Where did it go wrong at FIFA?

Premier League, FA Cup, Champions League and European Championships! These are only a few of the football tournaments held but one which gets the whole world together is the FIFA World Cup! What made things go so wrong in the committee?

Bribery! That was the main problem that occurred which caused them to be the headline news for reasons which hurt their reputation. People can be tempted so easily with money, especially when it is such a large amount. You would think that someone like Sepp Blatter would be immune to these bribery requests but it turns out he gives into them as easily as anyone else.

One of the main reasons for unethical behaviour in a business is due to poor leadership which is the case for FIFA. It was the executives who were bribed for a total value of almost $100m. When accused at first, they chose not to reveal their own investigations to the public and just publicise an executive summary. I believe that this is one of the places where they went wrong. It may have been better for them to cooperate and give the investigators what they needed.

Sepp Blatter - who has been suspended until further notice - denied all accusations and some people at FIFA still believe that the whole scandal would just "go away" but something as big as this is not going to magically disappear. Michel Platini - successor of Sepp Blatter - has also been suspended. This leads to the question, how long has this been going on for? The FBI has been investigating them for three years and although the investigations start with the bidding process for Russia 2018 and Qatar 2022, it has been extended to look back as far as the past twenty years.

I do not believe Sepp Blatter could have managed this scandal on his own with none of his executives finding out. Most of the committee would have been in on this issue and must have decided that it was not a problem to do this. A number of people have already been charged with this issue. A separate investigation for Sepp Blatter was also launched by Swiss prosecutors. It was unsure whether this meant that Sepp Blatter would continue with presidency but it was later agreed that he would step down when a successor was determined which I believe is the best thing to do right now. It was his decisions that caused FIFA to be involved in this mess and large sponsors such as Coca Cola are threatening to withdraw their sponsorship. This is fair enough because there is no reason why such a large international company should have links to a corrupted organisation as this may ruin Coca Cola's reputation.

FIFA has managed to fail most of the PIPCO principles. They did not maintain professional behaviour and had no integrity in their actions. They were acting out of self interest and did not consider the affect it would have on external shareholders.

It was decided that the best option for the FIFA committee to have a different president after a certain number of years so that even if scandals like this occur, the chances of it continuing on for so long is slim. Whether the business is big or small, ethics will always have a large role in it.

The press has a way of exaggerating the truth even when it is only a small issue and this gives the company a lot of bad publicity. In my opinion, if you have done something unethical, it is always going to come out sooner or later so any company violating ethical issues should expect this.

What do you think? Let me know in the comments below!

Daimler-Benz Chrysler merger takes the world one step closer to a global economy!

"Neither will survive alone, but it is a reluctant union!"

The Daimler-Benz merger with Chrysler is one of the most well-known international mergers in the world - not because it was successful, but because it failed as one company. What was the reason for this? The main one is that they ignored the cultural differences within the company which meant that there was no way it would work even if they managed to improve all other aspects. People have a large number of questions regarding this - why would they do it? What were they trying to achieve? How did they reach the $92bn figure as a settlement?

Let me start with the price. $92bn is a lot. It is the largest industrial merger in history and this deal rocked the markets! All the meetings were held in secret and in different locations. Only a limited number of people within the companies were even aware of it. In March 18, 1998, the price had to be determines. The CEOs met to discuss this. How many shares in Daimler Benz would be offered for one Chrysler share? Bob Eaton - the CEO of Chrysler - had a very specific ratio that he wanted to follow.He claimed that he wanted 28% more than what shareholders are worth because he could not sell the idea of a merger to the shareholders otherwise. By the end of the meeting, they came to the conclusion that the settlement would be at $92bn.

Mergers and acquisitions have started becoming more and more popular in the recent years. Why are people spending shareholder's money to buy another company? In my opinion, the main reason for this is synergies - if two companies are merging, the combined value should be greater than the sum of the two companies separately, otherwise I do not see the point for it. However, you cannot just join two companies together and expect everything to work efficiently without doing anything about it.

The structure of the company is most likely to change and this change should be made sooner than later. Employees should also be made aware of the possible changes as well. Although they declared that the Daimler Chrysler merger would be a merger of equals a lot of people were aware of the fact that there was no possibility of having two leaders. A lot of employees felt like it was a takeover rather than a merger so how was this an equal merger? Staff from Chrysler were worried because they were told that Eaton and Schrempp would be co-chairman for three years and then Eaton would retire. Even this plan failed because Eaton ended up leaving the company a year earlier than originally planned. 

