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Our team studying on Kiwi Kosmic Kosmetic case study which is a manufacturing and retailing natural cosmetics and skincare product .After analysing and reading the all single aspects of the case study we found that our client Meredith has some problem with the plant and the equipment at her work place. Ministry of health and Transit examine that our client need to restructure the business and she also need to replace the equipment and it can be done only by investing the big amount of money.
From the information received from the bank and the interview held with the manager we come to know that if Kosmic kiwi Kosmetic wants to apply for the loan then they are eligible for it. All the financial records and the image of Kosmic kiwi Kosmetic qualifies them for loan application. The bank can provide them with $5 million loan @4.7% P.A. The time duration will be 10 years. There are some conditions and policies which mention the conditions in which what action will be taken if the company fails to pay the loan amount. The main actions which need to be keeping in mind are as following:-
If the company fails to pay the amount of bank loan then the company will be overtaken by the bank and all the assets will be under the bank and will be sold to recover the amount of the loan.
In case if after selling all the assets, amount is not recovered then bank is eligible to take over the personal asset of the owner of the business.
The information received from the global finance company our team come to know that our client can apply the loan through the bank and finance company. We can raised the money in two way first we can applied the $5 million loan through the bank and rest of the amount we can raised through the global finance company and they willcharge 4.5% of the whole amount for getting you the loan from the bank. The loan would be passed through the finance company and will be issued under company name.
Legal rights and obligation
Restructuring is the trade management term for the act of regrouping the legal, proprietorship, operative, or other structures of a company for the purpose of manufacture it more profitable, or better organized for its current needs. In business there are so many reasons to restructure the business like to change the ownership or ownership structure of the business. (Pomerleano & Shaw, 2005).
Business cannot be restructured as defined in the Employment Relations Act 2000 unless the affected employees' employment agreements contain 'employee protection provisions'. So if your employees don't currently have employment protection provisions in their employment agreements, you will need to insert these before you can restructure.
In organisation changes are made only in reaction to change in the external environment. Changes always occur when business strategies or major sections of business organisations are reformed.
According to Kurt Lewin "Change doesn't operate in a vacuum but within an interactive system which itself is within a wider environment"
The process of change is also helped through a process of observing or being in the system and exploring what works and what doesn't. (Green, 2007).Change can be difficult for employees to accept, but understanding why the change is happening and what the change is mean for them can dramatically improve their receptiveness to the change.By actively managing the change the end result is that employees become productive in the new environment more quickly.
According to Shaw's model "change is seen as both complex and evolutionary". The starting point for this model is that organisation is not equilibrium (Blake & Bush, 2009)
Legal rights and obligations:
Under the Employment Relations Act 2000, Legal rights and obligations in business in New Zealand are those where their employer is a contractor and they lose a contract to perform services and the contract is granted to another business, or where the business for whom the contractor is performing the work decides to undertake the work in-house.
In New Zealand if any business is to be restructured, the employer must:
notify all the employees whose work will be affected
give them relevant information about the restructuring tell them that they have a choice whether to transfer to the new employer and the date by which they must make that choice.
During the implementation of restructuring and reorganization processes, there are a number of legal and compliance issues associated with restructuring. Taking early advice can ensure you have the right plan and tools to restructure your business whilst ensuing legal requirements are met (Smith and Partners, 2011)
Legal advice and strategy
Tools to run meetings
If the company will change the ownership from sole owner to partnership than there will be some legal changes. Both sole proprietorships and partnerships are directly linked to the personal finances of their owners. Neither structure is a legal entity. All operations, capital tax obligations and liabilities are the responsibility of the owners. In addition, a partner may become liable for the actions and debt of other partners. As both structures lack the legal separation a corporation provides, an owner's personal assets are vulnerable if the business falls into debt or legal troubles.
Calculations is used to find out the total estimated building cost for a particular project, in this part of our project we need to calculate the approximately cost of building that we are going to restructure in northland region . The estimated building costs generated will include GST at the rate of 15%.
Light commercial 414 m2 industrial.
We decided to reconstruct the building in 600m2 floor area.
After estimating that we got 777600 cost values and it's include 15 % GST.
Its means we are getting 1296 $ per square meter.
Building cost =777600=0.76 million
Equipment cost = 1.2 million
So we need 1.96 million to restructure business.
Finance is the process of creating, moving and using money, enabling the flow of money through a company in much the same way it facilitates global money flow. Money is created by the sales force when they sell the goods or services the company produces; it then flows into production where it is spent to manufacture more products to sell. What remains is used to pay salaries and fund the administrative expenses of the company.
