Enterprise & Entrepreneuralism

‘Bridgetown Newsagents’ - A Small Business Case Study



Introduction

Dillons newsagents is a late closing local shop with a 'Mini-Mart' service. The 'Mini-Mart' side of the business is franchised from Dillons to a registered partnership: Mr Charles Pettifer and Mr Marc Devis.

Full services are provided in the shop, a paper delivery service is also available along with the full complement of groceries, fresh sandwiches, confectionery, videos, cigarettes and alcohol etc..

The newsagents is located in Stratford upon Avon, on the Birmingham road, approximately half a mile from the town centre and situated within a very residential area. Tesco’s are the immediate traders to the newsagents.

Nine years ago, the newsagents was expanded with the intention of providing the local inhabitants with a friendly convenient service. Lack of competition at the time provided excellent stability and potential for expansion which was enjoyed until two years ago when a superstore was opened nearby offering a major threat to business.

Business growth, structure, strategies and competition are to be addressed in the following document. Entirety of information sources and research are obtained from two year's part-time employment at Dillon’s newsagents.

Growth of Dillons:

In 1988, Dillons employed Mr Charles Pettifer as the operational manager, from this date the shop solely provided newspapers and magazines for approximately eighteen months. During this period Dillons were developing their own ‘Mini-Mart’ theme and as such decided to expand the facilities to supply a range of groceries and other common consumer goods as well as the usual news literature. The shop opening hours were also increased from the regular evening licensing hours of 5:30pm, to a more substantial one of 11pm.

At this point, Mr Pettifer decided to take on the shop franchise offered by Dillons with the help of a silent partner Mr Devis. Mr Devis has shares in the business, but does not have authority to make unsupported decisions.

The franchise resulted in Mr Pettifer being able to obtain many goods for the newsagents at discounted prices. The entirety of the shop was responsibility of Mr Pettifer provided that Dillons’ standards were not infringed.

At the stage of development outline here, it can be seen that Dillons newsagents is akin to stage one of the business growth cycle.

Key Issues:

Mr Pettifer strongly believed in providing a personal and friendly service to all customers and from the outset instigated this within the shop environment. Recognition within the local community and attraction of regular customers resulted from this and thus so did a modest, small shop turnover.

Management Styles:

The style of management was very individualistic; only Mr Pettifer's wife, Fatima was employed initially in running the shop (issues in employing family friends and relatives are recapitulated later). Because of this, only limited professional management skills were required.

Market Research:

This was initially achieved by close relationships with the regular local customers, providing key information to a number of customer needs, although no formal research was carried out.

Systems and Controls:

Due to Dillons’ requirements, the accountancy was in advance of a role model stage-1 business, providing efficient systems and controls for Dillons’ auditing. All secondary audits were made into a fully computerised relational-database system.

Sources of finance:

A great boost for the business was the initial investment by Dillons, this was followed by continued investments by the silent partner, Mr Devis, to enable increased expansion of the store.

Major Investments:

At this stage, no further investments were made due to the limited product range and turnover within the shop. Major investment here was therefore not justified.

Products:

The product range was initially limited due to floor space, and the occupying range purchased, in bulk, at a recommended cash and carry outlet.

Dillons had now become a very stable stage-1 business due mainly to the support and expertise of Dillons’ management. Also, the newsagent's position was integral to the initial success it achieved, being the sole organisation providing the previously mentioned services in the local area. ((Both businesses in the area also added tremendously to the custom in the shop.))

After one year, Mr Pettifer decided that there simply wasn't enough room to expand the shop product range to the domains revealed by his marketing strategy (albeit a very limited one!). A proposal was made to Dillons’ management to expand the shop premises approximately by four-fold. After the initial success of the shop and the predicted potential, Dillons agreed to finance the expansion and also improve the presentation of the shop.

Again, the improved video services aided to further boost the custom to the shop.

The shop now had the space to dramatically increase the product range as desired, although with this expansion, stage 2/3 considerations of the growth cycle were required at the very least to re-establish the business.


Key Issues:

Now, maintaining original customers and expanding the customer base was imperative to ensure maximum stock turnover. Further resources could now be exploited due to the expansion. Increased size and stock suggests that further staff are needed.

Management Styles:

Due to employing more staff, a professional style of management should have been adopted. 'Friends' were employed thus keeping the managerial position an informal one.

Market Research:

Research techniques had not improved in any way from the original methods and because of this (see later) a product stagnation was induced. Sales representatives suggested leads and ideas, however, these ideas were instigated for other reasons.

Systems and Controls:

The book keeping and control records were now of a very high standard with full accounting systems in operation. The entire business system was professionally audited by Dillons on a bi-yearly basis. Suppliers also checked control and display systems on their relevant products.

Products:

The entire product range was now entering an established market in itself. Each product was purchased from the main suppliers on a sale or return agreement (this agreement was a key principle to Mr Pettifer entering a new product into his range).


The shop had an impressive product range at this stage, the customer base was well established and supplier relations were improving all the time. Bridgetown newsagents now enjoyed economic success.


Personnel Structure and Culture

The following tree structure demonstrates the personnel hierarchy throughout the newsagents:
[diagram of management hierarchy goes here]

Explanation of the company hierarchy:

Dillons enforce company policies on all sides of the business. They deal with all supervision of goods delivered and provide regular audits. Visits from the area management are frequent and always stringent. Dillons also provide major investments throughout the Bridgetown store.

