AQA AS Business Studies Case Study Thread

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Well established (been running since 2002 - 5 years) and national interest in magazine

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Multi-skilled workforce - allows for job rotation

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A young workforce that understands their target market (this could also be seen as a threat due to Age Discrimination laws)

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Investigation into new product ranges (using matrix management) and new target markets (20-29 yr olds, 30-39 yr olds)

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33 full time staff + freelancer reporters

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Leah looking for profit maximisation - this may not always have positive consequences e.g. relocation to Spain may be cheaper but not ethical, also her authoritarian approach may get things done but unlikely to be motivating for workers (particularly the more creative ones - e.g. cartoonists)

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Use of market research

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particularly the use of secondary research into the topics that interested different age groups in deciding the theme of the magazine

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And the research made by Polar plc's market research department on the predicted economic conditions and growth in consumer spending

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Efficient Production - use of cell production, kaizen groups, use of quality assurance (the all round checking of quality by employees at every stage of production), and training provided (see below)

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Quality of training - very good quality of training - use of both on-the-job and off-the-job training to give employees positives of both - shown by competitors trying to poach workers as well

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Motivational techniques used - job enrichment and job enlargement

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Internal recruitment - quick to find employees to work in other parts of business, they are already accustomed to business culture and as it states in the case study, it avoids tensions between printer workers and workers in other areas of the business

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Loyal workforce - i.e. P8 of CS - 24 of 33 staff employed in 2004 still working for the company

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Some loyal, long-established suppliers (also make sure that these suppliers remain loyal)

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Experience and finances of Polar plc available e.g. market research department already used for info in last 2 tables, informed on any new UK or European laws and the potential difficulties arising from them

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Improving levels of customer satisfaction with the articles and features

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Rationalisation and delaying in the printing department -> reduction in costs as 2 supervisors and 2 printers made redundant

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Jeremy's smaller % holding in the company compared to 52% for Polar plc - states in the Case Study that Leah always has backing of Polar plc on any big decisions that need to be made - limits Jeremy, Kate and Sam's influence

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Tensions between Jeremy and Leah - throughout the case study there are mentions of their relationship

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Poor quality of printed magazine in terms of actual printed quality - well below industry mean (2.5 lower in rating - industry mean = 8, Smile = 5.5) - could lead to some lost sales where the quality of print matters

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Conflicts with suppliers - in disagreement over when suppliers should deliver (could possibly seen as a threat as well)

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Internet magazine technically inferior to competitors'

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Sales falling in first 1/4 of 2007

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Tensions within the whole workplace (but partly resolved by internal recruitment)

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Leah's authoritarian style may cause stress and demotivate staff - impact on creative staff

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Being a Ltd company instead of a plc means that shares cannot be distributed on the London Stock Exchange (minor point)

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Leah possibly being paid too much - "a high salary plus a very generous bonus based on profits"

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Freelance reporters and writers may not view things from Smile Magazine's perspective and therefore may possibly cause problems for the firm - possible loss of quality or mistakes, do not have the interests of the firm in mind when writing the articles - link this to outsourcing - see textbook

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Span of control too wide for Admin Officer and Print Manager to cope with effectively, they must delegate effectively otherwise (span of control = 6) - print manager SoC = 6 because on page 4 after the organisational structure it mentions the rationalisation and delayering in this area of the business

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the internet technician in particular has a span of control of 10! - he certainly needs to know exactly what he is doing and needs to be able to delegate tasks well

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it later says that in the printing department that cell production is used to overcome the difficulties of wider spans of control

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Leah may not feel as committed as she could be to the success of the company due to her having no shareholding in Smile Magazines Ltd

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"the need for quick decisions sometimes limited the opportunities for close consultation and led to decisions being taken in an authoritarian manner"

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Majority of workforce under 30 - this is a strength in that it does mean they understand their target market BUT it also means that there is a lack of experience and wisdom that older people might bring to the business

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Leah not necessarily good under pressure - when competitors cut prices by 15% she immediately cut Smile's prices by 15% too - this could have been handled more effectively by working out carefully whether they should be involved in a price war or compete on quality of their articles - possibly making a step to move their magazines into the 30 - 39 age group who are willing to pay more for their magazines

