Cyclermate Stage One – Individual Report: Further Guidance
Your examination of the company should have convinced you that the key issue is that of survival. The company has £675 in the bank and running expenses of more than £110k each month. The most urgent priority is to generate some cash immediately. Then you need to think about other prompt changes that will at least stop the haemorrhage of more cash until a longer term solution can be found.
Your report must focus on the existing situation and cost and efficiency changes that could quickly be made in the coming months. It is NOT about longer term changes such as revisions to the product line in the light of market analysis – that is for stage 2, and the group presentation and portfolio; you need only suggest what investigations should be made once the immediate problems are resolved.
You are writing a business report, addressed to the company’s bankers. As such it should fit the usual requirements for such a document – clear, concise, easy to read, use appropriate language, and be carefully structured to tell a story from introduction, through analysis to conclusions. Bear in mind that you are acting on behalf of the bank, so you should try to be objective, although you clearly also have responsibility to your clients at Cyclermate.
We have suggested a maximum of 3,000 words as a guide, but far more important is that the report is focused on the needs of the bank and provides them with the detail and analysis they have requested. It should be possible to do this within the word limit, but a well-written and concise report that exceeds this a bit will not be penalised; a rambling and unfocused report of 4,000 words certainly will be. Similarly you might be able to make all the necessary points in a well-structured, carefully tabulated report of 2,000 words, but if detail and analysis are missing, this also will be penalised.
A possible structure of your report might be (this is not obligatory – you decide how best to report):
• An executive summary.
• An introductory paragraph giving terms of reference, scope, and an outline of the report’s purpose and contents.
• Detailed analysis; you may want to include:
o Description of the major problems you have identified by function. These will be observations derived from the case text and your financial analysis (perhaps including points you have identified from the SWOT analysis).
o Your quantified sales, production, manpower and financial projections. In an ideal world, these would be part of a revised set of budgets for the year, on a month by month basis (probably as an appendix), but as a minimum, forecast figures of sales, costs and cash flow for the whole year should probably be attempted. Detailed explanations of your reasoning and assumptions in deriving the figures will be necessary.
• Conclusions and recommendation, which should be grounded in the preceding analysis, and offer clear suggestions as to what should be done to recover the situation in the short term, and what investigations and actions the company should consider in the longer term. If you wish, these could be set out under the headings (1-4 below) suggested in the briefing. A time plan matching what you recommend to be done and when might be included (perhaps as an appendix).
• Appendices to support your report. The purpose of an appendix is usually to provide extra information to a reader who is interested in further investigation. Data that is essential to the understanding of the report should probably not be in the appendices, but embedded in the report itself. But appendices are not counted in the word count!
Some further hints about what your report might include are given below, under the main headings that were specified in the briefing.
1. What immediate or short-term options could be considered by the company to alleviate the difficulties it faces with liquidity and capital structure?
• Are there any assets that can be sold of mortgaged to generate cash quickly? (perhaps think about borrowing on the value of the non-current assets; and/or might short-term assets such as receivables and inventory suggest a possible source?)
• Are there other sources of funds that might be called upon (perhaps think about the present gearing and/or other means of raising longer term funds)
• The budget suggests losses in the coming year – how will these be stemmed? (perhaps think about pricing, production levels, inventory levels, cutting expenses?)
• You might want to try modelling some price and volume scenarios to help explain your thinking to the bank. (Can you convince them that break-even is possible, for example?)
2. Review the production methods used by the company and suggest what improvements might be made to increase efficiency and reduce costs in the manufacture of the existing product.
• What will you recommend should be done to set the manufacturing operations to rights, firstly to reduce costs, but also to improve efficiency and quality? What process improvements will you suggest; when, and how will these changes help?
• If you stick with the currently budgeted sales and price figures, then costs must be reduced if the losses are to be eliminated. If you suggest changing the budgeted sales, how will your revised figures affect purchasing, inventory and production?
3. Identify and comment upon any human relations issues, suggesting, where appropriate, possible changes.
• In the light of your proposed changes to the manufacturing operations and your production forecasts, what do you recommend should be done with the workforce? (perhaps think about numbers and pay rates?)
• If one of your proposals is to reduce staffing, or reduce wage levels, how will you achieve these changes? (perhaps think about short time, or even redundancies, but also about motivation and the need to improve quality).
• What workforce-related changes can you recommend to improve quality? (training, perhaps, or adjustments to roles and responsibilities?)
4. Enumerate the investigations that should be made to provide options for the Company to ensure its longer term survival and profitability.
• This will be probably be a short paragraph, outlining what investigations you think might be considered to seek ways to achieve longer term security for the company. It will not be difficult to write!
