UK Starting Business

It is recommended that the company undertake steps in order to enhance their business performance. The company should continue to take measures in order to reduce their current overheads and expenses to a level where they only contain the necessary tools to compete for institutional and private client business.

In the present stock market environment revenues are low due firstly to a substantial decrease in the number of investors in the market, and secondary to the lower rates of commission which are gained from transactions because of the intense competition.

When revenues are low, the company is unable to make a profit due to its high overheads. A reduction in costs would result in the future in an increased profit during buoyant periods and reduced loss or even a profit in periods such as the present when the market is relatively inactive.

Although the firm has a parent company who will support and finance it through its current troubles, it is unlikely that if the firm becomes established as a loss making organisation, the parent company would continue to support it.

Thus, changes in the cost structure are a necessity in order for its long-term and perhaps short-term survival. Ideally speaking the above recommendation could be best achieved if the company could begin its planning process again. That is, relocate in smaller, less expensive offices, reset salary scales and be more cautious in its expenditure.

However in the current circumstances these suggestions are impractical because of the disruption, expense and behavioural problems which would arise as a result.

The author believes that the practical solution would be to retain the present infra-structure of the company but to cut costs and expenses down to a minimum.

Some examples of expenses and costs which are at present (and probably in the short and medium term) not affordable or excess to the company requirements are:
a) Certain employees such as researchers and analysts should be kept to a minimum as they are currently being paid high salaries but they do not make a direct contribution to the firm’s income. Also at a time when the market is (and likely to remain for some time) inactive, there is no logic for keeping more dealers than is needed.

b) Office space - with the company’s present operations reduced, letting spare offices on a short term basis could provide the company with a valuable additional revenue source and therefore result in a greater utilisation of assets.

This may not be feasible at the moment but it would be worth considering altering the layout of the offices and planning in order to lease the space when the market is subdued and it is not required.

c) Auxiliary equipment and services including canteen facilities, company events such as parties, dinners and so on. Obviously these cannot be cut completely because of the behavioural problems which would ensue.
Reasonably but less expensive canteen facilities could be offered. The reasons for these changes should be explained to the people who use the facilities and this will form part of the overall communication of the firm actions which will be discussed later.

The firm should take more secure steps in planning in the future for occurrences which will cause it difficulties. If the firm is able to prepare itself for both prosperous and lean periods there would be less need for radical changes when conditions alter.

This recommendation can be seen to be important when the company’s present position is looked out. Short-term planning resulted in the short-term profitability of the company.

It is, therefore, necessary that major investments and changes are the results of long-term forecasting and planning of the future market behaviour and its likely or even possible effects.

The company should introduce measures to curb the present behavioural problems which are present or which may result from any of their current or future changes in the organisation.

At present there are feelings of insecurity among staff who envisage that the present and/or future re-organisations will be of detriment to them. Some employees will obviously have to be made redundant if they represent an excess to the company requirements or are not affordable.

It will be far better for these employees to be told as soon as possible as this will eliminate the uncertainty which the other employees are feeling.

Of course the reasons for the redundancies should be explained fully as to create understanding of the reasons. Perhaps generous redundancy payments would symbolise that the company cared and regretted that it was forced to make these decisions.

The other parts of the restructuring program would also have to be explained to the staff, again outlining the firm’s present troubles and the proposed solutions.

This would lead towards ensuring the employee’s support and cooperation and if opportunities were given for them to offer ideas as to how certain operation could be improved, this could aid the company further in its drive for profitability.