"Mergers are never mergers! Either Eaton or Schrempp was going to be the leader!"

Another reason why companies might merge is to increase market power. With this merger, the company was exposed to both German and American markets and they could also save on tax purposes as well.An issue that occurred due to this was that people started referring to executives as German or American executives. This was wrong from the start. They should have been referred to as Daimler Chrysler executives. This would have shown the employees that they were serious about the merger and outsiders would have known that the company could also have global leadership in the car industry.

Culture played the biggest part in the failure of this merger. Employees were just put together but maybe team building exercises or such schemes should have been introduced to make the merger easier for them. Americans and Germans came from different cultural backgrounds so you cannot put them into one room and expect them to get along just like that. From personal experience, one culture would have to give things up at least partially to get along with the other.

Another issue that they had to face with wast that they were being excluded from the top S&P 500 American based companies in the Wall Street index because they were originally based in Germany. This resulted in investors pulling out overnight and stock fell by 10% and 8% respectively for Chrysler and Daimler Benz. This was not an issue which was discussed deeply but I believe that it should have been. It is impossible to be a German and an American company at the same time.

Most decisions were made in Germany and they had started to slowly take control of the company and employees and the Chrysler employees were aware that they would be facing a lot of changes after that.

It was a known fact for most people that although two men announced the news together to the press, only one of them would actually take the company into the 21st century. At the end of the day, I believe that if a company is in trouble, they should just find the best person to fix the problem - whether they are German, American or any other nationality, it really should not matter!

What do you think? Let me know in comments below!

Would you have paid $5.9bn to purchase Candy Crush?

"Mobile games have a lifespan that that a guinea pig would not envy!"

Mobile phone applications have become a big part of our lives. Other than the common social media applications such as Facebook, Twitter and Instagram, Candy Crush Saga is one of the biggest names in the App store. Introduced originally as a game for Facebook in 2012, it has now gone on to be one of the most popular games for smartphone users. How has it managed to stay popular for so long? I normally get bored of a game after one or two weeks of playing it which was why it came as a bit of a surprise for me when I learnt that Activision Blizzard paid $5.9bn for the owner of the game, especially since they have not been keen on the idea of mobile and social gaming. This leads to the question - how exactly did they decide that this figure was appropriate?

Activision Blizzard should have known how much King Digital Entertainment was worth before agreeing to pay nearly $6bn for them. There are certain factors that need to be taken into consideration before deciding on a purchase price. For instance, there are certain assets in a company which are difficult to assign a numerical value to. Another thing to consider is how efficient the market is - if the market is efficient it is safe to assume that the market share represents a true value of the company. However, a downside of this is that only about 3-5% of shares move everyday so it is actually a small part of shares that give an indicator of what the share price might be. All these factors are likely to have been considered before Activision Blizzard decided to buy King Digital Entertainment.

Why did Activision Blizzard decide to make this investment in the first place? Games normally have a short life span and Candy Crush Saga reached its optimum in 2012 and has been slowly declining since then. Within a few short years, I suspect that it is just going to be another game people used to play to pass time. According to the Financial Times, King had exceptionally good cash flow and they have started to diversify so although a large chunk of their revenue came from the increase of sales from Candy Crush ($250m to $324m) so this may have made them look more attractive to the buyers. Candy Crush is also a well known name which has the King logo on it so the purchase of the company would mean that the patent would appear on Activision Blizzard's balancing sheet, making their overall value higher. 

Activision Blizzard is known mostly for games such as Call of Duty, StarCraft and Warcraft. Personally I have never been a fan of these games, but I did play Candy Crush for a bit. Therefore, I think that these games are in completely different markets. Purchasing King was a very smart move by Activision Blizzard because it allowed them to go into the market and they immediately have access to a new customer base. It is also said to increase Activision Blizzard's earnings by about 30% next year so this is definitely a very good incentive for them to purchase the company.

I believe that pricing a company for a sale is a subjective matter so it is a difficult task. The value of King is said to be more than it's cash flow - and they generated $600m in cash alone last year. Considering that the deal was closed for $5.9bn, I would hope that this is true! Personally, I feel like the company has been overvalued and that Activision Blizzard should not have paid this much but then again, the purchase has given them a number of benefits such as a place in a whole new market so their potential number of customers would have increased vastly and a large potential increase in overall earnings.

