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Managing Small and Medium Sized Enterprises Assignment

   

Added on  2021-05-31

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Managing Small and Medium Sized Enterprises: Evaluation for Growth at icar Rentals Student ID:21086862 Word Count: 3299 (excluding references)

1 | P a g eExecutive Summary Small businesses enterprises (SME)’s make up 98% of the business population (BEIS, 2018). However, face very unique challenges in competing with their larger competitors (ibid). This report will focus on ‘icar’ rentals an SME based in west London, evaluating both the entrepreneur and business, charting its start-up and growth development to date. Short-term vehicle rental is a mature market and is facing increased pressure from new forms of access to personal transport. While hire companies are responding by adapting to these changed market conditions, research suggests that focusing on key user groups is needed so as to maximise available opportunities (Deloitte, 2018). The report discusses industry and company challenges, government assistance and sources of support, which may elevate strain on the business; in line with the company’s values and developmental objectives. Proposing recommendations based on theoretical frameworks and market analytics, to help focus on targeting these critical key consumer groups and sustain icars’s future growth within the industry.

2 | P a g eContents 1. Introduction 32. Findings 4 2.1 The Nature of the Entrepreneur behind the venture 4-5 2.2 The SME start-up processes 5 2.3 The business concept and sources of competitive advantage 6 2.4 Current level of demand and the competitive environment 7-8 2.5 The growth and development of the business to date 9-10 2.6 Current growth and development strategy 10 2.7 Challenges of managing and running the business 11 2.8 Support and Government Grants 11-12 3. Conclusion 12-144. Recommendations 15References 16-19 Appendix 1: icar Financial Overview 2013-1920 Appendix 2: icar Balance Sheet 2013-19 21

3 | P a g e1. Introduction The importance of ‘Small to Medium Enterprise’ (SME)’s has been well documented, SME’s are a key segment and driver for most economies (McAdam, 2010). As such many governments have been attempting to develop programmes to stimulate entrepreneurship, viewing smaller enterprises as the catalyst of economic growth and job and wealth creation (Oke et al, 2007). Trading for 15 years, icar rentals is predominantly an online car and van rental service company based in west London. One of the ventures owned by the entrepreneur Ken Jonson. Employing 6 members of staff, the company reported a turnover of £2,988,280 for 2019, with an estimated net worth of £3.7 million as evidenced in ‘icar Financial Overview 2013-19’ Appendix 1. Conforming to the definition of an (SME) according to the European Commission, as a business or company with fewer than 250 employees; an annual turnover not exceeding £50 million or an annual balance-sheet total not exceeding £34 million (European Commission, 2020). icar is a general use provider renting vehicles primarily to business and leisure travellers, and offer a booking service for international vehicles in the US, Canada and Jamaica through a franchise agreement with the owner’s family members (K Jonson 2020, personal communication, 11 March). This report focuses on icar’s UK business model, employing a mixed method research design, integrating quantitative and qualitative data, with the central premise to provide a more comprehensive and richer understanding of the research issues of either approach alone (Creswell, 2011). Utilising both primary and secondary data, with findings from interviews with the entrepreneur Ken Jonson and members of his staff and statistical financial data supplied by the company. Industry data and theoretical models will be examined allowing data to be integrated through “triangulation” (ibid). To ascertain the nature of the entrepreneur, evaluate the businesses start-up, concept, growth and development strategy, illuminate the challenges the business faces; and explore any governmental sources of advice or funding they have employed to date. In order to examine convergence, exploring the market environment and areas of competitive advantage that may be exploited by the company, to suggest recommendations to address the issues presented.

4 | P a g e2. Findings 2.1 The nature of the entrepreneur Baron (2004) suggests entrepreneurs may have tendency to frame decisions in terms of the gains they will fail to make if they do not become entrepreneurs rather than the losses they might make if they do, surmising they are therefore more risk seeking. Ken, informed me “entrepreneurship is about taking calculated risks” (K Jonson 2020, personal communication, 11 March). Which in further discussion I understood to be true in his case. Having numerous business initiatives since leaving school. Including the first Caribbean takeaway in Acton and Shepard’s Bush area (ibid), capitalising on his heritage and the lack of such an amenity for the local ethnic community, adhering to Drucker’s (1985, p:45) definition of an entrepreneur as “one who always searches for a change responds to it and exploits it as an opportunity”. A pirate radio station was initially a hobby, however realising the potential of paid advertising became a licenced community radio station he credits as one of the major initiatives that helped create a business network, firstly within the ethnic community and latterly due to initiatives with the police to build trust within the ethnic community, lead to developing more widely inclusive networks (K Jonson 2020, personal communication, 11 March). Passionate about inclusiveness of all ethnicities; he attributes this philosophy to injustices he experienced and witnessed when growing up (ibid). Many ventures which have not always made revenue, he explained have been prompted by his community spirit such as coach trips for underprivileged families from local housing estates, where he grew up; by his own admission in poverty at times. This primed him to succeed and to make a better life for those in his family, and the local community. The reason numerous of his ventures have been passed on to family members, through stringent controls he admits, due to his lack of “letting go” despite admitting once he has “solved a problem”, he “often losses interest” (ibid). Establishing his erratic nature, reinforcing distant characteristics within the Big 5 trait model where (John et al, 2008) note entrepreneurs as having higher levels of extraversion, and less of agreeableness than other populations and an internal locus of control. Believing they can influence outcomes through their own ability, effort or skills, rather than external forces such as chance, fate or environmental features controlling them (ibid). (Kerr et al, 2017) hypothesise entrepreneurs thrive on a strong personal self-efficacy to execute their visions in the uncertain and competitive environment of new ventures.

5 | P a g eFurther projects include a sound system, leading to promoting music events, and recently property development/investment. Entrepreneurial behaviour is increasingly recognised as heterogenous (ibid), Ken could be described as a portfolio entrepreneur, owning more than one business concurrently (Casson et al, 2009). It could be argued that most of these ventures are lifestyle businesses geared toward supporting the owner’s income, personal requirements and family employment, rather than maximising revenue (ibid). 2.2 The SME start-up process The business was started and grown through an organic process dependant on opportunity and need of the company, with no formal business plan in place. By process of effectual reasoning, as opposed to causal reasoning, where one begins with a specific goal and a given set of means for reaching it. Effectuation begins with only a set of means, in the process of deploying them; goals gradually emerge (Sarasvathy, 2001). A young person’s initiative loan from the Kensington and Chelsea borough, helped fund the purchase of two vans, securing a contract through word of mouth from a local B&Q, struggling with deliveries (K Jonson 2020, personal communication, 11 March). True to Deakins and Freels (2006) ‘3F’s principle where funding is primarily provided by founder, family and friends this generated revenue and further funding via a family loan from Ken’s grannie aided the start-up process. Initially only renting cars, vehicles were procured employing a flexible alternative for borrowing, rather than a bank loan, hire purchase was used directly himself and through family members; until the business built enough credit. Premises rental was the biggest outlay at this stage, as had not yet moved to an online model. All work was undertaken by the owner and his then girlfriend. Due to their experience in the transport industry and contacts with other businesses, an investment was made to secure an operating licence, allowing the company to operate minibuses and coaches, expanding their model, to provide coach travel in the UK and abroad, specialising in local ethnic events, such as weddings, funerals, and transportation of the Nottinghill carnival committee and steel bands to events. Their reputation and dedication to corporate social responsibility (CSR) secured them repeat rental trade from the police also (K Jonson 2020, personal communication, 11 March).

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