The Leeds Livery - Case Synopsis

The Leeds Livery

Case Synopsis

Under the ownership of Henry Montagu, Leeds livery was making profits that had been on a rise for 5 straight years. In fact, we are told, the profits had been better than the industry average over the last two years Montagu oversaw it. This he did by managing the business himself but Bilkmore came with another style of management by appointing a manager to run the business for himself and this ruined everything. He also cut off some of the traditions the pubs used to have that affected sales.

Problem Statement

As a result of the change of ownership from Montagu to Bilkmore, the business’ profits went down. Bilkmore changed the way the business was managed. He wanted to run livery the way he ran a roadhouse tavern in the 1990s. The fact that he was not interested in running the pub himself is where the problem began. It meant he delegated the role of the owner to a person that cared less about the survival of the pub. Another problem was that he wanted to run the business against the tradition the business used to operate in. he reduced incidentals such as team sponsorships and community events which meant he got out of touch with the locals thereby setting himself up for failure. He also cut the workers’ wages which meant instead of motivating his workers he was demotivating them. He also reduced expenditures on entertainment by 15% which further demotivated them. It got worse when profits reduced and instead of adding more workers he started to cut some of them off. This was a negative move. He also decided to postpone on the renovations to the business premises which meant that the place looked less attractive and could therefore not be attractive to the new clients. The final nail on the coffin was when he decided to change the kind of beers the pub was offering and fill it with cheap beer. This scared away some of the high end customers the firm had.

Therefore the objectives here include:

1. Finding ways to renovate the premises.
2. Find a way of retaining the workers who have worked there for a long time.
3. Returning the business to its old ways that saw it make its highest sales of all time.
4. Reintroducing incidentals.

Situation Analysis

With a look at the book of accounts of the pub for the year 2008 to that of 2003, the pub is not as profitable as it used to be. This therefore directly points out to the fact that the business’ weakness outweighs its strengths. This therefore is not an attractive business to buy.

Porter’s Five Forces Analysis

Buyer power

Buyer power is high, because of low switching cost for customer.  Buyer are individuals and businesses. Customers are attracted by low price and high quality standards.

Supplier Power

Supplier Power is low, because there are a lot of suppliers and they all ready to accept and offer discounts to their customers. Suppliers are labour, food and drink providers.

Threat of Substitutes

Threat of Substitutes is low, because product sold depends on the clients taste and performance. Substitutes are restaurants, hotels and bars.

Barriers to Entry

Barriers to Entry is low, because of no an obstacles for entry in the industry, but it may be difficult for beginners to compete with existing companies.

Industry Competition

Industry Competition is high, because there is a lot of competition from internal and foreign companies. Competitors are local small pub, family restaurant and other food outlets.

SWOT Analysis

Strengths

1. The business is located in Milville a town whose population is growingly rapidly over the years and that means the firm has potential of becoming a major pub because the market is there.
2. Half the population we are told works there are well off families, this therefore means the pub has a chance of attracting a rich market that will serve to expand its profits.
3. It’s located along the main road and that means it’s located in a suitable location to attract new customers easily.

Weakness

1. The pub needs a lot of renovation which will be expensive to the new buyer.
2. The firm’s profit is on a downward slopping trend.
3. The pub has no financial abilities to continue participating in local events like it used to that attracted customers.
4. The pub business market structure has changed has changed and therefore to restructure the pub to be able to compete with others will take a lot of time effort and capital.

Opportunity

The opportunities the firm has is that its operating in an environment where the people have grown prosperous and want to socialize close to home in a comfortable, cosy and friendly atmosphere. Therefore this being a home to over 21,000 people then it therefore means the market available to it, is its biggest strength.

Threats

The biggest threat to its operations are quite a couple;

1. The continued change in the way of operations in the industry. The culture in the industry is always changing and people are coming out with new ways of offering the same service better and that’s a threat.
2. With the increase in population in Milville it means there is a threat of new pubs to come up to compete for the available market.

Historical Financial Analysis 

1. The sales dropped from 500000 to 425000 in 2008 which needs to be worked on to improve profits.
2. The expenses should also be cut and this involves a cut in the salary of the manager which has risen by 4.4% in 5 years.
3. The pub should also work in increasing promotional expenses as this will serve towards increasing its customer base which has dropped considerably from 5% of expenses to 1.9% in 2008.

Identification of Alternative

1. To be able to cover the increase in population in Milville the pub could open a branch to increase its popularity in the area.
2. It could also cut off the manager and that will serve towards reducing on the expenses and this will increase the profit margin.
3. The firm should develop new ways of motivating employees by reintroducing incidentals such as team sponsorship and community events to publicize itself and attract new market.

Analysis

To be able to increase its customer base Leeds livery should plan on increasing the number of pubs it has around the whole of Millville. This is because with the increase in the population the market is growing. And this therefore means more pubs will be coming to the scene, therefore the need to increase its presence to keep its customer base. This can be done because by a look at the financial statement of Leeds Livery it shows that the firm even though the firm is going through a rough patch it still earns or makes some profits. So the situation is not really that bad it can be changed and corrected. The best way to do this is by opening more branches, this will be able to serve a larger population and also help spread the firm’s risk. There are funds to do this because we are told Hugh when he contacted his bank manager they agreed to loan him the money. This is a good alternative.