This paper is an MBA analysis of the Smith Designs case study written by Sylvia M. Asay, Larry Carstenson, and Susan M. Jensen from the University of Nebraska at Kearney. The purpose of this paper is to determine problems within the company and to find possible solutions and recommendations. The detailed analysis of this case showcase knowledge of Global Management and Leadership course materials learned thus far. Smith Design Case Analysis
Introduction and Summary
Owned by Cindy and her husband Greg Smith, Smith Designs is a seemingly successful home-based business, mainly selling crafted headbands to a single account, a department store buyer who supplied fifty-six stores. After five years of major changes and growth, the company has made a combined total of $165,405 in sales, $57,990 for their fifth year alone, and has a projected sales amount of $75,000 for their sixth year. Along with the projected growth in sales are major opportunities for growth and expansion. These opportunities leave the couple to review all aspect of their life, family, and business, including past business decisions, decisions that can help their company move forward in the short and long terms, and if there is actually a future for the company in the long-run.
A Look Back
As a stay-at-home mom with two small children of her own, Cindy began her home-based business by exploring her creativity and fashion training to find her niche in what is called “wearable art” (Asay, 2006).She designed baby rompers from plain cotton tee-shirts and sold them, along with leggings and tee-shirts for adults, at local craft fairs and boutiques either ready-to-decorate or pre-decorated.
By the second year of selling at boutiques and fairs, Smith Designs caught the attention of high-end department store buyer who became their major account – ordering infant rompers to supply twenty-seven stores. To go with the rompers, Cindy expanded her product line to include crafted hats and headbands, which grew in popularity. Soon, the headbands took the lead in sales and production increased while hat and romper production decreased. Sales continued to grow; with their major account now supplying thirty-seven stores, expenses grew and demand became impossible for Cindy to manage with Greg’s part-time help alone. To help, the Smiths progressively made some major changes. Three part-time piece-sewers were hired to keep up with demand, Greg quit his job to work full-time with Cindy, and they moved their family to the Midwest to help cut costs.
Now supplying fifty-six stores with headbands through their major account, and seeing growth in sales, profit, popularity and opportunities, Smith Designs is now left to evaluate their options and make major decisions.
Questions and Problems
Even though Cindy is very excited about the potential opportunities, she is forced to ask herself she could manage the volume of demand, and what options would she need to pursue to be successful. Almost from the start of Smith Designs, Cindy found her merchandise to be time-consuming to produce and incurred expenses mainly due to the continuous need to increase inventory to fulfill demand; which always seemed to be a struggle. Other major expenses are those linked to contract part-time labor, and equipment and repairs. Thus, with the business at its present state, the answer to the meeting demand question is, no; the problems being Cindy’s struggle to meet demand and growing expenses. These obvious issues can be the result of a number of initial causes such as, lack of business know-how, not enough on-hand workers, inadequate equipment and technologies, and lack of money and support. From the information given, the assumption can be made that all of these issues play a part in Smith Designs’ production and costs issues.
Fixing the Problems
At this point, the decisions that Cindy needs to make are risky and contingent to the success or failure of her business. Because of the significance and high-risk of the decisions, they would be defined by Lussier (2008) as “nonprogrammed decisions,” which require considerable time to process and make final decisions (p. 94). By using both a “reflective” decision making style and a “consistent” decision making style, Cindy should be able to take enough time to think and research before making an appropriate decision to fix and improve her business without wasting too much time that would jeopardize her business opportunities to make to think about how she has been managing her business.
Using the combination of decision styles will allow Cindy to really think about where she wants her business to be in the future, the decisions and changes that need to be made so that her business can meet her goals for the future, and a strategy to execute her plans (p. 92). To properly do this, Cindy should consider and execute two major processes – the decision making process and the strategic planning process, as mentioned by Lussier (2008).
To thoroughly execute the decision making process, Cindy would need to do the following; “classify and define the problems and opportunities”, set objectives and criteria”, generate creative and innovative alternatives”, “analyze alternatives and select the most feasible”, plan and implement the decision”, and then follow through to “control the decision” (p.92). After going through the first three steps and developing solutions, each alternative should be researched and analyzed. Risk and uncertainty should be considered and if possible, probabilities of success and failure should be given to each solution. Also, a pros and cons and/or a cost-benefit analysis of each alternative should be done.
These analyses both compare the advantages and disadvantages and the costs and benefits of each alternative; however, the cost-benefit analysis uses math, and personal “intuition and judgment” (p. 108). After each alternative solution has been thoroughly evaluated, the most rational decision should be clear and selected. Once the decision has been made, a strategy for implementation should be developed, executed and properly managed.
