Small Business Enterprise
Business Case Study
Part a Section 1 – Business Environment
The following pages will present an analysis on a company located in the United Kingdom, named Lings Cars. The company operates in the car leasing market. The company’s clients include both private individuals and businesses as well. The company’s operating ways are different than those of dealers’, as “Ling relegates the dealer to a middleman position and deals directly with clients arranging the supply and rental of their new cars” (Bized, 2007).
Experts state that in the United Kingdom the car leasing market is experiencing a rapid growth period. This situation can be attributed to the fact that the number of companies and individuals that use the car leasing method is continuously increasing. It seems that this method presents a series of advantages related to costs for customers (Parry, 2007).
Some specialists expect this market growth to continue over the next period, following the United States model. New estimates have revealed that approximately 1% of cars are covered by leasing deals in the UK (1888 Press Release, 2007). This means that the car leasing market in the UK is at its beginning, and the potential that could be exploited on this market is tremendous. One of the trends on this market in the UK is related to the fact that many car leasing companies are merging, in order to gain more power and to become more competitive on this market.
The company’s competitors are very numerous in this field. Even more, their number is continuously increasing. Given the fact that these companies are very similar in size and business approach, it is quite difficult for a company in this field to differentiate from other companies.
Some of the most powerful car leasing companies in the UK are: A1 Vehicle Solutions, All Vehicle Solution Ltd., AMA Vehicle Finance, Applied Leasing Ltd., Bowker Vehicle Contracts Ltd., Chevrolet lease, Driven Leasing & Finance Ltd., Driverite Finance & Car Sales Ltd., DSG Auto Contracts Ltd., Flexible Vehicle Contracts Ltd., Lease Cars Direct, Nationwide Car Leasing.
A1 Vehicle Solutions’ main advantage is its 10 years presence on the market. The company has another advantage, which relies on providing a very wide range of funding options, like: Contract Hire, Personal Contract Hire, Personal Contract Purchase, Lease Purchase, and others. Even more, A1 Vehicle Solutions has established and maintained good relationships with the top 10 largest finance houses in the UK, in order to be able to offer advantageous rates for the company’s customers. The vehicles provided by this company come directly from their manufacturers.
Another very strong competitor is All Vehicle Solutions Ltd. This company is very similar to the company described above. The company has an experience on this market of over 60 years, and it has also maintained relationships with Europe’s financial institutions.
AMA Vehicle Finance is considered to be one of the fastest growing car leasing companies in the UK. The company provides services like: car leasing, business Contract hire and personal contract hire. Also, it provides a wide range of personal Leasing and business leasing deals.
Applied Leasing Ltd. has a 12 years experience on the UK car leasing market. This company is able to provide special offers to its customers due to good relationships with major financial institutions, on the one hand, and with all major vehicle manufacturers, on the other hand.
The SWOT diagram for Lings Cars is presented bellow:
Experience on the market
Wide range of products
Clarity of pricing
Low initial outlay
Good market position
Lower financial force compared to its competitors
The company seems to be addressing private individual rather than businesses
The company can expand its range of products and services
The market presents great potential that has not yet been exploited
Increasing number of competitors
Several competitors are merging in order to gain more power
The company’s strengths rely mostly on a wide products and services range and on advantageous financial conditions for customers. This situation allows the company to gain a good number of private individuals as customers. Also, the company has a few years of experience and o good position on the market, so the business is in quite a comfortable situation, but there is still room for improvements.
The company’s weaknesses are mainly related to the company’s attitude towards its competitors and its customers as well. For example, the company does not have sufficient financial force that could allow it to be one of the strongest players on the market. The company is trying to promote a friendly image, which is suitable mostly for private individuals, but is not serious enough to be addressing businesses.
The threats that the company is facing are related to its competitors. Competition is becoming stronger on the UK car leasing market, as more and more companies of this kind are emerging. Even more, smaller companies are merging in order to gain more power. This method could be applied by Lings Cars as well, if the company is not satisfied with its current position on the market.
The opportunities that this company can take advantage of are related to the vast potential of this market that has not yet been exploited. As mentioned above, this market only accounts for 1% of the cars purchased in the UK. Therefore, the company should focus its efforts on expanding its range of products and services and on expanding its geographical area of operations.
Porter’s 5 Forces Analysis
Regarding the threat of substitute products, it is quite unlikely for this matter to present any negative influences on any company on this market, given its specifics. Even more, the UK car leasing market is at its beginnings, therefore there is not much threat regarding this issue.
However, the threat of new competitors entering this market is very high. More and more competitors start a business in this field. Some companies on this market are merging, forming more powerful companies that are a serious threat to smaller businesses.
The intensity of competitor rivalry is determined by a series of factors, like: increasing number of competitors, the market reports significant continuous growth, competitors are extremely diversified, ranging from small business to strong, experienced corporations.
