Business Administration Assignment: Case Of Weaven

Question

Task: Prepare business administration assignment considering thebasics of business administration concerning a new business venture “Weaven”.

Answer

Introduction
In this report of business administration assignment, the business administration of a clothing company ‘Weaven’, based in Manchester, UK has been mentioned. The external environment of the company has been analysed with the use of the PESTEL tool – to get an idea about the conditions in which the company has to operate. This is followed by the industry analysis done in the business administration assignment, with special reference to competition in the market, which has been done by the five-force model of Porter. Herein business administration assignment, the ‘Blue Ocean Strategy’ of the company has also been mentioned.

2. External Environmental Analysis
The management of a company often needs to analyse the external macroeconomic conditions in order to assess the circumstances in which the company operates. Doing so will not only enable the company to identify opportunities and openings but will also make sure that it recognises its weaknesses (Grant, 2016). Assessment of the external environment done in the business administration assignment is pivotal for the success of the company in the long run. The factors that influence the profitability of a company are recognised with the help of an external analysis. Weavenwill also need to assess its external environment expediently in order to survive in the long run and operate smoothly and profitably (Kotleret al., 2015). Besides, studying the external environment will also enable Weavento obtain information about their competitors and how they respond to a particular situation. It will also help Weavento monitor its business decisions in real-life conditions and forecast changes and drifts (Storey, 2016).

As already mentioned in the business administration assignment, an assessment of the external environment helps a business identify various opportunities. As such, the management of Weavencan also employ the intricacies of external-environment analysis to identify opportunities in the market. Weavenoperates in the clothing industry, the trends in which experience seasonal variations. During the summer season, the customers of the company looking to purchase light clothing, a trend that continues during the rainy season. During winters, however, the clothing pattern of the customers change entirely, and they opt to purchase heavy clothing, sweaters and cardigans. Post-external environment analysis, it has been found by the management of the company that majority of its customers belong in the age group 28 to 35, which means that the company has to cater to the dressing needs of such customers especially. Weavencan look to introduce newer designs that can attract the customers in this age group and price them competitively to enhance sales by a large extent.Catering to the demands of a particular class of customers will enable the company to attract loyalty from them, which will make sure of its profitability in the long run. It is estimated by the sales team of the companythat specialises in manufacturing for the customers in the age group of 28 to 35 will increase its productivity by about 40%. This, the importance of analysing the external environment and identifying opportunities is exemplary to a company.

The business administration assignment examines that another important decider of a company’s success in the market lies in scrutinising its external conditions and applying them to the way a company is going to operate in the market (McQuarrie, 2015). This can be done by the use of a marketing tool and is called a PESTEL analysis. Through this tool, the entirety of the macro-environmental condition associated with the company can be assessed (Bell et al., 2018).

Figure 1: PESTEL analysis
(Source: Created by the Author)

The PESTEL analysis of Weavenhas been presented below within this business administration assignment:

• Political –The UK enjoys several trade restrictions and has tie-ups with several countries for exporting finished goods. This will allow Weavento freely exploit the resources in Manchester and offer their products for sale. Besides, the political stability of the country will present no difficulty for the company to function efficiently
• Economic – The exchange rate in the country has been stagnant for a couple of years and is expected to remain the same (exchangerates.org.uk, 2019). Besides, a healthy rate of inflation will allow Weavento earn profits in the industry
• Social – Manchester has been the global centrefor clothing products and companies for a long time. Therefore, the involvement of several types of customers – both nationals and foreigners will provide a brilliant opportunity for the company to capitalise
• Technological – Despite technological advancements in various other sectors, the clothing industry has faced a shortage of innovation in the technical field. Owing to this condition, Weavenwill be heavily reliant on its manual labour for the processing of its raw materials
• Environmental – The environmental conditions in Manchester has favoured the clothing industry since times immemorial. Herein business administration assignment, it is expected in that the diverse climatic condition of the area, ranging from summers to winters, will help the company in diversifying their products
• Legal – Various legislations including the Trade Descriptions Act 1963 and the European Communities Act 1972 will help Weavenin managing their operations effectively in the market (gov.uk, 2019)

