhere.
In order to raise the necessary capital that Blue plc needs to expand into Europe, they must carefully investigate all the different sources available and work out which way is the most beneficial for them. Careful planning and efficient use of resources is the key to this, because if they get it wrong then the result could be detrimental to the business.
There are many factors that affect the location of industries worldwide. The main ones are listed below
Materials
Power Supplies
Transport
Markets
Labour Supply
In the 1th Century, industry tended to be located close to the raw materials that it needed. This was mainly due to the immobility of the raw materials, which were heavy to move due to expensive and inefficient transport. Nowadays, raw materials may be described as “footloose”, as an industry is rarely tied to the location of the raw materials. There is now greater efficiency in the use of raw materials as power is more mobile and transport networks have improved, as has technology. Industries that need to be located near to raw materials are those using materials which are heavy, bulky or perishable or which lose weight or bulk during the manufacturing process.
Early industry also tended to be located near power supplies. Then newer forms of power were introduced and the means of transporting it were made easier and cheaper. Therefore this locational factor has become less important.
Transport is obviously one of the main factors that an industry must consider when locating its business. There are a number things that influence an industry and its transport and the main one is cost. Cost is usually related to distance and the further an industry has to transport its’ goods, the more expensive it will be to do so. The infrastructure surrounding the industry must also be taken into consideration. If the transport networks are bad, then this will hinder and increase the cost of transporting goods.
One of the most important factors affecting the location of an industry is the pull factor of a market. Industries will locate near to a market if the product is bulky, as this will reduce cost of transporting it. Industries will consider a number of factors when locating near a market for example, are there many linkages involved in transporting the goods or does the product become more perishable after processing. Another factor is weather or not the market that it is locating near very large, or very wealthy.
The final factor affecting the location of an industry is the amount of labour supply in the area. Previously, labour was immobile and there were fewer semi-skilled workers. Nowadays there is an increase in the number of part-time workers and the availability of and skills of labour vary from place to place.
In relation to Blue plc, the advantages and disadvantages of different locations must be considered. It must be decided whether setting up industry in Northern Ireland, in the EU or in non-EU countries is beneficial to them.
Advantages for setting up industry in Northern Ireland
· Low rates of Inflation and taxation.
· Highly skilled workforce and more people opting to go onto higher education.
· There is a lot of Government support within Northern Ireland for businesses.
Disadvantages
· Cost of labour is relatively high than that of the EU.
· The location of Northern Ireland is relatively distant from the European markets. This therefore increases cost in transport.
· There is a limited source for raw materials and these often have to be transported from different countries, again increasing cost.
· There is still some political unrest within Northern Ireland and this can prevent businesses from setting up industry there. However it must be mentioned that the country has become a lot more stable over recent years and is becoming more attractive to certain industries.
Advantages of setting up industry in the EU
· The workforce in the EU is generally highly skilled.
· There is access to all the main markets for an industry in the EU. This will reduce the cost in transport and all countries within EU are interlinked.
· There is a lot of support from the EU towards industries within the community.
Disadvantages
· Labour is relatively high costing in most EU countries.
· There is a lot of competition within the EU for many businesses. This generally means it is very difficult to start up a new business within the EU, as the larger competition wipes them out.
Advantages of setting up industry in the EU
· The cost of labour is relatively cheaper than that of the EU
· Raw materials are usually more readily available than they are in the EU
Disadvantages
· There is political instability in many of the non-EU countries.
· Distant from the main European Markets.
· There is a lack of skilled labour and many do not continue into higher education.
· Many countries outside the EU are very poor and do not have the funds to provide decent infrastructure and services.
Blue plc must decide where to set up industry examination of the advantages and disadvantages of each location as has been done above is very important. The best location for the industry would be to set up in the European Union. The reason being is because if the company wants to expand into the EU then transporting costs would be reduced employing a local workforce would look good for the company. As there has been a little profit already generated from the EU, then this proves that setting up business there would be worthwhile.
The main objectives that a government has are to ensure that there is economic growth, low unemployment, balance of payments in equilibrium and low inflation. They achieve this by using two main tools, the Fiscal Policy and the Monetary Policy.
