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Initial Findings Report

Executive Summary

XXX (Pvt) Ltd is a successful business and has continually grown since it was set up by the owners parents in xx. The businesses main markets are in the xx provinces and its customer base is primarily in the low and medium income bands. Sales fluctuate throughout the year with trade picking up in the festival periods. The company has some operational objectives for the short to medium term but does not have a longer term strategic plan for the business. The Company faces a number of financial challenges as the price of cotton is increasing and the availability of bank finance to fund major expenditure items is expensive. There is very little promotional activity undertaken and the main channel to market is by direct distribution to retail outlets. XXX want to acquire 2 new vehicles but loan finance terms from the bank are expensive. The organisational structure is clear and managers have clear accountabilities. The production staff is mainly local women and the turnover rate is low. The machinery is traditional and labour intensive and little use is made of more modern technology. In the office function use is made of Information Technology but this could be expanded to achieve higher computerisation of records. The business has operated successfully for over xx years but now faces a number of challenges which require it to assess whether it wants to continue in its present form or develop and expand in the future

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1. Background and Introduction

Registered Business Name XXX

Address of Business Main Telephone Number Secondary Telephone Number Business Email Address Type of business Manufacturing garments

This Initial Finding Report has been produced by consultants from xxxxxxx programme as part of a free 3 day consulting engagement. This document summarises the current situation of XXX (Pvt) Ltd, outlines the companys issues, provides analysis and makes recommends for implementing short, medium and long-term actions for XXX (Pvt) Ltd. The content within this document has been developed with input from XX the Managing Director (MD) of the company.

2. Aims of the consultancy The objectives of the consultancy are to assist XXX Apparels (Pvt) Ltd to review its current position and help the company to develop future plans to meet its business objectives.

3. Methods used to collect the information Information was collected by the consultancy team at a meeting with XX on XX

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4. Company Profile The parents of XX started the business in XX and it was originally situated close to XX and shifted to its current premises in XX. At the beginning the business included manufacturing and retail textile shops however it no longer operates shops. The former business is now in the ownership of XX and his two brothers and each brother runs their own separate company. The brothers to some extent are in competition with each other.

For tax purposes the company operates as two companies; one for manufacturing and

one for purchasing and sales. However the management and staffing structure is common across the companies.

The company is mainly run by XX, with his wifes support as a director. There are XX employees including XX Management staff and XX factory workers in the company. There is a strong indication of corporate social responsibility in the business through creating job opportunities for unemployed persons in the surrounding areas.

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5. Observations by Business Function Strategy There is no written strategy for the Company and although it has short term and some medium term objectives they are mainly operational rather than strategic. The company has built on its traditional past but is now facing increased competition and other issues such as a rise in the cost of cotton. It is not clear what the annual turnover is or if the company is operating at a profit or loss. Options for increasing profits could include; reducing costs, selling more, raising process, developing new products or markets or developing partnerships to achieve injection of funds and expertise.

Finance Financial information was not available from the company but the Chairman stated that the company is profitable and that it maintains a positive cash flow. It would appear that some of the product ranges are profitable (XX) but others are more marginal (XX). It is not clear if the company establishes an annual budget for income and expenditure to help maintain control over finances. The management of the company may not be clear about how the company is actually performing and whether a return is being made on investment. Loans were recently secured to purchase two new machines and the company would like to raise a new loan to buy two new vehicles. This however would be expensive as the bank charges are estimated to be about 19%. A further challenge is the rising cost of the cotton raw material. The company maintains computerised and manual accounts reporting systems and financial records are held for the purpose of the Annual Accounts.

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Sales and Marketing The company explained that it has a written sales and marketing plan but this was not immediately available. Product XXX manufactures 100% cotton and manufacturers XX for ladies, gents and children. Its main product is XX and as it is pure cotton it is generally a higher quality material than its competitors are providing. The business is seasonal with higher sales being achieved in the festival period, particularly in March and April and November and December. At peak times, the factory is capable of working two shift patterns to operate 24 hours. Price- It is not clear what its pricing structure is but goods retail slightly higher than similar goods due to the fact they are 100% cotton which is valued by customers. Promotion The Company has built up a trusted brand but doesnt implement any promotional activities. Place- It has a small sales force of XX and uses a direct distribution system to retail outlets. The company production capacity means it doesnt have sufficient volume to distribute through wholesalers. Some initial ideas have been considered to use the internet (Facebook) to advertise and promote the product, particularly to a younger market. Competitors The Company has a number of local competitors but is unable to estimate what its market share is.

Human Resources XXX (PVT) Limited has XX staff; XX in management and XX workers. The organisational structure chart is shown below;

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Lines of responsibility for departmental managers seem to be clear and understood by the employees. Labour turnover is low partly due to the workforce being more mature and therefore less likely to be job mobile and because most workers come from areas close by. The majority of the workers are female but all managers are male. In the future there may be an issue with succession planning as the owners son has indicated he doesnt want to enter the family business. Training is provided for workers and tends to be the on the job method. This includes health and safety regulations but not all workers are following the requirements, for example the wearing of safety masks. Technology The manufacturing process is labour intensive and as modern machines and technology are relatively high in price it is not practical to update the machinery. Use is made of Information Technology in the office functions but it is still not as effective as it could be for example; there is no website or online enquiry capability to promote the product.

Strengths, Weaknesses, Opportunities, Threats (SWOT) An analysis of XXs SWOTs is shown below; A summary of the strengths, weaknesses, opportunities and threats is shown below;

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STRENGTHS Clear attention customer demand 100% Cotton products Loyal customer Skilled and trusted employees Good poduct & brand Business knowledge Family support

WEAKNESSES Financial challenges Doesn't have strategic plan Lack of modern machinery Not implementing promotional activities Didn't try to popular brand name or re position No HR function

OPPORTUNITIES Opening new sales outlet in company premisses Joining with local or foreign partner for getting capital requiments Access for new market Added new products

THREATS Competitors product (low quality, low prices) Higher material prices Barriers for getting finance ( higher interest rate , bank rules and regulations)

6. Business Objectives Limited information was available on the companys plans for the future. The objectives are primarily operational rather than strategic.

Short Term :
o o

To purchase two vehicles for distribution activities To purchase additional stock before prices rise again

Medium Term :
o

To buy a new calendaring machine (knitting machine)

Long Term :

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Join with local or foreign business partner.

5. Recommended actions
o o

Short Term : Establish an annual budget for income and expenditure to help maintain control. Develop forecasts for cash flow, sales, and profit and loss to help longer term financial planning.

Medium Term :
o

Consider developing promotional activity to target the low season period, possibly offering promotions which sell higher margin products linked with promotional lower margin products.

Long Term :
o

To explore building partnerships with new investors to develop the business and enter new markets.

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7. Conclusions XX is a well established company which has a good locally recognised brand.

There are a number of potential challenges:

o To develop a clearer forward direction for the company over the medium to longer term (3-5 years) with specific strategic objectives.

o The challenge of differentiating itself in a market where there are several competitors both locally and internationally producing similar goods, often at a lower price.

o The rising costs of cotton and the high cost of borrowing from banks means it is financially challenging to raise capital for new equipment to expand production, sales and distribution.

o The need to invest in modern technology to improve efficiencies and potentially increase production, both of the 100% cotton and the products.

o The need to adopt a more customer driven approach to product development ( rather than the current product lead approach ) to ensure products continue to meet customer changing demands

8. Next Steps XX would be pleased to agree priorities for the next 3 days of free consultancy with XX.

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