3. Industry Analysis
The next step in efficient business administration lies in analysing the industry. This needs to be done in order to review the conditions in the market and understand the needs and demands of the customers. This will help a company in identifying opportunities that no other competitor in the market is emphasising on, and therefore, build on it. Before analysing the industry in this business administration assignment, it is important to understand the customers that a company is targeting. This helps to narrow down the scope of the company to solely the targeted consumers and help them satisfy their needs (corporatefinanceinstitute.com, 2019). This can be done by employing the marketing tool ‘market segmentation’. It is the process of classifying a market into several strategical segments of potential customers. This is done in a way that segregates the like-minded customers according to their demographics, psychographic and behavioural traits (Cross et al., 2015). The market segmentation of Weavenhas been presented below within this business administration assignment:

Figure 2: Market segmentation of Weaven
(Source: Created by the Author)

It can be understood from the table above in the business administration assignment that the company is currently looking to target the customers in the age group of 10 to 60 (with special attention to people in the age group 28 to 35). The company will manufacture clothing products for both males and females having an income of £800 and above per month. Therefore, the company will look to target the lower and higher-income individuals by providing them with products at reasonable prices. The customers can be either existing or potential ones, or even the ex-customers of the company having either a lavish or meagre lifestyle. After segmenting the customers preferentially, Weavenwill have to assess the needs of their customers. The secondary sources utilized to develop this business administration assignment reveal that an average UK consumer spends 5% of his total income on clothing products (fashionunited.uk, 2019). The primary sources of information expose that an average consumer will more likely spend more on high-quality fabrics than less in low-quality fabrics.

The data so obtained can be used for the benefit of Weaven. The USP of this company is in selling high-quality products at a competitive price. In order to understand whether the rivals in the market follow the same strategy, it is important to use the ‘five-forces model of Porter’ (Aithal, 2017). Primarily used to analyse the level of competition in the market, the model developed in the business administration assignmentrevealed the following information about the competition in the industry:

• The threat of entry – Owing to high competition in the clothing industry in the UK, the threat of new entrants is high. Since a low amount of capital is required to start a business in this industry, Weavenwill always face the threat of new entrants
• Bargaining by suppliers –It is evident in the business administration assignment thatWeavenrelies on the high quality of raw materials provided by its suppliers at a low cost. However, their bargaining power is higher as the number of suppliers in the market is relatively lesser than the number of buyers. Also, very few substitutes of raw materials exist
• Bargaining by buyers – Weavenlikes to sell its products at a fixed price, albeit in a competitive way – which negates the bargaining power of the buyers
• The threat of substitutes –Since the number of alternatives to a clothing company in Manchester is many, Weavenwill face stringent competition from its substitute firms
• Rivalry – This pertains to the rivalry among existing companies. This is high because of the presence of numerous competitors and little consumer loyalty

To gain an advantage over its existing customers and negate the rivalry identified earlier using Porter's tool, the management of Weavenwill be using the ‘Blue Ocean Strategy’. Using this strategy mentioned in the business administration assignment, the company will look to make the competition irrelevant using its market segmentation and data obtained from the primary and secondary sources. Since the company has been able to identify that the strongest consumer base in the market lies in the age group of 28 to 35, it will target these customers by providing them high-quality clothing at reasonable prices. Using the ‘Blue Ocean Strategy’ with regards to the case scenario of business administration assignment, Weavenwill look to create an unrivalled space in the market using its ‘cost-differentiation’ strategy (Mi, 2015). This will present the company with an ocean of opportunities to capture the majority of the market share.

