His entrepreneurial spirit drove him to leave a stable career and convert his part-time engine reconditioning business into a full-time endeavor. He moved from a shack next to his trailer home to a small hut that he rented for one month. After renting the hut he moved to a stall in a service station. With neither a business name nor a business license, Pat had little control over parts and profit. When the opportunity came to rent a larger space from a garage owner Pat took it. Here his business continued to grow and there was a need for him to hire a helper. Although he was in the business of engine reconditioning, he hired a premed student. Finally in 1977, Pats business got a name. He incorporated it as Bennetts Machine Shop, Inc. During that same time he moved the business to a rented building that only he occupied.
Analysis of the case.
The case analysis will be done using the SWOT analysis and all the aspects will be analyzed strategically.
Vision & Mission Statement:
Bennett’s Machine Shop, Inc. has the vision of achieving diversification in the field of engine business and makes the company a profitable organization. The main intension is to keep on finding new ways of repairing and renewing mechanical equipments and operating systems of all kinds especially auto engines with regard to quality of products and services and trying to achieve top position in international competition.
Need to fill in some stuff from the case like the business that the company is currently doing and the undertaken loan.
Strategic SWOT Analysis:
Some of the major strength of Bennett’s Machine Shop Inc can be highlighted as
• Having service/product diversity in the field of engine making and rebuilding has given them a competitive advantage in the industry.
• Mr. Pat Bennett is continuously looking for expansion as he first expanded his services from engine rebuilding to installations, and then again by undertaking the tool sharpening and modifications contract with Boeing.
• Recognizing the value of services and market share, the organization is actively interested market research and invest in advertising.
• Complete Engine service is available at the shop which is a very distinctive feature market wise.
• Customer friendly price structure
The company’s strength challenged by several weaknesses that currently exists. The vast and growing list of weakness suggests that the company has to do a complete overhauling of its business in order to succeed the competitive environment. Some of the important ones are mentioned below:
• There is a lack of a clear plan of action as the company is currently headed by just one person having an individual idea for the business.
• It can be inferred that Pat Bennett possesses the technical skills to perform the job, but does not have a functional business plan in place to operate the business.
• In addition to other elements, having a plan would have required developing a mission, establishing goals, conducting research for the services provided, researching financing options, and having a clear marketing plan.
• There is no evidence that Pat did any research work before beginning his business. Because of this poor planning, his organizations structure is weak and the organizational culture is dysfunctional.
• Bennetts weak organizational structure has lead to poor materials management. There appears to be an absence of direction and control of inventory and tools. The facility has piles of used engines scattered inside and out.
• Pat also allows customers to drop off engines around his property giving it the appearance of a salvage yard instead of a machine shop. There is also inadequate space to store parts and tools. Work areas are cluttered creating difficulty when trying to find the tools to perform the job.
• There is no specialized HR department due to which there is abundance of inefficient hiring, training, and retention practices.
• There are no clear work schedules in place and it is presumed that the employees are satisfied with the limited benefits being offered offers; this has contributed to the dysfunction.
• There is also the absence of a systematic plan of operations. Just giving an employee a few pointers is an example of this. These issues have an effect on the employees abilities to do their job and ultimately has a negative effect on the value creation process.
• Presented issues led to the closing of his new shop after 14 months and the mismanagement of the Boeing contract. Proper negotiations with Boeing may have led to a situation where Pat Bennett had more control.
• Shop has poor financial management. Almost every asset that Pat owns is financed by debt. He did not plan nor seek the advice of a professional when he began his business; he assumed that debt financing was the route to pursue. He did not place any value on having a competent firm to manage his finances.
• The owner also likes to spend money excessively on high quality of life items. The attitude is that I am happy as long as I am making a profit attitude. Strictly bottom line focused, but unaware of what the steps are to a perpetually positive bottom line, in essence minimum business sense.
• Another weakness is the excessive expenditure on advertising without a firm cost benefit analysis before investment of funds. They have spent more on improper advertising than on professional fees and taxes. Because of poor planning, the firm had to shut down just to take orders as a result of one advertising venture.
In summary Bennetts Machine Shop value creation model has kinks in every step. The absence of planning has led to the mismanagement of the essential inputs of human resources, materials, and capital. This has resulted in a poor conversion process and substandard outputs such as the shoddy relationship with Boeing.
The opportunities available to the organization are limited because of their high debt situation. It would prove very difficult for them to expand the service base, grow, and hire new people with limited capital. If the situation were different, the firm could have the opportunity to acquire new equipment to keep up with the advancing technology in automobile engines. Bennett’s could also have the opportunity to invest in smaller shops located in their strategic area.
In addition, they would be able to outbid other firms for the Boeing contract. Also more capital would allow them to focus on the installation jobs, which is what currently gives them the advantage over their competitors.
The high debt situation makes the organization vulnerable during economic slow periods. They cannot afford to lose customers because that’s the only source of their revenue generaton. Also in this industry customers are not brand loyal, they will fluctuate from low prices to great service. Bennett’s weaknesses leave them exposed to these threats. The debt situation also makes it difficult to combat the threat of new technology.
The organization doesn’t even have a business license or name when it began. There is always the threat that a competitor will offer a product that they are not offering or are unable to offer because they lack the labor or capital.The threat that a new company could move into the area and begin to perform installations also exists. With skilled labor, necessary machinery and tools a new firm could open up at anytime.