Identifying Challenges and Strategies for Holbrooks Florists

Introduction

The main purpose of this document is to briefly outline the current and prospective challenges which is going to be faced by Holbrooks Florists, especially in the context of increasing operational costs and stiff competition from hypermarkets. The document will discuss both internal organizational issues and external issues which the business needs to take care of to increase profits. (a) Simply understood, scarcity is the relative absence of a certain resource. In the case of Holbrook’s, the main scarce areas are scarcity in technical expertise, financial resources to expand and effective cost-cutting measures. (b) Three advantages public sector has over private is that it attracts employees more, has more scope for an equitable work environment and is a fairly predictable industry. Advantages private sector has is that profits can be kept by the owner, salary and expenditure can be adjusted to avoid excess tax and you have full monopoly on your business operations. Disadvantages of public sector include excessive political interference, inflexible organization and delay in decision making. With private sector, disadvantages include greater risk for shareholders, smaller resources and more legal bounds. (c) Three options Holbrooks can undertake: Hiring technical experts to set up website Going public to raise capital Organizational analysis through the usage of mechanisms like SWOT and PESTLE. (d) Centrally planned economy is an economic system where the decision of production and trade is wholly made by the government. The objective is to rapidly progress and industrialise (Brown and Neuberger, 1968). In the case of Holbrooks, the benefits of central economy would be equitable economic structure, no pressure of stakeholders and less accountability. The disadvantages include loss because of not following the market logic of supply and demand, no say in the functioning of the store and little scope for increase in profits of owners, hence little desire to innovate the business as well. Hence, Holbrooks is a business which would operate better in a liberal economy. 2. (a) A flat organizational structure means fewer layers of management between the owner and employees and Holbrooks is such an organization. This can be disadvantageous as flat organizations tend to have multiple supervisors and employees are more likely to quit if reporting to multiple supervisors (Clement, 2019). Second, it could lead to confusion with respect to the chain of command within the organization and who is actually in charge. Third, the supervisors, in this case the children of the owner, may lack the technical expertise of management and hence be ill-equipped. Fourth, new initiatives may ask for reorganisation of managerial positions and this will be opposed by the current managers. Lastly, decision making may be biased as managers come from the same family and could have similar perspectives. For example, if home delivery of flowers is agreeable to one manager but not to the second, the conflict of decision becomes a personal as well as a professional matter. (b) A good alternative for this business, since it is a mid-level family-run business, would be to structure the business according to the hierarchal public model. The reasons for this is as follows: Public model is innovative and in the contemporary market, the business model needs to develop rapidly (Saul Kaplan, April 19 2011). Since Holbrooke’s wants competitive advantage, they need to adopt this model. It will allow for balance of family and market interests, where decision making will depend more on market logic. It will increase financial resources by the introduction of outside shareholders and give opportunity for the business to invest greater money in technical improvements. A hierarchical structure will assign clear roles for managers and make them responsible for certain sections, to avoid insubordination. There will be more scope for specialisation if the store introduces special services like cake delivery, personalised messages and so on. (c) The principal agent problem occurs when there is conflict regarding power or resources between the owner and the stakeholders. In this specific case, this could be a conflict which may occur between the owners, Jack and Jamie, and the store employees. Grossman and Hart (1992) discover that conflict also occurs when the agent possesses information that the principal does not. 3. (a) — If the rate of growth is below inflation rate, then it means loss for the business. In the case of Holbrookes, their growth rate must exceed the increasing cost of fuel and transportation, labour and supplies in order to remain profitable. — From 2019 onwards, the minimum wage for workers in the UK is £8.21 per hour (gov.uk). But working for minimum wage may drain the morale of workers. In a mid-level business like Holbrookes, reduced salary may men compensation by provision of leaves and insurance, which may in turn cost more to the business. — The recent exit of the UK from the EU has meant a sharp decline in the exchange rate of the pound. Presently, the pound is free floating and in order to keep up the exchange rate, it is imperative that the supply and demand is kept up. This will ensure that in relation to the euro, the pound has a good exchange value (worldfirst.com). — Fuel prices have steadily been increasing over the years in the UK and that is a problem for Holbrooks as materials for their business need to be sourced which depends on long-distance transportation. Lucas et al (2018) postulate this has caused financial problems in households across UK too. This will affect retail prices and push people to cut back on non-essential items like flowers, which may affect Holbrookes. —COVID continues to have an adverse effect on the economic prospects of the UK as growth rate fell by about 7% (Young and Lenoël, 2020). While the growth rate was 1.3% in 2019, it decreased to -11.3% in 2020, breaking the chain of steady growth that has been taking place since the beginning of the decade (statista.com). This could prove harmful for items which are considered non-essential items, flowers being one of them. (b) Supply side policies in the UK may include loosening of trading laws on Sundays and reduce taxation of sustainable businesses. Demand side policies include SME tax relief like AIA claim and tax deductibles like fuel, clothing, resell items etc. The Sunday law relaxation was brought about to supplement businesses which have been affected by COVID, although concerns have been raised for their safety. Coupled with relaxed taxation for SMEs, Holbrooks could invest in greater expansion. Additionally, employees would not be dissatisfied even with docked pay if they are compensated for their transport and other miscellaneous costs. AIA claims can be used in order to get deductibles from machinery which has been newly acquired. 4. (a) Five reasons why Holbrooks should trade internationally are: (i) Greater prospect for building customer base (ii) Scope for international expansion through international stores (iii) Tax benefits (iv) Gain an edge over local competitors who do not have branches abroad. (v) Find greater opportunities for profits in markets where similar service doesn’t exist, effectively gaining monopoly in a fresh market instead of trying to fill a saturated market. (b) Three important factors which may have a negative impact on the business due to globalisation: (i) Increasing competition as multinational organizations may enter the market, which may offer a better deal on flowers, which Holbrooks may not be able to afford. (ii) Globalizaton leads to diversity in population, and to cater to that, Holbrooks will need greater investment in their business. If they don’t change their services, they’ll lose more customers. (iii) Opening markets and outsourcing labour would entail several ethical issues which they have to take care of. Neglecting that would land the company in trouble, like it did with Nike. (c) Tariffs which could negatively effect the development of floral businesses in the UK include: — Brexit could result in the increase of tariffs between Britain and the rest of Europe could be as high as 5-7% of the current exports, valued at around 11.4 to 16 billion dollars (UNCTAD, 25 February 2020). — Additionally, other non-tariff measures could account up to 32 billion dollars (Ibid). — The ‘No Deal’ policy which has been proposed is postulate to have a negative effect on trade whereby exports could decline more than 20%. Costly tariffs like this would discourage businesses to expand or take a significant chunk out of medium sized business, especially if they are trying to tide over the present economically difficult times (Gasiorek and Garett, 2019). — If Zero Tariff policy is lost, post-Brexit, the UK will have to impose tariffs for goods from the EU and vice versa, a move that will affect businesses in the UK (Faulconbridge and Chambers, December 7 2020). For Holbrooks, that means that plans for expansion will have to wait until the tariff plan is finalised, but they risk losing customers to the fast growing hypermarkets in their areas. Word Count (excluding references): 1487

References

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4. Grossman, S.J. and Hart, O.D., 1992. An analysis of the principal-agent problem. In Foundations of Insurance Economics (pp. 302-340). Springer, Dordrecht.

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