The Small Business Casebook

231 Pages·1979·18.515 MB·English

by  Sue Birley (auth.)

THE SMALL BUSINESS CASEBOOK
THE SMALL BUSINESS
CASEBOOK
Sue Birley
M
© Sue Birley (introduction, editorial matter
and chs. 1, 3, 4, 8, 10) 1979
© Institute of Small Business, London
Business School (chs. 2, 5, 6, 7, 9, II) 1979
All rights reserved. No part of this publication may be
reproduced or transmitted, in any form or by any means,
without permission
First edition 1979
Reprinted 1982
Published by
THE MACMILLAN PRESS LTD
London and Basingstoke
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Birley, Susan J.
The small business casebook
I. Small business - Great Britain - Case studies
I. Title
338.6'42'0722 HD2346.G7
ISBN 978-0-333-26100-2 ISBN 978-1-349-16192-8 (eBook)
DOI 10.1007/978-1-349-16192-8
The paperback edition of this book is sold subject to the
condition that it shall not, by way of trade or otherwise, be lent,
resold, hired out, or otherwise circulated without the publisher's
prior consent, in any form of binding or cover other than that
in which it is published and without a similar condition including
this condition being imposed on the subsequent purchaser
To
PROFESSOR BRUCE SCOTT
for starting the ball rolling
Contents
Acknowledgements VIII
Introduction
EA VES AND W ASHBOURNE LTD 4
Sue Birley
2 SEED OYSTERS (UK) LTD 32
David Norburn and Sue Birley
3 M. D. BENEDICT LTD 72
Sue Birley
4 COHEN AND FOWLER 80
Sue Birley
5 STEPHENSON, TURBRIDGE AND BASSETT, INC. 93
David Turpin
6 REGENT PRINTERS LTD 101
Sue Birley from material collected by Derek Essen and Walter Maughan
7 R. J. NEVILL LTD 109
Philip Green
8 GILBERN CARS LTD 116
Sue Birley
9 MORGAN MOTOR COMPANY LTD 130
Arthur Moore from material collected by Nancy Marwick. Arthur Moore
and Marlice Tomkinson
10 BARNES AND WARD LTD 144
Sue Birley
11 HENR Y SYKES LTD 184
Sue Birley and Chris Hall
Those cases not written by Sue Birley were prepared under her direction by former
M.Sc. students at the London Business School.
Acknowledgements
My grateful thanks go to Professor Michael Beesley for initiating the project; to David
Norburn, Philip Green, David Turpin and Arthur Moore for providing four of the
cases; and to Michael Beesley, Peter Gorb, Bill Porter, David Norburn and Bob
Hamilton for reading and commenting on the drafts. I am grateful to M. Sc. and Sloan
students at the London Business School for being willing guinea-pigs, and to Linda
Harris, Sue Coan and Ann Clapp for patiently typing the many drafts. I should also
like to thank the owners and managers of all the companies for being so helpful in
providing material to allow others to learn from their experiences.
Finally, I wish to thank the Financial Times Ltd for permission to quote an extract
from an article by Margaret Reid published on 7 September 1977.
S.B.
Introduction
The small business is a vital part of the economic and social life of the community, and
yet it is only recently that academics, businessmen and others have begun to recognise
that small business is rarely large business in microcosm. The motivations of the
owner-manager, the skills and resources available to him, and the pressures exerted on
him by the environment are often quite different from those of the functional manager in
the larger firm. The cases in this book examine these differences while at the same time
giving the student an opportunity to study the critical factors in the development of the
small firm.
There are, of course, factors that the small business and the large business have in
common. Business policy is the study of the total business, and the techniques of
analysis which are used do not vary with the size of business. Thus, this book also
affords an opportunity to practise these skills.
The cases are intended for students - any student who will eventually find himself
working in a managerial capacity. Very few students will become small businessmen,
but almost all will come into contact with them frequently during their working life,
whether as customers, suppliers, advisers, investors or even competitors. Despite this,
most students have no idea of what such a business is really like. Management teaching
encourages the view that profit, systems and structure are the measures of an efficient
and healthy business and yet these can be anathema to the small-firm owner. He may be
happier in apparent chaos but in complete control, and so, faced with companies such
as Eaves and Wash bourne or with entrepreneurs such as Ali Cameron, the student's
initial reaction is one of disbelief. The aim of this casebook is to turn such disbelief into
understanding so that the student will eventually be able to interact with the small
business community in a constructive way.
Each case is intended to be taken at three levels. First, the student should be able to
identify the general issues that the case is highlighting. For example, Chapter 6 (Regent
Printers) looks at the issues of delegation and corporate structure in a rapidly growing
firm. Secondly, the student should be able to suggest solutions for the particular
problem posed: for example, (again in Chapter 6), what to do with Elroy, who has been
promoted beyond the level of his capability but who is viewed by the owners of the firm
as part of their extended family. Thirdly, and as a result of his analysis, the student
should come to realise that many of the solutions which he suggests come from an
external view of the firm, and, if they are to be implemented, may require the
introduction of a third party. The question of who this person is and how he should help
and persuade the owner is one which not only is important in the particular situation but
also is currently being studied by both government and commercial organisations.
Although the book is written as a self-contained course and is used as such at the
London Business School, each case can be taken and taught in isolation as part of any
general management course. A selection of cases is already being used in a wide range
of institutions, from colleges of further education to business schools and for students
from Higher National Diploma to post-graduate level.