That's my opinion anyway, what's yours? Let me know in the comments below!

Margin Call - Be first, be smart or cheat!

"It's just money; it's made up! Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat!"

What is Margin Call really about? Other than the good actors, chilling background music and extraordinary views of New York City, Margin Call tells a story about the volatility of trading prices and how a fire sale (when a firm sells everything at discounted prices when they are faced with large risks) works. The movie is about how efficient the market is and how people reacted to the potential changes in the prices.

It all starts with an equation - an equation that proved that the company followed the historical trends. This means that their market is following Fama's (1970) weak form efficiency where the current price reflects all the past movements. Was this a wise decision? Personally, I think they should have followed Fama's strong form efficiency theory where they considered all the available information in the market. One of the issues for them was that the volatility trends showed everything going downhill for the company at any minute. They would be faced with a projected loss greater than its market capitalisation if the firm's assets decreased by just 25% but is this a risk that the company was willing to take? What would be the outcomes for them if they ignored this prediction and just kept going on with their business as normal? The company chose to not ignore the prediction and get out of the trading business as soon as possible.

"If you're the first out of the door, that's not called panicking!"

The head of the firm, John Tuld decided to basically get rid of the balance sheet by 'selling something that has no value'. Technically, since they were just omitting part of the truth and not directly lying to their clients, John claimed that they were 'selling to willing buyers at the current fair market price so that we may survive'. Was this statement right? Was the price they were selling at really the current fair market price because as soon as they started selling everything, the prices would be all over the place?! There is this view but another way of looking at it would be that as the head of the firm, he was concerned with saving his own people before the crisis hit.

In the movie John Tuld claimed that the three ways to survive in the business was to be first, smarter or by cheating. The company's actions could be classified as being first or cheating. It is a matter of opinion. You could argue that they were the first to take actions in the market or it could be said that they were cheating because in the end, they were taking money off the people who did not know any better to save themselves in the crisis.

Their plan was to start selling as soon as the working day started but no employee was allowed to buy anything that day. Employees were promised a seven figure bonus as an incentive because some of them would have been reluctant to do this because they were putting their own careers at risk. The only issue was that they had to do this as quickly as possible. Once word got out, they were going to be making large amounts of losses - this is where they had to test the pricing efficiency in the market which is how quickly and rationally news in the market place is reacted to. This was a good theory for them to be using because as the day went on people started rejecting offers and the company was selling their assets at a much lower value than what it was worth - some of them making them a loss of millions of dollars. This was to be expected because different market participants got the news at different times of the day so they all reacted differently. For a market to be efficient, everyone would get the news at the same time but this was not the case.

A question left which is likely to be in everyone's mind after watching the movie is - "Do companies really work this way?" Surely insider information within the company can affect the way decisions are made - they may not always have the customers best interests at heart. A way to avoid this would be by considering Markowitz's portfolio theory and not investing everything you have with one firm.

Basically, do not put all your eggs into one basket! That's my opinion anyway, what's yours?

High dividends to shareholders or reinvesting profits - which is better?

If there are no attractive investments, should the company increase the dividends and give money to shareholders?

Since the beginning of 2014, the house building sector has grown significantly by about 60%. More people have been investing in this industry due to this. Most investors also received special dividends. This would have made the investors happy but was this really a wise move by the companies?

Extraordinary dividends can be declared every now and then but I believe a company should make sure that they are in a stable position first. Dividend policy aims to maximise shareholder wealth and are very important when it comes to communicating how the company is doing. If a company does not pay any dividends to shareholders, they might get the wrong message and think that the company is not doing well at all but it may just be that they are reinvesting the money. On the other hand, if companies continuously give shareholders high dividends, they might wonder why the company is not reinvesting their money at all - investment capability drives growth which would increase the share price.

Share prices have suffered recently and analysts have recommended that investors should not buy shares from the house building market right now. Current market conditions are claimed to be "too good to be true" so their valuations could suffer if the gross margins are affected negatively. Could the companies in this sector have avoided the unfavourable conditions they are faced with right now if they had not paid extraordinary dividends earlier? I believe that they could have saved their money then and just paid shareholders an average amount of dividend so that they could continue paying dividends with their retained earnings even when things are potentially going downhill for them. When it comes to paying dividends, it does not necessarily have to be on the current year's profits.

