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Jim and Bill Bonner set up a medium size paint company named by Bonner paints. But they have about average sale during last several years and earning average profit for last several years. Now they want to get retirement from their business. They also have a good team for their business which is very loyal to their business and they want to sell their business to their senior managers Tony Edmunds working as sale and marketing manager, Vernon Smith working as the chief accountant and Roy Crawford is working as the production manager.
Basically Boner paints produce high quality paints for their industrial customer by making more than 200 variety of the paint. But here the most important thing that should be consider is that Jim Boner has the basic chemical expertise relating the production field and always do some experiment and explore different formulas to make new paints. Bill has complementary sales skills and tried to enhance the sales of the company. That is main competitive advantage that the company has over its competitors. The main reasons of the failure of the Bonar paint are that the both brother who are the owner of the business they not do take any suggestion of the senior manager. And they mostly produce the paints according to the orders that is very risky business if they make the paints according to the markets need and trends they should not have to face such problems.
Analysis is the current business standings, internal and external threats and advantages of the business.
We have tried to use best of its available resources and analyze its business strategy by using different tools and techniques for micro and macro level of business standings Strategic analysis of a company can be done in different two ways
For the Micro level we can use different tools like PESTEL Analysis etc.
PESTEL stands for Political, Economical, Social, Technological and Legal. Political, Legal and Economical factors do not affect the Bonner paints too much the most factors that can disturb the business of the Bonner paints are discussed below
Political factors means how the government interferes in the business and what are the affects of the government new rules and regulations on the business. In this type of business the political factor does not disturb the growth and operations of the business. Only described rules and regulations should be followed.
Legal issues also do not have directly relation to this business basic rule and regulations should be obeyed by the Bonner paint industry
Environmental factor can disturb the Bonner paints business like that people may starts use the wall paper instead of the paints or while making the paints they should also take care of the extreme weather of the regions. Paint may spoiled by the weather and it also can emit some gases that are harmful for the human body and atmosphere as well.
Boner paint industry can also be affected by the technical factor if there is suddenly the new technology introduced in the market. They should have to adopt the new and latest technology that is available in the market and always try to explore new techniques that can reduce the production cost and company can earn more profit.
Social factor is most important factor that can also affect the business of the boner paints. In social factor we have to analyse either the society of the area is affected by the wastes of the business or not or it support and encourage the business or not.
Porter Five Forces
We can also use another tool to analyse the business but it is used for the macro level to analyse the business strategy. In porter five forces we have five different aspects that can be discussed to analyse the business strategy.
New Competitors- There is always chances for the new entry of the same type of the business in the market. In case of Bonner paints there are many different brands available in the market and also chances of the new entry in the market. So new business owners must aware of this aspect while making the strategy for the business. They should have to maintain the standard level and introduce some unique formula that should be very hard and difficult to be copied.
Substitutes- There are so many substitutes of the paints available in the markets for example instead of using the paint people can use wall papers. To overcome this threat Bonner paints should introduce some special and unique varieties of the paints and also maintain that standard.
Buyer bargaining power
Buyers create the increase or decrease trend in the demand of goods and services. The buyer bargain power is strong in the market. There are many other competitive businesses and substitutes available in the market. The Bonner Paints should improve their standards by providing better and low cost paint.
Supplier Bargaining Power
Suppliers bargaining power is the power of suppliers who provide raw materials to our business. They can induce the business to purchase raw materials on higher cost.
According to this type of business, the supplier s' bargain power is higher. Because there are many paint manufacturing businesses in the market doing same type of businesses. The suppliers bargain power is higher, Bonner Paints should research the market and search for suppliers, supplying better raw material at lower cost.
Intensity of Rivalry
Intensity of rivalry means level of competition. If there are more competitors in the market then the intensity of rivalry is higher and if there are less or few competitors available in the market than the intensity of rivalry is lower.