Funding is a tool to manage financial risk in an effective and timely way. It provides you with an in-depth understanding of capital structure and the financing options available to companies and covers the important areas of pay-out policy, mergers and acquisitions and corporate restructuring.
The first part of the programme focuses on the application of derivatives in corporate finance settings: real options, risk management and optimal gearing. The second part concentrates on the important areas of dividend policy, mergers and acquisitions, corporate restructuring, financial distress, the security issuance process, and long-term financial planning.
We had several conversations and discussions recently about the restructuring business. As advisers we have been trying toput together all the information from primary and secondary resources.Some problems were encountered when requesting vacation due to what is perceived as long approval waiting periods.
In terms of parameters our client got some problems in her business. There are three main parameters, which are money, time limitation and legal issues.
In our client case finance is the main problem. She had lack of finance to meet up the requirement of restructuring the company. Estimated cost of restructuring is $1.9 million. in this case finance is basic problem. Every single step to be taken needs financial support, they have to set up plant and machine, building and all other tasks can't be accomplished without help of finance.
Legal Issues and obligations
Unless there are contractual restrictions, Courts always favour employer to make business more efficient and to recognize the right of the employer to restructure the business by the way employer thinks fit. Our client has 60 employees, and to restructure, our client have to considerjustification of the Information and Consultation of Employees Regulations. According to (Rudman, 2009) under these regulations, workers can appeal that the employers draw up acontract to notify and access them about foremostconcerns affecting the business, such as restructuring. When the company will change into limited share company, she will lose the right to decide and will have to act like other workers.
Restructuring has tax and lawful complications, so our client will need the help of proficient professionals. To restructure company, our client need to make sure that she is following all relevant registration procedures such as consultation, notice, fair selection criteria and redundancy packages. If our client want to take loan and investor money both than Banks and other lenders may require additional guarantees.
After calculating the exact amount of fund required by our client for restricting the business we start working on the solutions and best possible way to arrange the funds. We found out two best ways to gather the required fund and our sources were
We conducted an interview with ANZ bank manager. We give the brief description of our client case and ask some questions related to what we were looking for. Bank manager said that the bank can only approve the loan of $1.2 million on the name of company at 4.5% p.a. for duration of 10 years. The bank approves all the details of company provided to them. After taking the loan of $1.2 million still 0.79 million is left which we will finance through global finance company and they will charge 4% of commission of total amount financed through them.
With these two solutions our client would easily gather the amount required for restructuring.
Our first option for the client isInvestor. As per the funds requirement, our client needs amount$1.96 million to restructure the business and improving the access to the premises. To solve this problem, one of her international customer offering her $ 1.4 million in order to become a part of her business, so this will be the first option for our client . If she accepts the proposal of investor she needs only $ 0.56 million. We selected this option by using SWOT analysis, provided by Albert S Humphrey. With the help of this model we focused on the Strengths and weakness of the company at present situation and also in future after accepting the purpose (Willlson, 2000, p.178).
Our second option is Bank and finance company to help our client. We conducted the interview with the ANZ bank manager and bank is ready to approve the loan of $1.2 million at 4.5% for 10 years duration. And rest 0.76million will be applied through finance company by giving them 4% of total amount.
If we will suggest our client to go with option one that is accepting investor proposal. This can lead to several consequenceswhich can be positive or negative both. With the help of SWOT analysis we found that what way these can affect our client's company. Even if she will accept the proposal of $1.4 million from the investor, she cannot get rid from the problem. We found some advantages and disadvantages of accepting this proposal. This will help us to choose the best solution from both options and determine where change is possible. A new opportunity might open wider avenues, while a new threat could close a path that once existed (Willlson, 2000).
The company has a legal existence separate from management and its members.
New shareholders and investors can be easily assimilated.
If our client accepts the proposal she does not need to take loan of $1.96 million from bank.
Financial security that comes with business. The Company's shareholders will only be liable for any debt the company accrues according to the levels of their own investment and no more. This can provide a comfortable feeling of security for investors in the Company.
The investor is foreigner so her company can grow in foreign market and it will increase the productivity.
New management will give new ideas.
If our client accept proposal of investor she has to restructure company. She will lose her authority and privacy.
The profits of the business must be shared.
Company may loss reputation in society due to change in management. It will be very hard for company to keep the trust.
New management may be creating conflict in idea and delay in decision because of the change in internal environment of company.
Our client has to share her secrets formula.
