Business enterprises are formed with a goal of generating revenue, expand and attain business sustainability. The management is required to develop different business strategic plans to strengthen the performance of their enterprises. Business strategy refers to a long-term plan of action planned to attain a particular goal or a set of goals. A good business strategy should categorically state how a company should conduct business to achieve the desired goal. Coming up with a business strategy is one of the core management function. Coming up with a good strategy and executing the strategy in a proper manner is important to attain success. However, this may not be the case because of unforeseen circumstances. It is therefore important to frequently review the organizations business strategy against the current internal and external environment.
This paper seeks to establish various business strategies that can enable Buttler’s plc, an independent timber and builders merchant, to achieve its organization stated objectives. The paper looks at the company’s financials, customers and competitors based on Suitable, Acceptable, and Feasible (SAF) criteria and provide different strategic options.
Buttle Plc is an independent Timber and Builder’s merchant founded in the year 1919 in Kentish Town, London. The company has branches in London, St Albans, Enfield, and Leighton Buzzard. The company has diversified its business portfolio and today, Buttle plc also sell building materials, plumbing material, and trade as plumbers pal in Enfield and London.
The company has been expanding over the years. The current CEO, Peter Buttle, took advantage of market opportunity and diversified the product range. The company success as a timber and builder’s merchant is because of diversification of the business where the company added a full range of building materials such as blocks, bricks, underground drainage and a fleet of crane-offloading vehicles.
In the year 2002, Buttle acquired buildings and land in Leighton to establish its branch. The company further diversified in the year 2008 and began offering plumbing and heating supplies to customers and establishment of plumberspal in Kentish Town. In the year 2008, the building industry was hit by recession and many companies made losses. Long & Somerville Builders Merchant did not survive the recession and Buttler took advantage of the situation and purchased their modern 2.5 acres site in Enfield. Over the year 2010-2012, the company made losses. The company posted a net profit of £139, 000 in the year 2013, and £416,000 in the year 2014. This indicates that company performance has been improving over the years.
The primary objectives of Buttles plc are to increase its sales by £25 million be the end of the year 2020. The company also targets a minimum net return of 5% on sales. Similarly, the company would want to increase shareholder’s value by £5 million and the acquisition value of the business to be £12.5 million. Therefore, there is a need for the development of strategies that can enable the company to attain the stated goals. But before looking at the strategies that the company should adopt, it is important to do internal and external analysis by looking at the industry trends, customer analysis, competitor’s analysis, and performance analysis of the company.
The United Kingdom is one of the largest economies globally. The country is open to trade and is one of the attractive destinations for both domestic investors and international investors. The real estate industry has been picking up over the years after the recession. The real estate market is the second-largest market after Germany. The United Kingdom government support and encourage projects the real estate market making it an ideal place for construction industries. The industry is expected to grow by 5% between the year 2015-2020 indicating that the company will be able to take advantage of these opportunities to generate more revenue.
Buttle plc sales its merchandize to national house builders, general contractors, public sector organizations, local builders, and home improvement. The company essentially sells its merchandise to all users of building materials despite the size of the company. Builders require a lot of materials required for the construction of buildings. Buttle plc are able to purchase materials directly from the UK leading manufacturers at leading prices and sell to our customers in areas including London, Hertfordshire, Bedfordshire, Middlesex, and Buckinghamshire.
The company customers require products of high quality. The reason is that investors and home builders always want to build beautiful and durable structures that cannot easily depreciate. Buttle’s provide customers with high-quality building materials, timber and Joinery, landscaping, tools, fixings, and Ironmongery as well as decorating services. The Buttle’s Plumbers Pal supplies customers with plumbing and heating products, bathrooms and kitchen products.
The company also assist its customers by providing them with the delivery of products to the site, sourcing of special items and offering free advice, quotations, quantity estimates, and brick matching services to all customers.
The United Kingdom building industry has many building merchants. Some of the key competitors include Travis Perkins, Jewson, Buildbase, Lawsons, E.D Elson Ltd, Plumb Center, City Plumbing Suppliers, PlimbBase, and LHS.
Travis Perkins: Travis Perkins is one of the largest UK builder merchant catering to contractors and construction professionals. The company sells building materials, and rent tools to contractors and construction professionals throughout the UK. Travis Perkins Unique Selling Proposition is that they pride themselves as the forerunners of the building and construction market.
Jewson Limited: Jewson is one of the key competitors of Buttler in the provision of timber and building materials. Jewson Limited also offers materials for landscaping, kitchens, bathrooms, joinery, insulation, brick, and flooring. The company also provide construction tools and types of equipment for rentals. The company has won its position in the market through the bidding process and building partnership relationships with private companies and suppliers.
BuildBase: Buildbase a brand name for Grafton Group who provide building and plumbing materials in the United Kingdom. The company distributes, hardware, plumbing and electrical supplies, lumber, gardening, and building materials.
Plumb Center: Plumb Center one of the brand name for Wolseley Company stocking building materials from leading suppliers of plumping and kitchenware such as Worcester Bosch, Fernox and Ideal standards.
E.D Elson Limited: This family-owned business also supplies building materials in the United Kingdom market. The company unique selling proposition is the provision of reliable service at competitive prices. The company has branches in St. Albans, Essex, and North London.
From the above competitor analysis, it is evident that there are many key players in the building industry. Therefore, it is important that each and every business enterprise develop strategies that give them an edge over other competitors. Buttler is a member of Builders Merchant Federation as well as a respected member of NMBS and H&B buying groups. Therefore, the company is in a position to purchase supplies from UK leading manufacturers at a competitive price. The company also have skilled manpower to source items for clients making it possible for the company to offer clients the right materials at a competitive price at the right time.
The management must look at the Key Performance Indicators (KPIs) to ensure that the set objectives of an organization are being achieved. The management can use various analytical tools, concepts, and techniques to accurately evaluate the performance of the company. One of the methods that can be adopted by the company is ratio analysis which is helpful in identifying internal strengths and weakness and estimate future financial performance.
The most used liquidity ratio used is the current ratio in which organization current assets is compared with its current liability. The current ratio is an important ratio used to determine a company’s performance by determining its ability to settle short-term bills.
Current Ratio = Current Assets / Current Liabilities
For buttlers, the current ratio is 1.7 (2,541,178 / -1,494,419) indicating that the company can be able to pay off 1.7 times its liabilities using liquid cash. Therefore, the company can cover its debt by the current assets.
Solvency ratio is an important ratio used to assess the financial stability of the company. The ratio is arrived by comparing the company’s debts with the organization assets and debt-to-equity. The best ratio that can be utilized by Buttler is the debt-to-equity ratio which is a financial ratio used to determine the ratio of company financing that comes from investors and creditors
Debt to equity ratio = total liabilities / total equity
For buttlers, the debt to equity ratio is -4.78 (-1,494,419 / 312,400) indicating that the company has a high debt-to-equity ratio indicating that the company uses higher leverage to finance its assets.
Profitability is one of the Key Performance Indicators used by managers and investors to determine if a company is performing well. A profitability ratio is a financial metric utilized to determine the management ability to convert sales into profits and cash flow. For buttler, we will use the net profit margin ratio and return on asset ratio.
The net profit margin ratio is used to determine the amount of revenue that remains after deducting operating expenses, interests, taxes, and preferred stock dividends.
Net profit margin= (total revenue-total expenses) / total revenue
(511,526-3,498,481) /511,526 = -5.84