Mr Pettifer works a typical day between 9am and 5pm, provided there are no anomalies. He is solely responsible for book keeping, reports, control systems and ordering of tobacco, alcohol and video supplies. Being the operational manager, Mr Pettifer is continually managing and assessing the store.

Fatima Pettifer works similar hours to her husband and is responsible for all stock orders except the above mentioned. General shop maintenance is also an ongoing task.

There are shifts designated to each of the workers:

5am - 11am    11am - 5pm    5pm - 11pm

The above shifts were maintained so that someone was constantly available to man the shop. Employees are expected to work beyond their shift time occaisionally in the event of a subsequent shift worker not being on time. Each shift is covered seven days a week, with the exception of Christmas day. The labour involves till-operation, re-stacking shelves, petroleum regulatory checks and general shop duties.

Shelf stackers are generally employed together to ensure that all stock is efficiently replaced. Both work six evenings per week and are responsible for re-stacking the enirety of the shop.

Due to the individualistic style of management, problems arose when Mr Pettifer was not present within the shop (anytime between 10am and 5pm daily) since no management issues could be delegated to anyone else. Any sick or holiday leave would result in a further backlog of paper work and reduced stock in the areas for which he was concerned.

As previously stated, all the personnel employed were family or friends. This greatly helped in promoting a friendly shop environment for the customers; good working relationships prevailed and common interest in the success of the business was reflected in the workers' attitudes. Although this method of employment assisted in creating a friendly atmosphere, the following internal management problems soon became apparent:

Exploitations of relationships between manager and personnel was intrinsic in many staff related issues, e.g., salaries, hours worked, holidays etc..

Till and cashing-up procedures were informal due to the trust between employees. This may have proved to be a dangerous operation because of the liberation of that trust, i.e., opportunities were made available to all employees disregarding their status.

Overlapping the boundaries between personal life within the family and business life were often perceivable since husband and wife were working within the same environment. Although this situation was occaisionally embarrassing and no doubt detremental, the shop definitely benefitted overall by the traditionality and local friendliness.

No formal business strategies were evident to cater for family integrations and because of this a unique, informal shopping environment was created but it was inefficient and poorly structured; small problems continuously plagued Mr Pettifer, drawing him away from managerial responsibilities that were consequently not being dealt with effectively.

Competition:

Although the above problems prevailed since the expansion of the shop, Bridgetown newsagents were still economically successful until the introduction of competition in the local market.

As Dillons was the sole convenience store within the local area, prices tended to be expensive because of the lack of price wars with competition. This proved to be an almost fatal error when the competition entered as they were able to effectively compete with all of Dillons’ price range.

In the early stages of 1996 a Tesco superstore opened less than a mile along the same stretch of road as Dillons. Since Tesco is an extremely large shopping chain (and not a small business), large financial backing was employed and the product range was undoubtedly greater. Prices considerably undercut those presented by Mr Pettifer, drawing away regular shoppers and leaving mainly those who frequented the store even before it was expanded.

Tesco opened during Dillons’ most profitable times (i.e., 7-10am and 4-7pm), and this reduced a high percentage of custom from the shop, threatening the profit margins that had been developed.

Within six months of operation, major recruitment of captial was required by Dillons just to help the business survive. Mr Pettifer was forced to reduce all staff salaries (including his own) dramatically.

Business Life Cycle:

Applying the business life-cycle to Dillons newsagents, it can be seen that progression from the Inception stage to the Expansion stage was unnaturally ??? and only certain key elements of the life cycle were addressed or implemented.

During Inception, Dillons was actually similar to the life cycle model, with products tending towards expensive so the company would gain more profit. This point is re-enforced seeing that the business opening hours were 5am to 11pm during all days of the week; not taking into account ‘overtime’, it is obvious that the newsagents is already a very large commitment for Mr Pettifer.

Dillons soon drifts from the business theory since there was very little time spent in the survival stage. Here, the business structure should be improved and strengthened, but as no survival issues were presented to Dillons, this vital stage of the life cycle was missed presenting future problems.

Even as Dillons grew and expanded into new markets, no new competition was encountered thus diverging further from the life cycle and making the organisation even more fragile and vulnerable.

Management did not develop at all throughout the life cycle and remained individualistic and supervisory instead of developing towards a more distanced and decentralised managerial operation.

Conclusion:

Currently Dillons is still under major financial threat and business is not returning since the introduction of the Tesco store. In analysing the structure of the business it can be seen that very little long term strategies were employed and no foresight of major competition was predicted, although this seemed inevitable.

The original success of the business seems to be largely due to the major investments made by Dillons management, location of the shop and the lack of any similar shops in the local environment.

At all stages of the business life cycle it appears that there is never a great financial threat to Mr Pettifer. During expansion, nearly all the risk involved was presented to Dillons management and Mr Devis in their capital investments. After expansion, good trading and a good relationship with the priciple supplier of the shop’s products enabled a sale or return method on all products (within a reasonable time period). This method proved ideal since it diminished any anxieties in regard to development of the shop’s product range and ensured that there would be no profit loss on over ordering of goods, reduced slaes or changes in the market culture.

Pricing strategy was governed by the motivation of increasing the profit margins. Short term risks such as the time to acheive profit on turnover were reduced whilst the risk of being dramatically undercut and pushed out of the market was increased exponentially. Ironically, this risk factor being the single largest reason for crisis was not recognised. External issues exasperated Dillons due to the neglect of any long term planning.


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