Although the buyer volume is quite large, customers have little bargaining power. Buyer switching costs are relatively low. Given the products that this market refers to, buyer price sensitivity is quite high.
Suppliers instead, have a greater bargaining power. In most cases, suppliers are also the car manufacturers, which establish their prices in accordance with production costs.
Section 2 – Aims and Objectives
The company’s business operations refer mainly to providing car finance. The company also provides full protection of the UK Distance Selling Regulations. Also, the company does not charge any road tax for the contract and free delivery and collection.
The company’s main objective is increasing the turnover of new cars to
100m per year within 5 years. Other than this, the company does not wish to hire any additional staff, as the turnover growth mentioned above is to be achieved with the same staff currently employed. Secondary objectives refer to increasing the number of automate processes, increasing the efficiency of savings, and optimizing communication with customers and suppliers.
Section 3 – Business Structure
The type of ownership structure applied by Lings Cars is partnership. The company has two equal partners. This type of ownership is suitable for a small business like Lings Cars, given the fact that personal liability does not raise many problems in this situation.
There are four basic types of organizational structure: functional structures, divisional organizations, federations, and matrix organizations. Lings Cars seems to apply the functional structure, although this small firm cannot be called an actual organization, given the fact that it only has 2 employees. However, the company is divided into simple parts, defined activities, each of the two employees being specialized on certain tasks (HRM Guide, 2007).
Given the fact that the company’s main objective is to increase its turnover within 5 years, it is recommended that it diversifies its human resources side. Unless the company employs more personnel, it is quite unlikely that this objective will be attained.
Section 4 – Performance Analysis
The company’s financial performance is detailed bellow:
In 2005, sales reached
10,815,848, determining a gross income of
108,000. The company’s fixed assets in 2005 consisted of: motor vehicles
8,489. Current assets totaled
29,309, while current liabilities totaled
31,816. The company’s capital account in 2005 was of
31,816. The company’s sales reached
109,384, while total expenses were of
53,360, leading to a net profit of
56,023 in 2005.
For 2006, the company’s gross sales increased up to 211% compared to 2005. The monthly structure of this increase was the following: January – 214%, February – 130%, March – 382%, July – 153%, August – 123%.
Obviously, the company is on an ascending direction, given the 211% increase of gross sales in 2006. The company is gaining more and more financial power. It is recommended that the company uses its financial power for hiring additional personnel and for expanding its range of products and services.
Section 1 – Recommendations
The first recommendation refers to the company’s human resources approach. The company only has 2 employees, which are also the two partners owning the company. In order to expand the company’s activity, it is recommended that the company employs additional personnel. Without increasing the number of employees, it is very hard to believe that the company’s growth objectives will be achieved. Once a business is expanding, the necessary of human resources increases as well.
The second recommendation refers to the company’ advertising methods. Currently, the company uses word of mouth as main advertising method. This is a very effective tool in terms of cost and results when it is used by a small business. But if the company is planning on expanding, other advertising methods will be required.
Another recommendation is related to the company’s image. The company is trying to portrait itself as a friendly business, close to its customers. This method works very well in case of private individuals. But given the fact that the company addresses businesses too, it is recommended to add more seriousness to its image.
Also, regarding the company’s prices, it is recommended to continue the direction that the company currently follows.
Section 2 – Maintaining Performance
One way of maintaining the company’s current performance refers to continuing the current financial strategy. Also, the pricing strategy seems to be working for Lings Cars, and therefore, the company should continue following this direction. In order to increase the company’s current performance, certain financial investments are required. The most valuable resource the company should invest in is represented by human resources. It would also help to expand the range of products and services, and to expand the company’s geographical coverage as well.
Section 3 – Expansion Suggestions
In order to expand the business and to be able to provide better price offers for its customers, the company should establish and maintain strong relationships with major financial institutions, like major companies in this field do. The company should establish a strong connection with major car manufacturers as well. In addition to this, the company should think about expanding its geographical coverage.
Lings Cars Case Study (2007). Biz/ed. Retrieved November 26, 2007 at http://www.bized.co.uk/compfact/ling/lingindex.htm.
Parry, Martin (2007). LeasingAndContractHire.com and Fish4.co.uk target the UK leasing market. BeetrootStreet Press Releases. Retrieved November 26, 2007 at http://www.beetrootstreet.com/blog/index.cfm/2007/8/4/LeasingAndContractHire-and-Fish4cars-target-the-UK-car-leasing-market.
UK Car Leasing Market on the Brink of an Explosion (2007). 1888 Press Release. Retrieved November 26, 2007 at http://www.1888pressrelease.com/uk-car-leasing-market-on-the-brink-of-an-explosion-pr-l2w6tg1271.html.
Organizational Structure (2007). HRM Guide, Organizational HRM. Retrieved November 26, 2007 at http://www.hrmguide.net/hrm/chap4/ch4-links3.htm.
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