The Fiscal Policy
The Fiscal Policy is the Government spending and taxation for the specific purposes of stabilising the economy. If the Government increases spending then this represents an injection into the economy. Therefore National income will rise which could and most likely will lead to inflation. If the Government raise taxes, then this represents a withdrawal from the economy. National income will therefore fall and inflation will decrease. Governments may raise taxes as an anti-inflationary measure.
The Fiscal Policy can be used to reduce unemployment by creating jobs, but this also may prove inflationary. The policy should therefore be used with care, even when it is being used to create new jobs. It still remains a difficulty for the Government to maintain its aims simultaneously. In relation to Blue plc, the Fiscal policy can be a good or bad thing to the business. If the Government where to increase taxation, then people are going to have less money for luxury goods which is what Blue plc sells. This would cause a decrease in sales and therefore a decrease in profits.
The Monetary Policy
The Monetary policy is the regulation of the money supply and interest rates by the Government in order to control inflation and stabilize currency. If the economy is heating up, the Government can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, the Government can reverse the process � increase the money supply, lower the reserve requirement and decrease the discount rate.
This will affect Blue plc just like the Fiscal Policy would. If interest rates are increased, public spending will decrease and so too will the companies profits.
Labour productivity is conventionally measured as the ratio of real output to labour input. Although this measure relates output to the number of employees, it does not measure the specific contribution of labour as a single factor of production. Rather, it reflects the joint effects of many influences, including new technology, capital investment, capacity utilisation, energy use, and managerial skills, as well as the efforts of the workforce.
Labour productivity index shows the rate of change in output per person engaged.
Labour Productivity Index = Production index x 100
Employment index
Blue plc management should plan and control production levels and labour productivity. Production levels may be raised by
· Getting employees to work overtime
· Hiring Extra Staff
· Sub-Contracting work to another firm
· Managing the workforce to achieve more output.
If Blue plc want the opposite effect and reduce production levels then they may do this by either cancelling all overtime or reducing the number of employees.
The economic arguments for the Euro are sub-divided into main groups transaction costs, trade competition and investment. Ultimately, abstaining from the Euro means higher costs (as far as transaction costs are concerned) than if we joined. The commissions involved in buying the Euro when trading with European countries will remain and the uncertainty arising from a floating exchange rate will also continue to be apparent. Whilst this is unlikely to make a significant difference for UK businesses buying continental European exports, it could well affect the number of UK exports being purchased by continental European companies. Basically, UK exports will be more expensive to Euro zone countries compared to exports of other Euro zone countries due to the changing cost of buying the pound. The UKs membership in the Euro zone would eliminate these costs. Trade competition refers to the fact that if exports from Euro zone countries are all priced in the same currency then it is easier for companies to see price differences between companies across borders, ultimately increasing competition between companies. In effect, with the lack of tariffs or quotas for import and export between Euro zone countries, it is almost like an integrated single European Economy as buying from a company in a fellow Euro zone country is exactly the same as buying from a company in your own country. This is called price transparency it will become far easier to compare prices across the markets of the Euro zone. The removal of transaction costs associated with exchanging currency has another effect. Intra-European investment flows would likely increase. This means that companies across the Euro zone would benefit from increased investment from other Euro zone countries.
For Blue plc, moving into the European market will therefore result in easier and more cost efficient trading with other EU markets. Exchange rates would also be wiped out as trading will be in the same currency. This would therefore attract more selling between each of the markets that it is interested in as raw material suppliers will not be put off trading with a business that uses the pound.
If Blue plc are wishing to expand their company into the European and possibly the worldwide markets, then they must consider all the economic factors that will face them. If they are operating within the UK alone then there is no problem, as they will be dealing with a single currency. However they will not see an increase in their profits if they do not expand. If they find after expansion that their main market is in Europe then it would be better off locating industry there and operating in a Euro zone. This would ease financial strain on them and other markets would look to them for trade as they deal with the same currency. For a company like Blue plc, expansion is only the naturally progression. The company is growing and expanding into Europe will only ensure that it remains that way. The company may also find that the next step after Europe will be the USA and that is where real power can be achieved. Dominating the worldwide market is the mission statement of Blue plc, as the only way forward is to broaden the companies horizons and expand into the International arena. Careful planning and management is essential for this to happen and tough decisions will have to be made in the near future. The existence of Blue plc is in the way expansion is dealt with and if it is done correctly, the future of the company is very bright.
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