As a part of our Primary Research we concerned with Bank and Finance company.A restructuring through loan is usually expensive but can be a choice in the favour of our client and a preferable substitute to financialdisaster. The main costs related with a business restructuring are the time and effort to negotiate with bankers and creditors.
Our client's authority will be safe and she will remain the decision maker.
Our client's good will and reputation would remain under her name.
The owner pays taxes on income from the business as part of his or her personal income tax payments
Our client's secret formula would be safe with her.
She needs to pay loan in 10 years. So she has enough time to come over the problems.
Only one risk seems so far under this option is if the company failed to pay back the loan, all the assets and the business would be taken over by bank.
We studied both the options, used problem solving model and listed out the benefits limitation of each option. After going through all possible issues and studying both option we decided to advise her to go with second option, which is to go with Bank Loan and Finance Company.
Actions necessary to implement this solution
Tell employees and workers about the upcoming changes and create some strategies so that the internal process keeps on going.
Apply for bank loan of $1.2 million
Apply for finance from Finance company for$ 0.76 million.
Provide all the required financial documents to bank and finance company.
Get a handle on cash
Get agreement from your board and bankers to the plan
Negotiate with creditors for reductions of the amount she need to pay back.
Develop a financial and organizational plan (turnaround plan).
The reason why we suggest this solution to our client is that, this solution suits best to our clients case with minimum risks and more advantages. If she will go with this solution there will be no loss of authority for business and her reputation. Her goodwill would be under her name. There would less fear within the employees for threat to job. If she takes this step, the only threat to the company is that if the bank loan will not be paid then bank may over take but if she goes with this step her privacy, authority and goodwill would be safe with her.
Risks are part of business so she had to take that much risk if she wants to carry on the business because this solution left her with less disadvantages but more advantages.
Signatures of team members
Gurpreet Kaur Bajwa
Appendix: Project Proposal
Project purpose and goals
In this project our team research project aims to identify the nature and scope of the managerial problem outlined in this case study "Kosmic Kiwi Kosmetic A" and through collection, collation and analysis of both secondary and primary research by team members, to find and evaluate possible solution.
The problem for our client in this situation involves that according to the Ministry of Health and of Transit New Zealand, Our client has some safety problem issues with her plant and equipment at her work place and it can be solved only by huge investment of money in new plant and equipment.
After group discussion we notice some positive and negative issues that are related to the problem.
Her equipment and plant are outdated and old as compared to the increasing production.
Not precise laboratory and proper waste disposal processes.
Needs huge amount of money to invest in new plant and technology.
At same time she found an international investor but at the cost of restructuring of her company.
She has also problem to take decision whether or not to accept the investor's proposal of restructuring.
After restructuring the CEO will be of his choice.
Employees fear change and when they are scared of being downsized, it can affect morale. In many of these moves, companies have to release some of the workforce. This can affect the loyalty of employees and it could hurt the company in the long run investor's choice.
She is successful, wealthy and socially responsible women.
Her company is real asset to the community.
She has ability to motivate her staff and get the best out of them.
If she will restructure her company, it will improve working conditions and overall health and hygiene.
We are going to analyze the situation of Kosmic Kiwi Kosmatic and seeking out the best solution. In this case the company cannot be continued in current situation. It has to be refrained.to know that what exactly the problem is, we used different techniques as follows
The concept of brainstorming was introduced by Alex Osborn .Osborn offered a theory of the steps involved in the creative process, describing it as "a stop-and-go, catch-as-catch-can operation. The purpose of a brainstorming session is to work as a group to define a problem and find a plan of action to solve. The primary rules of brainstorming are that any idea or matter how outrageous are worthy of mention and no evaluation of ideas take place until entire list is generated (Sproull, 2001, p.48).
We decided that we will read the case study individually to identify the problem. We are five members in our group and four members identified that our client has health and safety issue with the plant and our client has to invest the money in her business to establish the new plant and equipment. One of our group member said that our client also has a problem with her decision making because one of her international customer has offered to become a major investor if she agrees to restructuring the business and in that situation she can't able to take the right decision whether she has accept the offer or not. So after the group discussion, we decided that Health and safety is the main problem for our client at the work place which can be solved by only the investment. So this method helps us to find out what is exact problem in the Kosmic Kiwi Kosmetic.
Elaborate on the definition
In 1983 Buzan introduced the mind mapping technique with many applications and elaborate on the definition. One of the methods of mind mapping is to draw the ideas and thoughts process. The principles of elaborate on the definition have few ideas which are easy to understand and the best way to learn it by practice.