According to the Bonner Paints, the level of rivalry is higher. Because there are many DIY paint manufacturers available in the market
Operational advantages and disadvantages of Bonar paints.
Roy Crawford is the production manager and the Tony Edmunds is the sales manager of the company and they both have different strategies. Here we discuss the advantages and disadvantages of the strategy of the operational manager Roy Crawford. He wants to reduce the ranges of paints on the limited numbers and increase the productions of some particular verities so that they can get advantages and perfection of same verities. While the Tony Edmunds says that if they reduces the number of verities they can lose the customer and good will also. They should not have to reduce the verities but they have to reduce the productions of the products.
Reduce the range of paints in order increase the production of specific ranges will result in increase in sales and profit.
Getting perfection on the limited product range will improve production quality and quantity.
Adopting this strategy will reduce the cost of production and increase the volume of production.
This strategy will improve the quality of production that will result in increase in sale volume and customer satisfaction.
Producing specific range of paints will decrease the cost of production and will give the company enough resources to improve research and development of the company
Improving quality of production will increase repetitive customers. By applying this strategy Bonar paint can get repetitive customer which is the key success of the business and company can get more business from one customer.
Extra innovation cost will be reduced by the production of specific range of paints. That means company do not have to bear any extra cost for the innovations which takes highly extra cost.
Producing specific range of quality paints will increase the volume of sales. Now Bonar paints can sell increase the volume of specific products and can increase its sales which means company can earn healthy profit.
Increase in production of the limited number of verities will increase perfection. By adopting this strategy company can get perfection in specific range of paints which may cause to increase the good will of the company.
Increase in good will of the company.
Strategy of Roy Crawford has also some disadvantages should be kept in mind; following are some drawback of his strategy.
Reduction in variety may result in loss of potential customers. Company can loss its potential customers which were doing big business with the company.
By reducing the range of the paints company may lose its potential customer which means revenue of the company will decrease and company's business may affect.
The most important drawback of this strategy that the growth of the company may stop due to no innovations. Company may not compete and survive in the market due to no innovations.
Company has to stop the production of number of products to achieve desired results. By doing this company can stop the production of such variety which gives the competitive advantage to the company.
There are many advantages and disadvantages of this strategy which are not ignorable but according to me Bonar paints has to analyse that what are the specific range of paints are enhancing and doing good business and are giving more profit to the company. Company should not stop the production of these varieties and should stop the production of those verities which are casing loose for the business or earning very low profit. Company should not stop its innovations and must allocate some portion of its profits in research and innovations for the growth and batter future of the company. For the industrial paints company produce paint on order basis. Company should not loose these industrial customers and should try to get more orders and should take some steps to complete the orders on time. Company should also have to introduce some general paints which are mostly used in the markets and should improve the quality and can increase productions of such varieties, for this purpose company have to make some research. Bonar paint should have to explore some new markets to increase the sale.
Key areas where change needed for successful buyout of Bonar paints
While taking the decision of the successful buyout of the Bonar paints the three managers of the Bonar paints Roy Crawford the production manager Tony Edmunds the sale manager and Vernon Smith the chief accountant of the company must take step regarding the successful buyout. They should have to consider following points.
In the first step the all the managers which are going to own the company should be fully award of the mission, vision, goals and objectives of the company. Now they are going to own the company and they should have to think like the owner of the company first they were managers now they are becoming owner of the company and now they should have to take quick decision where it is necessary and has also to take suggestions and opinions of the administrations as well.
All the managers must have good coordination among them, and all the company's issues must be discussed.
All the managers have to bring different strategy for new environment. They can balance them. All the managers should have to participate in decision making regarding company issues.
As the company do not have much funds the sales manager Tony Edmunds has to make a research that following varieties of the paints are doing good business he should pin point them and have to increase their productions.
They must have to appoint the Jim and Bill Bonar as the new production manager and sales and marketing manager because both have incredible experience in their field and also knows about the company's working and its position. If they appoint other managers the new managers first have to understand the company's working its rules and regulation that is a very long process.
