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SMALL BUSINESS ENTREPRISES
PROFILE OF A SMALL BUSINESS
IDENTIFYING ITS STRENGH AND WEEKNESS
Company Name/ Address
+ 44 (0) 42 612 2073
+ 44 (0) 42 617 50 56
E-mail: [email protected]
Group Managing Director: Charles Green
Managing Director: John Caxton
Marketing Director: Charles Smart
Sales Turnover: £ 2.2 million
Net Profits Trading Year 2013 £800,000
Oversea Markets: 85% of turnover being derived from product selling at
under £5 each and 52% at below £3
Number of Employees: 20
friendly, soft lighting, easy access with electric escalators on all floor.
customer toilet facility
& East Europe
Ferndale Toys is the unmistakable
collection of developmental toys which offers unsurpassed educational benefit
for children during their formative years.
Products in the Ferndale range are
designed with safety and durability in mind.
Only the highest grade materials are used
and rigorous testing procedures ensure that quality standards remain
Manufacturing and whole of
children’s Toys. The range include
Toys Limited was established in 1978 as a subsidiary of Ferndale plastics
Limited, a manufacturer of plastic household goods. The objective of
management was to diversify the product range while utilising existing
production techniques derived from manufacturing plastic goods.
ISO 9001 certification
retailers of FT products include Toys R us, Tesco, Argos
According to industry statistics, 25,125 establishments
primarily engaged in the retail distribution of sale of toys, games, and hobby
and craft kits and supplies in 2014. These firms employed 143,077 and generated
an estimated £21.78 billion in revenues. Over 81 percent of establishments
employed fewer than five workers and 98 percent employed less than 50. However,
the few firms large establishment, such as Toys RUs, dominated sales.
Specifically, 3 percent of the establishments generated nearly 91 percent of
the industry`s revenues. Large discount stores, such as Ferndale Toys and Target
were also top outlets for UK toy sales. The toys store Association exist to
represent this vital sector of and inform new business owners wishing to enter
the market (MBA, 2010).
SWOT analysis is a tool for auditing an
organization and its environment. SWOT analysis is the first stage of planning
and helps marketers to focus on key issues. SWOT stands for strengths,
weaknesses, opportunities, and threats. Strengths and weaknesses are internal
SWOT factors. Opportunities and threats are external SWOT factors. A strength
is a positive internal factor. A weakness is a negative internal factor. An
opportunity is a positive external factor. A threat is a negative external
factor (MBA, 2010). Ferndale Toys uses SWOT analysis
to help reach its objectives.
establish in the UK: Ferndale
Toys is well established in the UK, The Company has in excess of 2 small
businesses stores in the UK and Worldwide. It also owns the baby brand, Babies
Ferndale Toys which adds another 1 store. Ferndale Toys UK also markets
successfully on the Web (in collaboration with Amazon.com). It has a huge
distribution network that benefits from advanced logistical systems. Having so
much shelf space means that the company has a strong bargaining position when
it comes to buying prices from manufacturers. It turned over more than £ 2, 2
billion in 2014. The companies has learned to survive and
adapt in a competitive world with rapidly changing business conditions. Small
businesses face additional pressures because they have to compete against other
small businesses, as well as large and well-established players in the
industry. According to Mayo (1927), suggest that companies that cannot satisfy
consumer demand may suffer such consequences as lower sales, higher inventory
and lower profitability.
and fast growth: One of the
strength of Ferndale Toys is its continuous and fast growth as the years pass.
The company is reaching out only to new markets but to different kinds of
venues to market their product like the internet, this gives them a distinct
advantage towards their competitors. The continuous and fast growth of the
company shows how well they are operating and how effective their strategy
are well trained: Another
strength of Ferndale Toys is the employees of the company being trained well. Training is crucial for Ferndale organizational development and
success. It is fruitful to both employers and employees of the organization. An
employee will become more efficient and productive if he is trained well. Ferndale Toys employees were well
chosen and well trained to do their respective job. These employees are well
managed to keep them in line with the objectives and standards of the company.
This is a strength for the company because it leads
to quality performance of employees and quality services to the client. This
has helped to retain existing customers and attract new clients. Kotler (2010)
suggest that retaining customers in long term would help to improve profit and
sustain the business.