4. Who are the key people and skillsinvolves in the case of business administration assignment?
After having planned the various strategies of the company and analysing the competition in the market, the focus should now be shifted to the personnel involved in setting them into action. Therefore, the various skills should be identified, and the personnel carrying them out should be listedin the business administration assignmentas follows:

• Technical skills –These skills are needed to be possessed by the workers and manual labourers in the employment of the company. Some of the types of equipment needed for garment manufacturing include –attaching machines, cloth measuring and cutting machines,applique scaling and embroidery machines and industrial sewing machines. Since the technical skills define the quality of the product, it is important that the company employs only highly skilled personnel
• Marketing skills – The marketing department of the company will be responsible for marketing skills. In order to place and promote the products of the company in the market, the contribution of this department is exemplary (Gillespie, 2015). Besides advertising for and promoting the brand in the market, the marketing team shall also be responsible for assessing the market conditions and evaluating the external forces
• Communication and negotiation skills – This shall be done by the managers and KMPs of the company who are in the closest contact with the company’s stakeholders. Negotiation with the company’s suppliers, customers, money lenders and shareholders define the success of the company. For this reason as stated herein business administration assignment, the negotiators must be individuals will high levels of intellect and great communication skills
• Leadership skills – Perhaps the most important skill of all, the leadership skill in a newly incorporated company like Weaven, must be democratic. The leader must always effectively communicate with the subordinates and encourage them to strive for the success of the company. Participation of leaders in the daily operational activities of the company is necessary for it to achieve its goals and objectives (Pardey, 2016)

5. Financial feasibility
The feasibility of the new venture shall be ascertained from the revenue generated from the sale of three different products manufactured by the company over a period of 12 months starting from April 2019. The sales and revenue forecast have been made, keeping in mind the capability of the company to produce a limited number of products every month. The per-unit prices of the three different products have been kept constant throughout the year, and the growth rate in sales has also been recorded. The table containing the sales forecast has been presented in Appendix – II of the business administration assignmentand represents the estimated revenue generated by the company in 2019. Similarly, Appendix – III contains the estimated profit and loss of the company for the financial year 2019.

Before incorporating a company, it is important to know how much capital investment it requires. This can be done employing listing out the variable and fixed expenses of the company. Such expenses may be different for different companies. The fixed costs are recurring costs which do not change with the change in the level of output. On the other hand, the variable costs are such costs which have a bearing on the level of outputs produced by the company. As such, it has been ascertained (as represented in Appendix – IV below within this business administration assignment) that Weavenshall need a capital investment of about $62,000. This requirement of the fund can be satisfied with various financing options. Some such options of financing have been listed below:

• Equity financing – As stated in the business administration assignment, this is the most popular method of raising capital by companies. However, this method of financing is not generally used for newly-incorporated companies, as the investors do not tend to invest in them. But since the ownership of the company will be distributed upon equity financing amongst several shareholders, it will be beneficial to an infant company. Equity financing is also one of the safest means of financing, as it neither involves paying back the principal sum, not does it involve interest payments (Coleman et al., 2016)
• Debt financing – Debt financing involves raising money from banks and financial institutions. This is the easiest method of raising funds, and also the riskiest. In debt financing, the company has to repay the principal amount along with a fixed rate of interest, which incurs heavy expenses to the company (Cole and Sokolyk, 2018).
• Lease financing – In this method of financing mentioned in the business administration assignment, a company leases equipment from lessors, and pay them a specific amount of money every month for a predetermined time. The company claims full ownership of the leased asset after the maturity of the payment period (Jensen et al., 2018)

Since the initial capital budgeting by Weavenis not substantial, it is recommended with regards to the scenario of business administration assignment that it employs a mix of debt and equity financing. In saying so, it is recommended that the company raises 40% of its fund requirement from the public by floating shares, and finances the remaining by accepting loans from the banks. Also, it will result only in 40% of its ownership getting distributed among investors, with the majority of the ownership still resting with the company. As for the remaining money, it can borrow the same from several banks and financial institutions by paying a fixed rate of interest every year. In this way, financing will not be a burden for the company. ?

Conclusion
It can be seen in this business administration assignmentthat the industry Weavenis involved in is a strictly competitive one. In order to enable the company to successfully operate in the market, its external conditions have been analysed. The key personnel associated with the company have been highlighted and the skills required by them to efficiently manage the company have been discussed within this business administration assignment. The feasibility study of the company entails mixing its debt and equity options to reduce financial burden of the company.