Roy Crawford has to pin point the range of paints which is earning nominal profit or suffering loss. He should have stopped the production of these paints with the consent of all other partners.
Tony Edmunds has to get some new contract for the industrial paints and Roy Crawford should have to assure it that all the orders should be completed and delivered on time.
Advantages and Disadvantages of developing formal Mission Statement of Bonar Paint
Mission Statement is the one line company's purpose of existence the mission statement of the company should describe about the all company's working and its purpose of existence and all other matters should be highlighted in the mission statement of the company.
Mission statement is a brief description of a company's fundamental purpose. A mission statement answers the question, "Why do we exist?"(1)
In the Bonar paints they have to develop new mission statement of the company because they are going to cut-off a wide range of the paints so they have to change it and they are also going to improve the quality of the paint that will show the company's new working policies and objectives.
Advantages of mission statement
The mission statement ensures some transparency for investors and employees alike so they can have some confidence as to any potential use of their resources be they capital investment or labour. A mission statement is also designed to ensure that all stakeholders are clear on the overarching purpose of the company so everyone can be focused on the same goals and objectives. When someone reads a mission statement in a business plan they are looking to get a feel for the range of activities that the company will focus on, in other words its core purpose and what it stands for.(2)
A mission statement is like your North Star. A North Star, is not a place you go, it is a fixed point giving you perspective on where you are going. Your mission statement keeps you headed in the right general direction. A mission statement is a very specific umbrella statement explaining why you do everything you do within your organization. (Bobb Beihl)
A mission statement is a statement of the organization's reason for being, its purpose - what it wants to accomplish in the larger environment. (Kotler p.49). It explains why the organization does what it does. It says what, in the end, the organization wants to be remembered for.(Drucker). A clear mission statement acts as an "invisible hand" that guides people in the organization. (Kotler p.49).
An effective mission statement clearly defines who the customer is and what services and products the business intends to provide. It also serves as a guide for day-to-day operations and as the foundation for future decision-making.
Contemporary strategic marketing perspectives indicate that an organization should define a business by the type of customers it wishes to serve, the particular needs of those customers groups it wishes to satisfy, and the means or technology by which the organization will satisfy these customer needs. Thus the firm will be perceived and act more customer & market-oriented. (A customer-satisfying entity, not a product-producing entity.) (Kerin & Peterson, p.2).
A company's Mission Statement acts as the company's compass. The mission is the path. (The vision is the end point.) The mission directs the company to its vision (dream). With it, anyone in the organization can always judge the direction the company is moving in relation to its stated purpose. With it, one can easily make adjustments to keep the company moving in the direction intended.
Missions may need to be revised every few years in response to every new turn in the economy. A company must redefine its mission if that mission has lost credibility or no longer defines an optimal course for the company. (Kotler p.68)
Without the mission statement, a company is lost, and will drift according to the pressures of the business environment. The fundamental problem, termed mission creep, has been a diffusion of focus. There is the tendency of successful organizations to try to extend their influence beyond the limits of their core expertise. So if you want to stay focused, develop a clear, concise mission statement.(3)
Disadvantages of mission statement
There are many disadvantages of mission statement but the main disadvantage of the mission statement is that you cannot change it again and again. One you have developed a mission statement you can make some changes over the period of time, if you change your mission statement then its means that you are not enable that what you have to do or why you are establishing a company.
In the mission statements you describes that what you have to do and why you are doing and you bound the company.
While forming a company you should have any special and clear purpose behind it. So company should have a clear and concise mission statement so that the people can understand the purpose of formation of the company. Through this the company can get good reputation and clients trust. Mission statement is the main theme, objective or reason of existence of a company. It explains the business nature. Mission statement shows the great impact on the public. It should be concise, comprehensive and clear.
Bonar paint should have to introduce its mission statement they should have to tell their customers about purpose of its business, products and different varieties of the paints. That people can trust on the products of the Bonar paints.