Convenient location: Ferndale Toys premises is located in an area where rent cost
less, with all facilities around. There is an efficient transport network
including; bus garage, and train system. Which enables staff to get to work
easily. It also allows supplies to be brought in from far afield cheaply and
quickly. And it is convenient for customer as it is located on the street near
the market place. Kotler (2010) suggest that the location of a business could
determine the foot traffic that the business may attract from face to face
customers. Choosing the right location may have a big impact on cost and
revenues. It may benefit the company in term of profits.
Affordable prices: Ferndale Toys understood that, customers will choose a
lower priced item over a higher priced item that they perceive to be of
comparable value. Charging a low price encourages many customers to buy your
products and services by making them affordable and offering them a reason to
choose your products over those of your competitors. Charging a fair price does
not necessarily mean charging the lowest possible price (Fayol. H, 1985). If
your product is of high quality, you may develop a marketing strategy based on
charging more than inferior product but relatively little for such a high
seasonal sales: As with all
retailers in Western society, Ferndale Toys UK is heavily dependent upon
successful sales during the final quarter of the year. They need to make profit
from Christmas. Retail is notoriously seasonal and Ferndale Toys UK is no
different to other retailers. In fact it could be argued that toys are a key
Christmas present product, so are even more likely to be dependent upon
Competition: Small businesses have competition that may have better branding and better
reputation than they have established (Wood.S, 1982). This type of weakness is
prevalent when customers are already familiar with a specific store or brand,
and then a small business creates or offers a competing product or service.
Companies with better brand recognition, and established reputations, see a
higher percentage of the market share, which is a potential weakness for a
small operation like Ferndale Toys.
Lack of technology: Today`s business world
relies on technology for everything from inventory management to communicating
with customers. According to Taylor (1947), suggested that when a business uses
outdated technology it can slow down productivity and contribute to the business
losing money. For example, Consumers are increasing use of the Internet to
research companies, find their contact information and browse their
inventories. Some traditional brick-and-mortar operations don`t have an online
presence, such as is found on websites or in social networking profiles, so it
is hard for potential customers to find them. Small businesses like Ferndale
Toys might lose customers if their competitors are online.
Lack of marketing: Marketing is a key factor
in promoting products and services to customers, whether through pay-per-click
campaigns or by offering product samples to potential customers (Friedman. A,
1977). Ferndale Toys lacks of budget for
marketing, this is a major weakness that can affect how much of the market
share the business acquires, and how high its sales are from quarter to
Small staff: Limited human resources is a weakness
many small business owners discover they have when they do their SWOT analysis.
According to F W Taylor (1947), suggested that Limited human resources can
include having a small staff, which makes it difficult to tackle every item on
the company`s to-do list. On the other hand, a company with a full staff that
lacks the skills and training necessary to perform tasks can be a hindrance to
an organization. Ferndale Toys Company wants to launch its social media
presence, but none of the staff has experience in social media, it can be a
major weakness for the company. Either they`ll have to hire a consultant, or
risk an unsuccessful social media launch.
1.1 ANALYSIS OF THE BUSINESS
USING COMPARATIVE MEASURES OF PREFORMANCE
Application of Porter’s Five
Forces Model to Ferndale Toys LTD
Five Forces Model illustrates how the competitive landscape in Ferndale Toys
industry is impacted by five prominent forces.
These forces are: Supplier power, Threat of new entrants, Buying power,
Threat of substitutes, and Rivalry. The
degree of rivalry is the center of this model as the other 4 forces branch off
of this. Each of the forces influences
the nature of competition into the industry. Additionally, the organizational
strategies are often impacted as the company formulate his strategies in order
to respond to the dominant competitive forces in the Toys industry (Buchanan.
The competitive rivalry within the
Competition is the foundation of the free
enterprise system, yet with Ferndale Toys businesses even a little competition
goes a long way. Because companies in an industry are mutually dependent,
actions by one company usually invite competitive retaliation (Beynon.H, 1975).