After the group discussion we decided touse this technique that will helps us to identify the problem that our client facing at this stage. We prepared various options that will help our client to clearly identify the problems. We choose this technique because there can be more than one problem definition, more than one right answer, and more than one perspective from which to view a problem.
By adopting this method we have two options that we can advise our client whether she wants to restructure the business or not. We will look over the advantages and disadvantages of this change and this will help us to find out important issues that need to be resolved first. By using this technique we can get more options to solve the problems.
PRIMARY DATA SOURCES
Primary sources will providefirst-hand information and direct evidence which help us to solve our client financial problem. Our client needs the financial support for restructure the business and for the replacement of the health and safety equipment.
Account expert, web page
SECONDARY DATA SOURCES
Sproull.B. (2001).Process problem solving: A Guide for Maintaince& Operations Teams. Productivity Press.
Beecroft.G.D.,Duffy.G.C., &Moran.J.W. (2003). The Executive Guide to Improvement andChange. ASG Quality Press.
Willson.G. (2000).Problem Solving.Kogan Page Publisher.
Mind Tools (1996).Appreciative Inquiry: Solving problems by looking at what's going right. Retrieved from
Whetten.D.A. &Cameron.K.S. (2011). Developing management Skills. New Jersy: Pearson Education.
Our group members collected data from various sources.Before this we did meetings and divided topics with each other in order to create a clear and coherent theoretical and practical framework to support sound solution development.
Topic/ issue focus
Calculate the cost,
Problem Solving Model
Bank policies, finance policies
Advantages and disadvantages of restructure
Book(developing management skills)
Legal rights and obligation for restructure
Book(Process problem solving)
STRATEGIES AND TOOLS
Strategies and tools are very useful in business. They help us in problem solving in business. This part of the project proposal presents strategies that our client can adopt, and specific tools that we can use to solve problem and can suggest appropriate solution.
Problem solving model
There are many different problem solving models. In this case study, we are using analytical problem solving model to solve the problem of Kosmic Kiwi Kosmetic. Effective problem solving depends on a methodical and logical move toward and it involves at least four steps, which are as below:
Defining the problem
Implement and follow up on the solution
Evaluate and select an alternative
Generate alternative solutions
Identify the advantages and disadvantages and constraints
Identify the important criteria
Define the problem:
According to Beecroft, Duffy & Moran (2003) this involves diagnosing a situation so that the focus is on the real problem not just its symptoms and we did by using brain storming technique and elaborating the definition of problem. In the case study, Kosmic Kiwi Kosmetic, have a several problem like health and safety problem, restructure the business, investment in equipment, and her company also need a sophisticated laboratory to continue her business and she is also facing the problem with a major decision whether she accept the investors demand or not. But the main problem we found in this case study is that Meredith black has a problem with equipment and plant. So define the problem step help us to find main problem of our client.
The second step is to generate alternative solutions .This requires postponing the selections of any one solution until several alternative have been proposed (Sproull, 2001). As per our case study we think that this step will help us to create the substitutes and making strategies that will help us to illustrate from the various expanded option and it will beneficial of increases opportunities in problem solving. By doing this we will able to recognize better and act on the best possible business choice. It will make sure us that not good idea is left unnoticed. Brainstorming techniques we already used and this will helps us to generate the alternatives in this stage.
Evaluate and select an alternative:
The third step helps us to think about the advantages and disadvantages of the proposed alternative before making the final selection. An exact substitute will solve the problem without causing other unexpected problems. In this case study, our client has main problem of health and safety and to solve this problem she needs to do investment. She has one offer from investor, this is one direct alternative. But by using this step, we will suggest her better alternative for the solution of the problem.
Implementing the solution:
The final step helps us to implement and follow up on the solution. Implementing any problem solution requires understanding to possible conflict from those will be affected by it(Beecroft, Duffy & Moran, 2003). In this case study before implementing any solution, we will go through all steps and after that we will implement our solution.
OTHER MANAGEMENT MODELS /TOOLS/CONCEPTS
We are discussing the other techniques that will be useful in problem solving model. The theories that we will use as other management techniques are Appreciative theory and SWOT analysis.
This theory was established by David Cooperider and Suresh Srivastva, this theory highlights the positive contribution made by employees and uses the company's strengths to change organizations (MindTools, 1996).It also means to discover and find out better to understand, and will make usable to find new potentials.
