Posted: September 16th, 2017

Succession for Family Business

Succession for Family Business

Order Description

Task 1 and 2 is one Report (3000 words), Task three is a Separate report (1400) words

PGBS0148 Entrepreneurship and Enterprise Assignment 2

This assignment requires you to analyse a business environment and suggest an appropriate strategic direction to secure the future of the business.  The marking criteria for the assignment is as follows:

Learning Outcomes
By the end of the module you should be able to:
1.    Critically evaluate theories and concepts relating to entrepreneurship;
2.    Analyse the environment for entrepreneurship;
3.    Analyse and critically evaluate entrepreneurial practice.

Case Study
Introduction
Gary Stanley has just turned 60 and has begun to reflect on what he has achieved over his career. His company Stanley Toys is one of the most successful toy manufacturing companies in the UK. The business specialises in educational and recreational handmade wooden toys for re-school children. The company based in Plymouth has around 160 employees of which 105 are on the operational side of the business whilst the others are in administration, management, marketing and design.  The annual turnover of the company in 2014 was £14 million due to very healthy export sales. The forecast sales for 2015 are for a 10% increase which is likely to continue for several years to come.  Despite this success, Gary’s son (Robert) and daughter (Emily) have further expectations to significantly increase sales beyond this level with an aggressive growth strategy. However Gary has significant concerns about following such a strategy.
Growth of Stanley Toys
The business began in in the smallest possible terms. Gary would hand make specialist toys with his woodworking skills for his children.  These proved so popular that he started making them for family friends and a business was born.  From this point the business grew rapidly to the point that a dedicated premises was purchased and staff taken on. Gary’s sister Sarah invested in the business as a shareholder with 10% of the shares.  Due to this investment the business was able to invest in new products and turnover grew significantly as they began to sell to international markets.  The business won awards for innovation and sales increased as Stanley Toys become recognised internationally as the market leader for handmade wooden toys.
Gary continued to build the business and took on new designers.  Due to the nature of the products they were able to generate a high profit margin. Gary expanded the business further by starting up a new section making antique replica furniture from commissions. To generate the capital for this section he sold a 20% share of the business to a group of friends.  These investors are silent partners and play no part in the day to day management of the business. Robert his oldest son is a qualified design engineer runs the antique furniture section of the business. Robert is an excellent design engineer whose key strengths are designing and creating new products for his division.  He admits that he does not particularly enjoy the other aspects of the business.
The Family
Karen
The persona who really helped Gary to build the business is his daughter Karen, who is a qualified accountant and lawyer.  She is also a natural leader as well as an effective manager.  She has significant external experience of working within consultancy firms and within different industries.  In the time she has worked at Stanley Toys there has been a huge increase in turnover, profitability and the value of the company. She has worked effectively with Sarah and together they have introduced a significant amount of company policy and systems to enable the effective operation of the firm. She has also worked closely with Gary to give the firm a strategic orientation and differentiate the business activities from rivals.
Robert
Since joining the business, Robert has wanted to develop new educational toys in plastic and views this medium as flexible and complementary to the existing products on offer.  However, Gary has always rejected this idea as he feels that it would take the business away from its central focus and increase direct competition.  The cost of moving into this products would require significant investment in new premises, plant and machinery and has been estimated at costing more than £2 million.
Emily
Emily is the youngest family member and joined the business last year.  Emily has a degree and Master’s degree in Marketing.  She has also external experience of working in market research before becoming a junior product manager for a large company. Emily is an excellent salesperson and has had a positive impact on the sales figures within the company. However, she has also been described as intolerant and impatient of others.  As a consequence she has fallen out with several other members of staff who have chosen to leave the business. Robert tends not to argue with her but Emily has to avoid such situations as good staff are leaving the business. Gary has always had an excellent relationship with company staff has attempted to advise Emily who ignored his suggestions.  Gary is concerned that Emily is not an effective leader nor is she bringing the best of out the marketing and sales team.
The New Opportunity
Through her contacts in the business world Emily has been offered the possibility of a multi-million dollar contract from a United States based business specialising in educational and recreational toys for re-school children. However, the toys will have to be made from plastic and profit margins will be significantly lower due to the nature of the contractual agreement and profit share. The advantage of this contract is in high volume production runs and very large markets. However, the US company will also take five months to pay invoices and Stanley Toys will have to pay for machine tools and recoup this from their sales. The business would have to set up a new section to cater for this development. Gary has always been risk adverse and careful with any investment strategies in the business.  He is concerned that the project will over extend the business by costing more than it makes and they will lose control of the business.  Currently, the business does not have sufficient capital to fund the investment. Robert is delighted by this opportunity and has been asked through Karen to explore investment costs as well as possibilities in subcontracting manufacture elsewhere.  Within this approach, the design control and project management would be retained by the Stanley Toys.
Future Direction
Further to this new opportunity, Gary has received a serious offer to buy the business for more than twice the annual sales.  This is with the proviso that he retires and his children remain in the business.  Karen is significantly opposed to this and feels that Stanley Toys could develop and grow even more. Sarah is very happy with her 10% share in the business and the potential for this to grow in value.  The external investors in the business would like the sale to go through. Robert is undecided but Emily want to keep the business in the family with her as Chief Executive Officer.  The situation is about to discussed at the next board meeting.
Business Ownership    %
Gary    50
Sarah    10
Karen    5
Robert    5
Emily    5
Craig (not in family business)    5
External Investors    20
100%
Prepare a briefing document for all members of the Stanley family to advise them on:
Tasks
1.    Based on the information provided in the case study compile a report and make a recommendation to the CEO regarding the best course for succession in the business.
2.    Identify the potential problems that might occur in this process. Why might the business be vulnerable and to who?
3000 words not including appendices
3.    With reference to the relevant academic theory identify the advantages of owning and developing a family business.  What are the drawbacks to developing a family firm. Why do family businesses require a succession plan and what are the key elements in managing succession.
1500 words not including references
Word count should be adhered to with a 10% variation allowed either way in Task 1 and Task 2.
Please submit the assignment electronically to [email protected] by the 27th April 2015.

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