Let's consider what Modigliani and Miller's opinions are on this. We have to understand that they did not actually create the dividend irrelevance theory but just defined it. In 1961, they argued that the share prices were determined by future earning potential and not by the dividends paid now - share value is set by investment policy. They believe that if dividends are never paid, the company's shares are worthless but is this really true? What if the companies found a really good investment deal one year and decided to go with that option rather than giving their investors a high dividend? I believe that the right balance between paying dividends and reinvesting is very important. 

As always, Modigliani and Miller (1961) made some key assumptions with the biggest one being that there is no tax - however if you look at the political risks of dividend policies, the assumption there is that if a business is making an unusually large profit, the government would get involved and implement additional taxes. Therefore, can Modigliani and Miller's theory really be applied to real life? I don't think so! In fact, I don't think any one theory can explain whether companies should pay dividends or not.

Some analysts have argued that gross margins may rise next year before they start to decline again in the future. Updates about trading for house builders may look appealing, we have to remember that they are very vulnerable to change.

What is the best way for a company to react to profits? I believe it depends on whether the profits are low or high. Managers may try to maintain dividends by using retained earnings when profits are low - the aim is to send a signal to shareholders claiming that the drop is only temporary. On the other hand, if their profits are very high, directors of the companies may be more cautious about it and not declare a huge dividend because they may not be able to maintain the rate in the future and cuts in dividends could lead to shareholders being more uncertain about their investments.

What do you think is the best way for a company to react for fluctuations in profits? Let me know in the comments below.

Drastic Drop in Chemring Share Price - What Happened?!

Halloween's around the corner but trick or treaters in scary costumes isn't what shareholders of Chemring should be afraid of...

Recent reports show that the pre-tax profit for Chemring was only two thirds of what it was originally expected to be and that their underlying operating profit forecast was cut down to £16m from about £33m. Since the start of the Iraq war in March 2003, Chemring has experienced rises to their share price until March 2011 but then this has fallen significantly by approximately 80% since then. Analysts are also suggesting that the warnings about their expected profits would also contribute to the decrease in share prices. From the graph below you can see the sudden drop in the share price between the 26th and 27th of October.

A cause for these negative effects on the profits was that there have been delays to their contracts. A contract with the Middle East worth about £100m had to be delayed until next year and Chemring was hoping that this contract would compensate for their other issues.

What is the main problem for Chemring though?! Why are they facing these issues? The answer is simple...the company had taken on more debt than they can handle. Modigliani and Miller (1963) suggested that a company should take on debt but only as much as you can! The theory is that this would increase the company's value in the future. I believe Chemring did try to follow this theory to a certain extent because a large amount of their debt was due to high borrowings between 2007 and 2012. The money went towards the acquirement of 11 other businesses so technically, in the long run this should benefit the company, but I believe they took on more debt than they should have although it was for a good investment.

Although high levels of gearing would decrease the overall cost of finance, it is not always possible with high levels of risk. A company with high levels of gearing have high debt so the financial distress costs associated with this becomes higher as well. I believe that this is the issue Chemring is currently facing because their net debt is between £155m and £165m with their interest costs for 2015 are expected to be about £15m. 

High gearing levels are also risky for the shareholders which would explain the sudden drop in the price. Chief Executive Michael Flowers stated that the company has restructuring plans in place but it is a slower process than expected due to the high levels of debt in the company. A large amount of time has been contributed towards managing this debt and the opportunity cost has been the operational movement and growth opportunities to the group. Chemring has a plan to raise £90m through a rights issue next year and all the money from this would go towards the debt and the capital structure of the company.

Despite all the problems they are currently facing, Chemring remains optimistic about the fact that they will recover in 2016. It would be a slow recovery but due to the ongoing international political situations in the Middle East (they would need more robust defence and security measures) the company claims that they would have higher returns.

If a company takes on a large amount of debt, the business would require high returns. The issue for Chemring is that they have high debts but they are not generating the returns needed right now. Another important factor that they should have considered is what a reasonable amount of debt would be for them. It depends on various factors such as the type of economic conditions as well as the time period - I believe that what's acceptable in one era may not be acceptable in the other.

What do you think? Let me know in the comments below!

The Madoff Hustle - how did he pull it off?

"Everyone wants something for nothing, you just give them nothing for something..."

You hear about scams and think “I’ll never be stupid enough to fall for that!” but the number of people who are looking for something in return for nothing is crazy. I believe this was the belief people who trusted their savings with Bernie Madoff had.