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No automation through use of machinery - will need to for long-term stability of business - machinery allows them to alter production according to demand more easily, does not need to be motivated or have breaks like workers, does not need to be paid wages (but yes, does need maintenance), and of course overall higher print quality that may be able to compete with the industry mean

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Falling morale within the business

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Currently they are only appealing to the 15-19 year olds - just 6.2% of the population. If they moved into the 20-29 and 30-39 year old age groups they would have a far greater market size to work with (28.1% of UK pop.) - remember it is better to have a small share in a large market than a large share in a small market

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20-29 market - most brand loyal - possible future readers

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30-39 market - willing to pay more - pay more per head - to promote an image of quality they need to reach this market in particular to allow them to set higher prices

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Giving workers greater responsibilities - job enrichment - use of job rotation as employees are multi-skilled

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Making use of the "tremendous insight into the whole range of activities within the organisation" that their workers have

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With so many members of the internet support team it would be expected that they could raise the standard of the internet magazine to the industry mean

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Matrix management projects on new product development and new target markets, kaizen groups

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Make use of Polar plc's market research department

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Extending markets into Eire - reach a whole new market that also likes the same content as current readers do

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Relocation of printing to Spain - allows a significant drop in production costs and allows them to be competitive without making a loss if necessary

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Use of ethical behaviour to appeal to consumers (direct opposite of above)

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From last table there is a general increase in consumer spending in both age groups that Smile are planning to move into in the future

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Lower unemployment levels forecast which means that there will be higher consumer spending as there are more people employed earning money and therefore able to spend money

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Exchange rate showing strong pound means that buying raw materials from Spain using pounds will be cheaper as they can buy more euros for fewer pounds

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Relationship with suppliers possibly deteriorating - more and more difficult to find suppliers

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Printed magazine market dominated by 2 very large firms sharing 50% of the market - Smile doesn't have the economies of scale to match the strength of competitors such as these - certainly couldn't survive in a price war

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Competitors poaching employees, in particular, from the internet support team

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Competitors cutting prices, unpredictable, might try and force Smile out the market using destroyer pricing or significantly reduce market share by penetration pricing

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Local communities protesting due to arrival of lorries at night

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The personal relationships between staff i.e. Jeremy and Kate (couple) could pose problems if other workers think Jeremy is favourable towards Kate (even when he might not even be doing it or does it unintentionally)

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Government legalisation - increase in recycling and minimum wage increase will mean production costs go up significantly

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Recruitment of young people under 30 - Age Discrimination Act

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Declining readership of printed magazine in overall market

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Large number of competitors in printed magazine market

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Lower levels of unemployment forecast also has a downside as it means that there is a lower pool of workers to choose from - this is particularly bad for Smile as competitors are likely to poach even more employees in this situation - Smile will have to someone manage to convince workers to stay either through higher wages or through motivation (i.e. motivating the worker so that they are happy to stay despite lower wages)

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Exchange rate of pound against euro is not favourable for the distribution of their magazines to Ireland as this will mean Irish retailers will have to pay more euros for fewer pounds -> therefore less competitive and harder to sell their magazines to retailers

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Higher interest rates mean that it is more expensive to get a loan - this is especially a difficulty for Smile as if they want to buy machinery, a vast amount of capital will be needed and very likely a loan will be needed to cover some of the costs of implementing new machinery (that is if they decide to implement machinery)

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At the same time as there being higher consumer disposable income from low unemployment, there will be the opposite due to high interest rates as the interest rates will particularly affect householders (a lot of people) - their new target markets of 20-29 yr olds and 30-39 yr olds will especially find themselves with less money as they are likely to have just bought a house

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Inflation has a slight increase which causes raw materials to cost more -> high costs of production, it also means that consumers will spend less

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All these points that highlight the consumer spending less are very important because magazines are a fairly elastic product (tell me if you think this is wrong) and so a fall in disposable income could have a negative impact on sales unless strong brand loyalty can be built up