6. References and appendices
Reference list
Aithal, P.S., 2017. Industry Analysis–The First Step in Business Management Scholarly Research.Business administration assignment International Journal of Case Studies in Business, IT and Education (IJCSBE), 1(1), pp.1-13.https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2988412

Bell, E., Bryman, A. and Harley, B., 2018. Business research methods.Oxford university press.https://books.google.com/books?hl=en&lr=&id=J9J2DwAAQBAJ&oi=fnd&pg=PP1&dq=business+administration+&ots=GLfxca6OIS&sig= pJ1pGwKhEh5UP5zxWqpBuBhbneg

Cole, R.A. and Sokolyk, T., 2018.Debt financing, survival, and growth of start-up firms. Journal of Corporate Finance, 50, pp.609-625.https://www.sciencedirect.com/science/article/pii/S0929119916302425

Coleman, S., Cotei, C. and Farhat, J., 2016.The debt-equity financing decisions of US startup firms. Journal of Economics and Finance, 40(1), pp.105-126.https://link.springer.com/article/10.1007/s12197-014-9293-3

Corporate Finance Institute.(2019). Industry Analysis - Top 3 Methods to Assess and Analyze an Industry. [online] Available at: https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis-methods/ [Accessed 12 Jul. 2019].

Cross, J.C., Belich, T.J. and Rudelius, W., 2015. How marketing managers use market segmentation: An exploratory study. In Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference (pp. 531-536).Business administration assignment Springer, Cham.https://link.springer.com/chapter/10.1007/978-3-319-13254-9_107

Exchangerates.org.uk. (2019). Exchange Rates UK - Compare Live Foreign Currency Exchange Rates. [online] Available at: https://www.exchangerates.org.uk/ [Accessed 12 Jul. 2019].

Fashionunited.uk. (2019). UK fashion industry statistics. [online] Available at: https://fashionunited.uk/uk-fashion-industry-statistics/ [Accessed 12 Jul. 2019].

Gillespie, K., 2015. Global marketing.Routledge.https://www.taylorfrancis.com/books/9781315716886

GOV.UK. (2019). UK trade policy: a guide to new trade legislation. [online] Available at: https://www.gov.uk/government/publications/a-uk-trade-policy-a-guide-to-trade-legislation/preparing-for-a-uk-trade-policy-a-guide-to-trade-legislation [Accessed 12 Jul. 2019].

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.https://books.google.com/books?hl=en&lr=&id=DTDvCQAAQBAJ&oi=fnd&pg=PP15&dq=external+environment+analysis&ots=emOKiJj34H&sig=jCB9Jbt563-jo8GfD-048cp_MKs

Jensen, J., Rust, E., Mackool, S. and Granneman, J., 2018.Business administration assignment OF EQUIPMENT LEASE FINANCING.http://search.proquest.com/openview/cd2b4047c70729bb7344f83f63b8033e/1?pq-origsite=gscholar&cbl=29215

Kotler, P., Burton, S., Deans, K., Brown, L. and Armstrong, G., 2015.

Marketing.Pearson Higher Education AU.https://books.google.com/books?hl=en&lr=&id=8TjiBAAAQBAJ&oi=fnd&pg=PP1&dq=marketing+analysis&ots=jedvrUB8e1&sig=y7CfU_OnAEjAdpkBDSNAo7j-Smk

McQuarrie, E.F., 2015. The market research toolbox: a concise guide for beginners. Sage Publications.https://books.google.com/books?hl=en&lr=&id=KXxZDwAAQBAJ&oi=fnd&pg=PT7&dq=market+research&ots=0lO1v0TCIS&sig=wMjrNTPc1ingrvAyfreWINHCF3U Mi, J., 2015. Blue ocean strategy. Wiley Encyclopedia of Management, pp.1-1.https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118785317.weom120024

Pardey, D., 2016. Introducing leadership.Routledge.https://content.taylorfrancis.com/books/download?dac=C2015-0-78934-0&isbn=9781317392163&format=googlePreviewPdf Storey, D.J., 2016. Understanding the small business sector.Business administration assignmentRoutledge.https://content.taylorfrancis.com/books/download?dac=C2016-0-95236-1&isbn=9781134838554&format=googlePreviewPdf

Appendix

Figure 3: Consumer expenditure trends in the UK
(Source: fashionunited.uk.,2019)