Madoff is responsible for one of the largest financial cons in U.S. history. What was surprising was that he was one of the last people on Wall Street people would expect to be arrested. He was the chairman of NASDAQ market at a certain point as well so it was clear that he had the trust from a lot of people. The number of people affected by the scandal was countless and it is hard to estimate how much money he actually stole.

Madoff was clever with his scheming - people parted with their money because he was exclusive. He would meet potential clients and tell them that he wanted them to be  comfortable with him before they invested their money. He came across as a nice and honest man. He did not promise investors a high return, but a steady one instead. He was basically telling his clients that they would receive a certain return each month at a very low risk.

The scheme collapsed because it became too big for him to handle. During the credit crunch, clients started to contact him asking for their money back. Madoff tried to reassure them that everything was fine and that the returns were still steady - some people were given this assurance a week before he came out as a fraud.

How did he fool people for so long? The answer is simple - he provided statements that looked so legit that even accountants such as Richard Friedman believed them. People received these each month so they had no reason to believe that there was anything wrong.

Did he do this on his own? Personally, I do not think he could have pulled off such a huge scam on his own. His wife Ruth, was the bookkeeper...surely she knew that he was keeping the money to himself? And what about his brother Peter who ran the office on a day to day basis or his niece Shana, who was the compliance officer of the company and was in the office for the majority of the time? Both his sons - Andrew and Mark who were in charge of the trading section - must have suspected something. At some point, they must have realised that the company was not doing any trading at all...their job title was basically pointless!

Harry Markopolos discovered that Madoff was running a massive Ponzi scheme. He informed the U.S. Securities and Exchange Commission (SEC) numerous times in 2000, 2001 & 2005 about this but was ignored by them...surely they should have investigated the situation then and saved a number of potential investors?! The scheme has left widows with penniless and retired men have had to go back to working in part time jobs just so that they can make ends meet. The video focuses on Willard Foxton - his father William, was an ex-army Major and had survived a number of things but shot himself in the head after losing his life savings of £35bn. This is just one example of how the scandal has affected families.

In the end, Madoff confessed everything to both his sons and it was them who turned him in. On the second anniversary of Bernie Madoff's arrest, Mark was found dead - he had committed suicide by hanging himself.

How did a middle class boy from Queens turn to one of the world's biggest fraudsters and leave so many people penniless? 

Madoff's investment sounded appealing but should people have really put all their money into one investment. Consider Harry Markowitz's theory - he suggested that people can reduce their risk through diversification. Instead of investing in a single firm, they should have a portfolio of investments. If the Madoff victims had not been so optimistic and eager for easy money, they should have looked more into the market and invested in a variety of different firms instead of putting all of their life savings into the hands of Madoff. Sure, there are plenty of opportunity costs involved in investing in a variety of companies such as losing out on potential returns, but I believe it is better to remain safe rather than sorry with certain scenarios - specially those involving retired people's life savings.

What do you think? Let me know in the comments below.

Until next time!

Will Glencore survive the crisis they are facing?

"Glencore must stop bleeding now!" - Christopher LaFemina (analyst at Jefferies).

Four years ago, Glencore introduced the biggest flotation in the history of London Stock Exchange. Their message to the investors was clear - the company was unique compared to the others in the industry. However, today the company does not seem to be much different from its rival, if not worse. The market has been fluctuating and unlike its competitors, Glencore also has a large amount of debt. Investors have been doubtful about how the company is planning on paying this off hence the volatility in share prices.

The company has been reported to be one of the worst performers in the FTSE 100 index over the past year with their share price falling approximately 72%. Their share price decreased by about 30% on Monday during the last week of September - this was their largest reduction in the company's history which has happened in a single day. However, as a quick crisis management action, the company released a statement to their employees stating that they had a "strong liquidity profile" and were able to recover a large proportion of what they had lost on Monday. This suggests that the shareholders has a technical approach when dealing with their shares - they buy shares when the market has improved and sell them when it is declining. I believe that this is a sensible approach for those who are not risk takers.

Glencore has also been receiving some criticism about their business model but their have been different opinions on this. Some executives of rival companies believe that this is not true and that the main problem lies with their poorer quality assets. The company has been around for quite awhile now and it is not possible for them to survive this long without a good business model so I do not think that they should be making drastic changes to their business model. I believe that the main problem lies with the misleading figures in the financial statements.