An analysis of rivalry looks at the extent to which the value created in an
industry will be dissipated through head-to-head competition. Rivalry among
competitors is often the strongest of the five competitive forces, but can vary
widely among industries. If the competitive force is weak, companies like
Ferndale Toys may be able to raise prices, provide less product for the price,
and earn more profits. If competition is intense, it may be necessary to
enhance product offerings to keep customers, and prices may fall below
occur on various “playing fields.” In some industries,
rivalries are centered on price
competition especially companies that
sell commodities such as Toys, In other
industries, competition may be about offering customers the most attractive
combination of performance features,
introducing new products, offering more after sale services or warranties, or creating a stronger brand image than competitors. In some cases the
presence of more rivals can actually be a positive for instance in a shopping area, where attracting customers may
hinge on having enough stores
and attractions to make it a worthwhile stop
Influencing Rivalry, Among Ferndale Toys Competitors the most intense rivalries
occur when One firm or a small number of firms have incentive to try and become
the market leader. In some cases, an
industry with two or three dominant firms may experience intense rivalry when
these firms are battling to achieve market leader status (Beynon. H, 1975). In
other situations, when competitors with diverse strategies and relationships
have different goals and the “rules of the game” are not well established,
rivalry will be more intense.
Threat of Rivals, Threats of rivals to Ferndale Toys can be reduced by employing
a variety of tactics. The company can minimize price competition, distinguish
their product from the competitors’ by innovating or improving features
(Atkinson.J, 1988). Other tactics include focusing on a unique segment of the market, distributing the product in a
novel channel, or trying to form stronger relationships and build customer
The threat of new entrants
may have the market cornered with the product, but they success may inspire
others to enter the business and challenge the position. The threat of new
entrants is the possibility that new firms will enter the Toys industry. New
entrants bring a desire to gain market share and often have significant
resources. Their presence may force prices down and put pressure on profits. Analyzing
the threat of new entrants involves examining the barriers to entry and the
expected reactions of existing firms to a new competitor. Barriers to entry are
the costs and/or legal requirements needed to enter a market (Clayton. T, 1994).
These barriers protect the companies already in business by being a hurdle to
those trying to enter the market. In addition to up-front barriers, a new competitor may inspire
established companies to react with tactics to deter entry, such as lowering
prices or forming partnerships. The chance of reaction is high in markets where
firms have a history of retaliation, excess cash, are committed to the
industry, or the industry has slow growth. Entry barriers are unique for each industry and situation, and can change over time. Most barriers stem
from irreversible resource commitments you must make in order to enter a
market. For example, if Ferndale businesses have well established brand names
and fully differentiated products, as a potential market entrant the business
will need to undertake an expensive marketing campaign to introduce the
products. Barriers to entry are usually higher for companies involved in
manufacturing than for companies that provide a service because there is often
a significant expense in setting up a production facility. The threat of new
entrants is greatest when Processes are not protected by regulations or patents
(Geary. J, 1992). In contrast, when licenses and permits are required to do
business, in that case Ferndale Toys, firms will not have any protection from new
entrants. Because there is no alcohol involve here. Another threat of new entry
is customers have little brand loyalty. Without strong brand loyalty, a
potential competitor has to spend little to overcome the advertising and
service programs of existing firms and is more likely to enter the industry
because Ferndale Toys has no brand loyalty. Another threat of new entry is, Start-up
costs are low for new businesses entering the industry. The less commitment needed
in advertising, research and development, and capital assets, the greater the
chance of new entrants to the industry. Another threat of new entry is the
products provided are not unique. When the products are commodities and the
assets used to produce them are common, firms
are more willing to enter an
industry because they know they can easily liquidate their inventory and assets
if the venture fail (Piore. M, 1984). Ferndale Toys are made of plastics. The
products are commodities and the assets used to produce them are common so
firms are more willing to enter the industry.
threat of new entrants, Ferndale Toys must enhance the marketing/brand image,
utilizing patents, and creating alliances with associated products can minimize
the threat of new entrants. Important tactics the company can follow include
demonstrating the ability and desire to retaliate to potential entrants and
setting a product price that deters entry. Because competitors may enter the
industry if there are excess profits, setting a price that earns positive but
not excessive profits could lessen the
threat of new entry in the industry.
The threat of substitute products
one business can be replaced by products from another. If you produce a commodity
product that is undifferentiated, customers can easily switch away from the
product to a competitor’s product with few consequences.
