Practise IB Business Management HL 3.5.4 by analysing strategies that improve liquidity ratios and short-term solvency.
The business grew rapidly over the next four years. Its growth was based on its innovative use of social media and other technologies, the youthful enthusiasm of its owners, its rapid response to customers and the strong word-of-mouth promotion from customers. In 2017, the partners converted MM to a private limited company. They became the majority shareholders, each owning a quarter of the shares, with the remaining quarter owned by their families. MM has strong ethical objectives, including in its choice of customers. It will not accept business from organizations without robust equal opportunities policies or those that do not actively work to reduce their carbon footprint. It will not work with businesses that exploit employees and it considers freedom of expression important. The owners try to reflect their cultural diversity in everything the business does. MM aims to respond to customers more quickly than others in the industry, with customer service at the centre of everything it does. The Bengaluru branch of MM has sales, design and customer care teams serving Asia. There is now the possibility of relocating more of the business to India in 2022. Rachel thinks that the opening of the Bengaluru office has provided an opportunity for a major reorganization of MM. The Indian office has been successful so far, with excellent premises. Some London employees moved to India, with the remainder recruited locally. Recruitment of highly qualified employees was difficult, so MM had to attract new workers with high salaries and generous benefits. The HRM problem concerns Clare, a highly successful marketing manager. Her drive and enthusiasm inspired her team, resulting in a 50 % increase in revenue by the department over the last 12 months. Customer satisfaction is very high and some marketing strategies designed by Clare’s team won awards. Clare consults and delegates but is prepared, where necessary, to be autocratic, particularly when targets must be met. Staff complained about unrealistic deadlines and bullying. Clare was rude to them, blocked their pay rises and threatened them with less interesting work. These employees asked for Clare to be dismissed for harassment. The Bengaluru office is responsible for customers in Asia. In 2021, this region will account for 30 % of MM’s business, but it is expected to account for 60 % by 2025. Rachel would like to move all of MM’s operations to Bengaluru. Bengaluru is a rapidly growing city with high-tech businesses, high-quality education and training facilities, its own film industry and potentially lower rents than in the UK. Javed could see operational difficulties: London has a stronger creative industry, and many creative employees are unlikely to want to relocate to India.
MM's growth has been helped by its unique selling point/proposition (USP) of rapid response to customer needs and by its high-quality customer service. New employees undergo detailed training to become skilled in:
- finding out what a customer's objectives are
- helping the customer work towards a marketing plan
- working closely with the customer as M M develops a marketing strategy for them
- maintaining links with the customer to provide an effective after-sales service.
The business takes a multicultural approach to its customers, employees and other stakeholders. MM's approach to diversity is one of the features that stakeholders say they like about the business. The company also ensures that it accommodates many cultural differences.
According to a business service that provides measures of social behaviour for every country, in British businesses:
- employees are accustomed to working in a competitive, individualistic society
- employees often take individual responsibility for their own actions and decisions
- competition is high between both employees and customers
- customers are accustomed to changing contracts when service is bad or competitors offer a better deal.
In comparison, Indian businesses:
- are based on power structures with a greater focus on teamwork than individuality
- are more likely to be hierarchical
- have greater loyalty from their customers
- have greater formality with their customers
- place importance on building business relationships
- are subject to greater variety in culture between businesses and regions.
Maintaining high levels of customer service is expensive. MM has increasing costs. Rachel is concerned about MM's finances and is examining the latest accounts for the company for 2019 and 2020 (Table 1) to identify problems.
Table 1: Selected financial information for \(\boldsymbol{M
Explain one method M M could use to improve its liquidity.