In my opinion, one of the essential aspects for a company to be successful is to have the right financial statements. Understating the debt so that the figures look good is never a good idea. Management can convince themselves that they do not have a debt problem and they would also be providing false information to their investors. One of the Glencore investors suggested that the management team could not have predicted the current situation because they were not aware of a balance sheet problem. It could be that the management did not realise that they had a debt issue in the company because of the misleading figures in their statements. Considering all of this, one of their current targets should be to make the balance sheet look better.

As of June 30 2015, their net debt reached about $26.9bn which was about 2.7 times their annual earnings. This is a higher ratio compared to its competitors and the company should have been aware of the consequences. Glencore has already taken actions to rectify this and have launched a $2.5bn equity-raising as part of their plan. They are aiming to reduce their debt by about $10.2bn which should make their balance sheet look better and hopefully build up the confidence of their investors. The company is predicting that their share prices would increase once they manage to reduce their debt.

One of the key things to remember is that this was not a plan for the senior managers to make money while the company faces its downfall - this has been the case for some businesses in the past and it is essential that the stakeholders know that this is not the case. The value of Mr. Glasenberg's stake is $7.6bn lower than what it was earlier and the company is working on plans to recover from the current problem.

When investing in companies, I think it is better to use the portfolio theory and spread the risk so that if one investment goes downhill, you are not losing all of your investment.

Let me know what you guys think in comments below!

Hereford Furniture: Sir Digby Jones helps a family-owned company with over 40 employees.

"British manufacturing is something we should be proud of!" says Lord Digby Jones. This may be why he has decided that his next task would be to help Hereford Furniture - a family owned business who was doing fairly well until making a loss of £80,000 last year. Digby believes that there is a market for different types of furniture but in order to beat the market, Hereford Furniture will have to increase the efforts they are putting in.

There are a few key problems Digby planned to solve during his time working with the company. One of the 'nagging points' for Digby was that Hereford Furniture was focusing on three things - manufacturing, retailing and importing. His question is - can the business succeed in all three? MD Mike Muxworthy responds with 'Why not?'

Digby argues that Hereford Furniture may not have the specialist knowledge for all three areas they are focusing on. It may be better for a business to focus on the area that they have the most knowledge in; this might give them a better chance at being successful. This is what Digby believes that Hereford Furniture should do.

Another issue that Digby wants to tackle is the problem of branding. The company wants to be recognised as a household name but they do not display their brand on any of the furniture they sell. Digby's question is "How can you hope to build a brand when you by your actions value it so little?" Hereford Furniture aimed to introduce a new brand known as 'Hereford by Design' which would only be sold to companies who agree to sell it under the brand. The question is, is this the right brand for the company who wants to catch the attention of their customers?

The team met with Emma Bridgewater and presented their new ideas to her - taking the current range of furniture and upgrading to a premium so that they would have additional features but how were they going to make something that Emma would not look past? How can they have a 'buy me effect' on the customer? In addition to this, Do Emma and Digby think that Hereford by Design is actually good enough to go to the market? Emma suggested that the company should offer a variety of colours.


Digby believes that Hereford is not the right word if they want customers to be talking about them. It only lets the customers believe that the furniture is functional and that they would get the value for money but where is the uniqueness which will push the customers towards actually making the purchase? Louise suggested a Danish word - Hygge - which was about social interaction and being home and wanting to be there. Digby agrees and suggested that this was the right idea for the new brand. Hygge gives the company personality and Digby believes that people will question it since there is no definition in English for it.This is an ideal way for them to increase brand awareness.

To improve the efficiency and effectiveness of the company, Mike informs the shop floor staff that they are going to cut a lot of ranges - approximately 49 out of every 50 products - and that they need to get the customer to order what they actually manufacture. Digby thinks that it is important for the business to have accurate forecasts and Kate agrees since she thinks that they are seeing the benefits of the new model but have no way of actually showing them on paper. Mike argues that it is a family business and that they do not necessarily need forecasts. An accurate forecast would be beneficial to the company since this would show them the financial implications.

Another problem Digby aimed to solve is the way the shop floor staff worked. Communication is key for them to increase their productivity. Some employees believed that they do not normally work together so a team building exercise was arranged for them. For them to maximise their productivity, the shop floor team would need more of these. Team building cannot be done in a day!

Small and medium sized businesses are important for the community because these companies are the ones who would hire that one extra person to solve unemployment in their economy. Therefore, it is important for businesses such as Hereford Furniture to continue their business.

What do you think? Let me know in the comments below.