The purpose in writing the book was to provide material to promote the teaching of
small business to students. This does not, however, exclude its use in teaching the small
businessman himself. A number of such businessmen, including the people who have
contributed case material, have found it helpful to use the cases as a basis for discussing
the strategic issues which they face within their own companies.
All the cases are intended as a basis for class discussion, and not as illustrations of
good or bad management.
The Cases
The main theme running through this book is the relationship between ownership and
management, since it is these two factors which are the key to many of the issues facing
the small firm, such as the source of future funds, succession or the acquisition of new
skills and products. The ways in which this relationship can change are highlighted in
Chapter 1 (Eaves and Washbourne), which looks at the critical choices to be made as
the firm grows from the entrepreneurial stage, through a second generation, to the
beginnings of professional management. This case series is useful either as a start to a
small-business course or as an overview of the area.
The limited amount of data in Chapter 1 can be contrasted with the amount in
Chapter 2 (Seed Oysters). Here the student will initially feel more comfortable but soon
begin to realise that in a start-up proposal, particularly for a new technology, he is ill
equipped to evaluate the venture. What criteria should he use and how should he weight
them? How can he separate a good idea from a bad proposal? How does he decide how
much money is really needed? And what should be the relationship between
shareholding and the inputs of money, products and skills?
Chapter 3 (M. D. Benedict) takes the student through the first two years of the firm
as it struggles to survive. It looks at the characteristics of the partners and poses the
question of how much luck and how much skill is needed in the early years of a firm.
Chapter 4 (Cohen and Fowler) is an important one for students - particularly as
many of them find it easier to identify with professionals such as Sid or Debbie than
with entrepreneurs such as Chris Cameron of M. D. Benedict or Stan Eaves of Eaves
and Washbourne, but also because it is the only example of a company with a
partnership rather than limited liability. The case series raises two issues which
distinguish service firms from the more familiar manufacturing firms. First, there is the
question of how to grow when the product is based upon the professional skills of the
individual; and, secondly, there is the problem of what management and control
systems are appropriate in such situations. It is useful to tie this case series in with the
case of Stephenson, Turbridge and Bassett (Chapter 5) to review the question of how to
motivate and manage highly qualified and effective professionals.
Motivation is the key to Regent Printers (Chapter 6), a rapidly growing and
successful firm. An opportunistic approach to growth is taken here, and successful
salesmen are given minority shareholdings and promoted to managing director as new
companies are created. Is this the way to promote growth, and should the salesmen's
motivation change when a holding-company structure is created?
In the discussion of all the cases so far, the student will be interested because growth
is assumed and so change is likely to happen. The case of R. J. Nevill (Chapter 7) will,
therefore, seem dull by comparison, since the firm has never really been more than a
'corner shop'. Nevertheless, it is important to recognise that Nevill represents a very
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large proportion of the small-business population, particularly in the retail trade.
Students will feel sympathy with Philip, both because they too would not wish to devote
their life to what they consider to be an uninteresting business and because they
understand the emotional pressures to which he is being subjected. In a discussion of the
problems facing the potential second-generation manager, his choices can be compared
with those of Paul Wash bourne.
Chapters 8 (Gilbern Cars) and 9 (Morgan Cars) should be taken together, in an
attempt to look at the possible reasons for survival of the small firm in a high
technology, capital-intensive industry which is dominated by a few giants.
Up to this point the question of the definition of 'small' has deliberately been avoided.
There is no finite point at which small firms suddenly become medium-sized, si~e, in this
instance, being a function of complexity of management systems and structure, of
product line or of shareholding. The teacher may choose either of the last two cases to
illustrate firms trying to make the transition from small to medium-sized. In the first
instance, Barnes and Ward (Chapter 10), an old-established company with, in effect,
one product, is jerked out of its slumber by a rapidly changing environment and is
forced to become market-oriented. Here the student is left with the haunting question:
has the firm slept too long?
By the end of Case C in Chapter 11, Henry Sykes has gone far beyond anything
which most people would describe as small. Nevertheless, in the financial world
obtaining a public quotation means that a small company has achieved the
respectability of medium size. This company is particularly interesting because it was
the first to trade shares 'over the counter' through M. J. H. Nightingale and Co. and
then to take advantage of Stock Exchange Rule 135(2) to obtain permission to trade
shares. But perhaps more important for the student of the small business are two issues
which run through the three cases in this series. The first concerns the relationship
between the investor and the operator, a relationship which becomes particularly
complex when the investor is responsible for both equity and debt capital. The second
issue concerns the time it takes to create, and the difficulty which growing and
successful firms appear to experience in creating, systems and structures which are
acceptable to both the bank and the Stock Exchange.
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