Cygnets of Chelsea: the first turnaround for David Kay, November 2011 Harvard Case Solution & Analysis

Cygnets of Chelsea: the first turnaround for David Kay, November 2011 Case Study Analysis

Potential cost reductions

The company needs to identify and reduce the expenses of the business with the intent of increasing the profit returns. Putting cost control in place would reduce the overall expenses of the company. The cost control would be the most significant factors for growing and maintaining the profitability levels. The company should focused on the cost controls particularly over overheads. The cost of overhead should be analyzed along with its impact on the bottom-line. Additionally, the advertising and personal relations cost should be based on the market or the product analysis rather than on the subjective impressions. Additionally, the cost of payroll should be minimized and the sales staff should be given a minimal basic salary along with the compensation based on how well the individual contributed to the success and growth of the company. Through providing the reward and recognition to the employees, the company would be able to inspire the peak performance, boost employee loyalty, and lessen turnover and improving the organizational effectiveness.

Cash generation capability

Building the cash management culture through encouraging the ash flows and financial discipline in both good as well as difficult economic times. On the basis of the goals and objectives of the company, the financial discipline could be translated into the various initiatives including leaner cost structure and more prudent investing criteria. Either way, the considerable focus on the financial discipline including integrated cash flow and financial forecasting would assist the company in improving financial stability, strengthening its balance sheet and lead to greater profitability. Consequently, the company would be able to gain the flexibility as well as control it needs for achieving the competitive edge over the market rivals (Deloitte, 2019).

Question no 3

Based on the value of assets and complete acquisition of the organization, it is recommended that David Kay should acquire assets only because he does not have enough funding or resources. For the acquisition of assets, David Kay requires approximately £325,000 but he only had around £110,000. The amount he has is far less as compared to the required amount to acquire assets. Considering the lack of resources i.e. funding, the finance should be raised by angel investors. Because angel funding is considered less formal and does not require much effort to raise funds in comparison to professional investors i.e. venture capitalist. Angel investors tend to be more risk-taking and do not show much involvement like professional investors. Additionally, angel funding serves as seed for the growth acceleration of start-up businesses.

The median funding by angel investors was considered to be around £200,000 for investment in new start-ups.  (Tetreault, 2019) For the acquisition of assets, David Kay requires around £215,000, which could be easily taken by the angel investors. In comparison, the acquisition of the whole organization is almost impossible because the requirement of investment by the angel investors would be more than double. Due to this reason, the acquisition of assets would be most appropriate at initial level on the basis of cost...............................

 

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