The application involves a four step process that includes: identifying the positive, group brainstorming, designing programs based upon best practices and executing the ideas. This theory will help us to analyses positive aspects and strength of her company. This theory will help us to generate alternatives in 2nd step of our problem solving model.
There is also SWOT analysis, which helps in problem-solving. The SWOT analysis is a useful tool for understanding of any kind of situation in business. SWOT analysis was provided by Albert S Humphrey. SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats and it is also useful in brainstorming meetings (Willlson, 2000, p.178). In SWOT analysis Strength and Weaknesses show the internal environment means the present situation inside the company as like factors relating to products, profitability, performance, quality, people, skills, brands, services, reputation, processes, infrastructure, etc. Opportunities and Threats are the external environment of the company as like markets, society, culture, technology, media, law etc. These factors tend to be in the future. After re-construction, Kosmic Kiwi Kosmetic will go under lots of changes. By keeping this tool in mind, we can select the best alternative in the 3rd step of our problem solving model.
Book"Developing management Skills" by Whetten.D.A. & Cameron. K. S.
Different views of the group members
Brainstorming and elaboration on definition techniques.
Division of tasks
Group discussion and communication between the team members
Absentees of team members
Contact with team members who were absent in group discussion
One of the
member will find out the merits and demerits of restructuring
5th and 6th November
Book(developing management skills)
Lack of practical knowledge.
Totally dependent on theory
we will use SWOT analysis tool to solve this probem
One of the team member visit the bank and will collect information about the business loan
6th to 12th November
Bank policies, finance policies
Lack of financing knowledge
We will meet the bank manager and will get the information.
One team member find out the legal rights and obligations for restructuring
13thto 19th November
Lack of knowledge of legal rights and obligations
We will search online about the legal rights and obligations of restructuring.
Other team member will do the calculations of approximate cost restructuring
19th to 20th November
Bank policies, finance policies
Less knowledge of calculations
We will do some online search and will take the help from the books
We will make final report to deliver to client
Our group report with solutions
client may not be satisfied
We will organize the meetings with client and make them satisfied and overcome the barriers.
Thanks for your interest in ANZ. Hope the following information will help you with your assessments.
What are the policies and conditions for Bank loan?
Ans. There are basic and certain policies for applying for bank loan. There are different rate of interests for different types of loan. In your case it's a Business loan. There are certain policies for business loans and the business had to pass through all the conditions for applying Business Bank loan. Following are some conditions which business should pass to apply for Bank loan:-
Business should have a good reputation.
Reason for applying loan should be clear and reasonable.
Business had a good profit ratio in last 10 years.
Business should be running more than 10 years.
What is current interest rate on Business loan?
Ans. Current rate applied on Business loan is 4.95%, but in case if the loan is for a heavy amount then the interest rate may vary depending upon the business reputation, it can be decreased to 4.50%.
Which documents are required before applying Bank loan?
Ans. Following documents are required before applying bank loan:-
Appropriate business detail clarifying what kind of business is.
Proof of business.
Information about Owner/Partners.
Financial record of business.
Profit record of last 5 years.
What is the time duration to pay back the loan?
Ans. basically it depends upon the amount of the loan but mostly the time period for business loan is 5 years.
Is Kosmic kiwi Kosmetic eligible to apply for loan?
Ans. After having brief intro about the company and the reason for loan are fair enough to make them eligible to apply the loan. They have good record and reputation.
Hi Students, in GLOBAL FINANCE we provide best solutions for your problem. We hope that all the information provided by us prove to be useful for you. After going through the information given about the company and the crisis going on with the company we come up with following information and possible solution for you.
What can be the solutions you can suggest to the problem for the Kosmic kiwi Kosmetics?
Ans. After knowing the problem of the company following solutions can be applied in the case:-
Taking loan from the more than one as the amount requires is very huge to be generated from single source.
Take two different types of loan, Business loan for major share of amount and a personal loan for small share under owner name.
Which solution is the best and more effective?
Ans. Best solution for the company will be to take business loan from two different banks of two different values.
Why this solution is best and more effective?
Ans. The reason why we suggested this solution is that, it's the only way to generate that amount and secured also. In case if they take two different type of loans then it can be very risky, especially for the person owing the personal loan.
What are the advantages and disadvantages of this step?
Ans. We did not see many disadvantages rather than risk of failure in pay back and advantage of this step is that the amount can be easily generated and secured too.
What will be your charges for availing the source?
Ans. We will charge 4.5% of the whole amount for getting you the loan from the bank. The loan would be passed through the finance company and will be issued under company name.