A Bit More About the Planning Process
One problem with Smith Designs is that Cindy doesn’t seem to have clear set goals and objectives; and, with the minimal goals and objectives she may have, she lacks the appropriate strategies to achieve them. Now, if Cindy truly wants to grow her business and pursue greater opportunities for the long-run, she should begin by going through the “strategic planning process”, which entails setting long-term objectives, creating a mission, and developing a strategy to attain those objectives and to “pursue the mission.” Once a real mission has been created and long-term goals have been set, Cindy should then focus on what needs to be done presently to maintain and/or begin to grow her company by setting short-term goals and objectives and a plan to achieve them; this process is called “operational planning” (p. 129).
Thoroughly Analyzing the Situation and Alternatives
In order for Cindy to make the best decision and to answer many of her questions about Smith Designs potential in the future, she will need to gather as much information as possible about her business, the industry, the economy, and competition. To do this, it would be wise to conduct a SWOT analysis to exhibit all the company’s strengths, weaknesses, opportunities and threats. The analysis will display what’s good about the company, competitive advantages, all the company’s problems, competition, present opportunities and possible threats to hinder or shut down the business (p. 131).
As stated in the case, the first option to move forward with the business is continue to operate and manage “as they had been doing, with some modifications.” This would mean that Cindy and Greg would continue to struggle to meet demand working from their home, continue to job-out to piece-sewers, and continue to seemingly be fluttering about without a strong business strategy. In my opinion, this option should not be an option at all (Asay, p. 286).
A second option mentioned in the case entails “jobbing out” some of their “product to be sewn by an existing manufacturer” when there is a need for the extra help. The case also makes a point to mention that there are advantages and disadvantages to jobbing-out (p. 287). The main advantage is the extra help with the sewing. On the other hand, jobbing out or “out-tasking”, as referred to by Nanda (2012), “hardly ever works” when there is a need for dedication, precision, cooperation and coordination for longer periods of time and the it “works best when there’s a one-time project that has to be done: an open-and-shut case” (Nanda, 2012). With the lack of dedication from out-taskers and the lack of control, managing a business can become very stressful and may do more harm than good.
As an alternative to out-tasking, Nanda (2012) suggests “smart outsourcing” instead (2012). In Cindy’s case, she would need to properly forecast the demand for her products to find the demand for the extra workers. Then she can use that information to help seek out the appropriate outsourcer to hire to do the sewing of select product. Outsourcing piece-sewing is a better alternative because it allows more stability in work, time, dedication, expenses, and coordination, etc.
Moreover, other advantages of outsourcing include; no salary expenses, “better revenue realization and enhanced returns on investment,” “reduced cash outflow and optimized resource utilization,” lower labor cost and increased realization of economics of scale,” “increased speed and the quality of delivery of outsourced activities,” and more time for leisure, business management, planning, and focusing “on core competencies while not being concerned about outsourced routine activities.” With that that is good, there are also a few shortcomings that may occur with outsourcing such as loss of control over processes, quality and performance (flatworldsolutions, 2013).
The last option mentioned in the case involves the most risk by suggesting that Smith Designs start their own small manufacturing company. This option will be a huge investment and will require an incredible amount of time, research and planning. This high-risk and involved option is one that Smith Designs is not ready for yet. However, it should be a goal for the future. A strategy for this goal should soon be put in place and launched.
Recommendations and Conclusion
Because of the current state of Smith Designs, I would not be wise for the company to stay the same (option 1), or begin a much larger operation (option 3), at least not yet. As an alternative that should solve all problems and help move Smith Designs into a successful future, I recommend that Cindy seriously go through the strategic and operational planning processes, seek out a business mentor to help advise and guide her in her business decisions, research funding opportunities for future growth plans, and plan to outsource selected products. Overall, if Cindy does what she needs to do for the short-term and finds an appropriate outsourcer, she will have the time to continue to learn the business, grow her company and live a less stressful, happier, successful life.
Asay, S., Carstenson, L., & Jensen, S. (2006). “Smith Designs,” Annual Advances in Business Cases, 26 (none), 284-291 Flatworldsolutions. (2013). The pros and cons of outsourcing. Retrieved from http://www.flatworldsolutions.com/articles/pros-cons-outsourcing.php Lussier, R. N. (2012). Management fundamentals: Concepts, applications, skill development, 5. Springfield, MA: Springfield College. Nanda, G. (2012). Out-tasking or outsourcing – Which Would you choose?. Retrieved from http://www.evancarmichael.com/Business-Coach/2148/Outtasking-or-Outsourcing–Which-Would-You-Choose.html
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