In contrast, there may be a distinct penalty for switching if your product is
unique or essential for your customer’s business. Substitute products are those
that can fulfill a similar need to the one your product fills. As an example, a family Toy store may prefer to
buy the packaged Toys produced at Ferndale Toys plant, but if
given a better deal, they may go to another Toys supplier. If Ferndale Toys
make handmade Toys form pure plastic materials, though, and the company are
selling to upscale Toys Company, they may have few substitutes for the product
that they are providing. Substitute products can come in many shapes and sizes,
and do not always come from traditional
competitors (Hunter. L, 1991). Plastic
Toys can be substitute for wood toys in customer’s preferences. This is why
when developing a business plan, it is critical to assess the other options the
customers have to satisfy their needs. To do this, company like Ferndale Toys
must look for products that serve the same function as theirs. A threat exists
if there are alternative products with lower prices or better performance or
both. Substitutes can become a greater threat when Ferndale Toys product
doesn’t offer any real benefit compared to the competitor products. What will
hold your customers if they can get an identical product from your competitor?
It is easy for customers to switch. Customers have little loyalty. When price
is the customer’s primary motivator, the threat of substitutes is greater
(Millward. N, 1992).
threat of Substitutes, Ferndale Toys can reduce the threat of substitutes by
using tactics such as staying closely in tune with customer preferences and
differentiating the product by branding. In some cases, the advertising
required to differentiate is more than one firm can bear. In that case,
collective advertising for the industry may be more effective.
The bargaining power of suppliers
requires inputs labor, parts, raw
materials, and services. The cost of a company inputs can have a significant
effect on the company’s profitability. Whether the strength of suppliers
represents a weak or a strong force hinges on the amount of bargaining power
they can exert and, ultimately, on
how they can influence the terms and conditions of transactions in their favor.
Suppliers would prefer to sell to company at the highest price possible or provide
them with no more services than necessary. If the force is weak, then company
may be able to negotiate a favorable business deal for themselves (Meyr. S,
1981). Conversely, if the force is strong, then they are in a weak position and
may have to pay a higher price or accept a lower level of quality or service.
Factors affecting the bargaining power is as follow;
have the most power when the input(s) company require are available only from a
small number of suppliers. For instance, when Ferndale Toys is making Toys and
need petrochemicals to process into plastic, they will have little or no
bargaining power with crude oil Company, the world’s dominant supplier. The
inputs they require are unique, making it costly to switch suppliers. If
Ferndale use a certain enzyme in a Toy manufacturing process, changing to
another supplier may require them to change they entire manufacturing process.
This may be very costly to the company, thus Ferndale Toys will have less
bargaining power with the supplier. And also the suppliers can sell directly to
Ferndale Toys customers, bypassing the need
for Ferndale toys business. For example, a manufacturer could open its own
retail outlet and compete against them.
bargaining power of suppliers. Most businesses like Ferndale don’t have the
resources to produce their own inputs.
In this position, the company might consider forming a partnership with
your supplier. This can result in a more even
distribution of power. For instance, Ferndale uses partnering with its
components suppliers as a key strategy to be the low-cost/high-quality leader
in the market. This can be mutually beneficial for both supplier and buyer.
The bargaining power of customers
The power of
buyers describes the effect that the customers have on the profitability of the
business. The transaction between the seller and the buyer creates value for
both parties. But if buyers (who may be
distributors, consumers, or other manufacturers) have more economic power, the ability to capture a high proportion of
the value created will decrease, and the company will earn lower profits. Buyers
have the most power when they are large and purchase much of the output (Smith.
A, 1910). If Ferndale Toys business sells to a few large buyers, they will have
significant leverage to negotiate lower prices and other favorable terms
because the threat of losing an important buyer puts the company in a weak position.
Buyers also have power if they can play suppliers against each other. In the
Toys supply industry, the large Toys manufacturers have significant power. There
are only a few large buyers, and they buy in large quantities. But, when there
are many smaller buyers, the company will have greater control because each
buyer is a small portion of the sales.
influencing the bargaining power of buyers, Buyers have more power when the
industry has many small companies supplying the product and buyers are few and
large. For example, Ferndale Toys may have little negotiating power if the
company and several competing companies are trying to sell similar products to
one large buyer. The products represent a relatively large expense for their
customers (Taylor. F, 1947).
bargaining power of buyers, Ferndale Toys can reduce the bargaining power of
the customers by increasing their loyalty to their business through
partnerships or loyalty programs, selling directly to consumers, or increasing the
inherent or perceived value of a product by adding features or branding. In
addition, if Ferndale Toys can select the customers who have little knowledge
of the market and have less power, the company can enhance profitability.