Less Mills International (Research Paper Sample)

Management
Name
Institutional Affiliation
Table of Contents TOC \o "1-3" \h \z \u 
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Executive Summary  PAGEREF _Toc389642774 \h
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1.0 Introduction  PAGEREF _Toc389642775 \h
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2.0 Uniqueness of small businesses and the agency theory  PAGEREF _Toc389642776 \h
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3.0 Strengths  PAGEREF _Toc389642777 \h
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3.1 Internal Strength: Marketing  PAGEREF _Toc389642778 \h
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3.3 Technological Strengths  PAGEREF _Toc389642779 \h
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4.0 Weaknesses  PAGEREF _Toc389642780 \h
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4.1 Economic and Financial  PAGEREF _Toc389642781 \h
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4.2 Cultural  PAGEREF _Toc389642782 \h
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4.3 Technological and legal  PAGEREF _Toc389642783 \h
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5.0 7Ps Marketing Mix and Creating New products  PAGEREF _Toc389642784 \h
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6.0 Recommendations and Conclusion  PAGEREF _Toc389642785 \h
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6.1 Marketing: Strategic Marketing and Market Intelligence  PAGEREF _Toc389642786 \h
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6.2 Management  PAGEREF _Toc389642787 \h
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6.3 Technology  PAGEREF _Toc389642788 \h
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6.4 Overcoming Economic and financial constraints  PAGEREF _Toc389642789 \h
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6.5 Overcoming Cross-cultural Barriers  PAGEREF _Toc389642790 \h
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6.6 Limitations  PAGEREF _Toc389642791 \h
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References  PAGEREF _Toc389642792 \h
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Executive Summary
This paper serves two purposes. First, it analyses the internal and the external operating environment of Les Mills International in the context of the theory of uniqueness of small businesses. Secondly, it provides recommendations based on the analysis done in the first part using marketing and management theories applicable to operation of business in the international arena. Agency theory presents a unique proposition in relation to the operations of small businesses. Management theory has focused on the problems that arise due to separation of ownership from management in conventional corporates; this has led to emergence of the agency theory. The agency problem is however not existent in small businesses because of the fusion of management with ownership. This presents special challenges for stakeholders and the firm. For example, the lack of transparency in operation and the scantiness of information is a concern for stakeholders in these small businesses. Therefore, businesses like LMI need to come up with measures to mitigate such problems.
Longevity of operation has benefitted the company since it has enabled it to understand the terrain well. To ensure increased growth, the company has collaborated with other big companies such as Nestle and Sony. The company rides on their brand recognition to elevate its own brand. The field of fitness training is gradually changing due to advances in technology. The company should re-align its business model to take advantage of these changes.
The company’s weaknesses include the threat of piracy, which decreases the company’s revenue. The company also has limited capital to expand. This is due to the ownership structure of the company. Cultural differences are another obstacle that the company faces. The report has cited the 7Ps marketing mix and one cultural theory that the company can use to strengthen its position and overcome the weaknesses.1.0 Introduction
Les Mills International (LMI) is a sports and fitness company founded by Phillip Mills in 1997 in Auckland, New Zealand. The company’s vision is to create a fitter planet through health living (Crossley, 2012). This report analyses the operations of LMI by looking at its strengths and weaknesses and attempting to find ways of optimizing those strengths and mitigating the weaknesses. It applies theories unique to operation of small businesses to help put the analysis in its right context. The report also fronts recommendation on the way forward for LMI. The final part outlines limitations of this report due to challenges encountered in its preparation. The structure of the report aims at establishing a good flow of the ideas; first performing a diagnosis, then a prognosis, while bearing in mind the limitations of the whole operation.
2.0 Uniqueness of small businesses and the agency theory
Small and medium sized enterprises have features that set them apart from the conventional forms of business, for example; their management structure is often incomplete and informal. The businesses are by-products of the entrepreneurial acumen of first generation entrepreneurs who pass on the baton to subsequent heirs. This is true of LMI, which is now in the hands of the second generation of the family. Owners of these businesses tend to have undiversified interests in the business, which is likely to be unlisted in the stock exchange since owners feel the need to maintain control (Fama & Jensen, 1985). All these features are evident in LMI.
This creates a special agency problem that is different from the traditional manager-owner agency relationship. The proprietor/owner in LMI is the manager. This may increase the cost of monitoring the business for outside stakeholders since they have lesser access to information than they would if the company was a public corporation. The business is also likely to suffer lack of managerial depth since top positions are a preserve of family members. Another problem that may arise is the risk of the company running into management problems due to succession hitches especially if the current management fails to put in place a good succession plan. To overcome some of these unique challenges the management have to come up with unique solutions, for example to overcome high cost of credit, LMI should establish long-term relationships with a small number of creditors thereby ensuring a high number of transactions. With time, the creditors will have enough information about the company and the cost of credit will come down (Ang, 1991).
3.0 Strengths
3.1 Internal Strength: Marketing
The company is thoroughly familiar with the market terrain. LMI is an offshoot of the LMN, which started operations in 1968. This gives the company several advantages relating to longevity in the market. Forty-five years of operations is a long period and the company has accumulated tomes of research data of trends recorded over long durations. Longevity gives the company credibility, as people seem to trust institutions that have operated for a long period. For instance when looking for credit, financial institution are jittery when dealing with a start-up (Education for Enterprise, 2010). Established firms like LMI do not experience such problems since they probably have a long history of relationship with a particular bank. Such relationships may help the firm access credit on more favourable terms than if the firm was new. According to Gibson (2011), an investor approached Les Phillip (The majority shareholder) in 2011 with an offer to purchase the company for $ 100 million he turned down the offer. This underlines the credibility that LMI enjoys.
3.2 Internal Strength: Management
The company also enjoys a stable ownership and management structure. Crossley (2012) acknowledges that this has played an important role in the success of the company. The company has maintained a familial look from the beginning except from that brief period between 1984 and 1990 when the company listed in the NZST. After the stock market crash, the Phillip Mills bought back the company (Education for Enterprise, EFE, 2010). The company has few shareholders with the bulk of the company belonging to Phillip and the others distributed among the company’s staff and a few private investors. This has provided stability for the company as decision-making is swift since fewer people need to ratify decisions. Decisions such as profits to plough back and the projects to pursue can be made quickly thus affording the company flexibility that is not found in public corporations.
3.3 Technological Strengths
The international market and advances in information communication technology offers LMI an interesting mix of opportunities that the company has started exploiting. Communication technology offers new ways of training and keeping clients interested in exercise. LMI has leveraged on information technology to create an exercise management application that can be installed on mobile phones. The website Gladeye (2014) features this application, named Momentum, and provides further information about the program. The application helps individual to meet their training needs by enabling them to schedule their training programs. According to the site, the application also has customisable timetables, offers training tips, offers rewards for performance, and gives the user feedback. This represents a creative application of technology.
4.0 Weaknesses
4.1 Economic and Financial
Delisting from the stock exchange was a double-edged sword; while it brought stability and flexibility to the firm, it also limited the firm’s capacity to raise funds for expansion. According to the EFE (2012), LMI is worth about $ 100 Million. The company has to expand at a very slow pace due to this financial constraint. The family is however not willing to loosen their grip on the company. In this case, the company will continue to ...