Hummingbird Furnishings by Hummingbird Rattan Ltd is a family owned business which commenced its operation in 1987. The company has grown over the years and has expanded in staff and distribution outlets in San Pedro, Ambergris Caye and Placencia. Due to natural disaster, the outlet in Placencia had closed down and left them with one distribution outlet which is presently located in San Pedro.
Hummingbird Furnishings provides furnishing for indoors and outdoors. They are proud of their wickers, rattan, wood, fiberglass, and bamboo products made for indoor and outdoor residential and commercial use.
Mr. Robert Lopez, founder of Hummingbird Furnishings occupied his childhood holidays working at Belize's first Wicker and Rattan furniture factory in the early 1970's. He became manager in 1983 and in 1987, making his request known to God; he embarked on his childhood dream, "to set up his very own small factory."
Crafting a business name was of the first step in getting that identity that would define his business.
Hummingbird Furnishings by Hummingbird Rattan Limited, this distinctive name, was given because of the location being off the Hummingbird Highway and Rattan best describe the type of component use in the construction of the merchandise. The business was first located where the now Texaco gas station is currently located on the Hummingbird Highway. .
Hummingbird Furnishings first started its business in a garage with one weaver; today Hummingbird Furnishings operates in a 30,000 sq. ft facility at No.54 Hummingbird Highway. Lopez's company has grown from its one-man operation to over fifty employees and has now downsized to its present employment of thirty Belizean workers due to financial constrained.
Product Offerings
Some of the main items that the company offers are illustrated below. Product Offerings include but are not limited to the products shown below.
Wicker-Indoor Sofa Rattan-Sofa bed (Queen)
Rattan-Palmera Coffee Table Bamboo - Armchair
Outdoor Patio Furniture - Tables Outdoor - Gazebo
Definition of the Problem
Generally, the business environment in Belize provides a relatively supportive arena for individuals to engage in private business ventures. This is however, to the extent that there are fewer barriers to market entry as compared to other countries. Unfortunately, the vast majority of these businesses are not true entrepreneurial ventures. More often than not, they are merely self-employment opportunities for those who have little options.
The GEM report indicates that most of new businesses formed in mainly agro-based low income societies are necessity based enterprises. "While the factor-driven economies have the highest TEA rates, they also have the highest proportion of necessity-driven motives, where entrepreneurs are pushed into entrepreneurship because they need a source of income" (GEM 2010). The true tragedy of the situation is that many of these potentially profitable ventures in Belize never become more than what the owners perceive it to be: a means to an end to survive or making a living. The time and effort needed to make these businesses into world class is rarely undertaken, despite the potential that they possess.
There are several factors contributing the problems that small businesses face in Belize. Perhaps one of the chief of these reasons is the failure on the part of business owners to address the problems associated with the incubation and start up stage of development. This is usually resulting from problems associated with what was merely intended to be a self employment venture. As a result, many small businesses do not recognize the need to develop a business plan. They set no clear objectives and are unsure of their mission and vision. Additionally, many of them do not keep proper financial records and those who do keep records tend to refrain from getting their records audited.
This problem only serves to highlight the need for government-sponsored help and programs for economic and entrepreneurial development. There are no defined policies to protect and nurture small businesses. Instead, many small business owners find themselves tangled in excessive bureaucracy and red tape.
Justification
With the ever expanding markets that are facilitated by globalization and its instruments, there is a need for Belize to increase and improved its standards. Business environments are swiftly transforming and Belizean business owners must advance their strategies or risk being swept aside by the wave change. The pace of structural and economic changes is becoming increasingly pervasive, such that our business efforts appear almost lackadaisical. Our modes of operations require no less than a revolution. Processes must be improved and overall business practices must lean toward greater efficiency.
Limitations
Perhaps one of the most prevalent limitations of the study is the availability of information. There was also a lack of defined corporate structure and policy as well as limited time of staff to accommodate and give information to us.
Scope
The study will involve a comprehensive analysis of the individual units that make up the business in order to get a clear picture of the whole.
Objectives
The organization, in its entirety, will be analyzed. Departments including management, human resources, marketing, finance, and purchasing will be studied to determine the efficiency of its processes and make recommendation for improvement.
Specific
Evaluate the managerial and administrative functions of the business.
Evaluate the human resource feature of the business.
Evaluate the level of utilization of the available physical resources.
Evaluate marketing strategies of the business.
Evaluate purchasing distribution procedures.
Draw conclusions based on evaluations
Make recommendations for improvement.
Methodology
A mostly qualitative approach was used to gather information. This took place in the form of unstructured face to face interviews as well as various other methods listed below.
Interviews
Interviews were conducted with Ms. Sahia Arnold the Accountant and Mr. Danilo Martinez, Administrative Officer on 23rd October, 2012 from 3:30 p.m. to 4:30 p.m. Both Ms. Arnold and Mr. Martinez oversee several of the departments in the organization.
Visits
Onsite visits and tour of the facilities was done in the company of Ms. Sahia Arnold. Non participant observation method was employed to gain insight on how the business operates.
Internet
Historical information about the company was retrieved from the internet via the company's website (www.hummingbirdfurnishings.com).
Organizational Structure
At the present time, there are a total of thirty (30) employees working for Hummingbird Furnishings across the various sections. Hummingbird Furnishings presently have an Organizational Chart which is outline below. There is the Board of Directors, Managing Director and Financial Controller; they also assist in the areas of administration, sales and finance. Immediately following these are various heads of departments for sales and marketing, human resources, production manager and assistant production manager for distribution and quality control. Among the other employees there are several with more years of experience who act in the informal post of supervisors over several others in their same group.
Hummingbird Furnishings - Organizational Chart
MANAGING DIRECTOR/FINANCIAL CONTROLLER
PRODUCTION MANAGER
HUMAN RESOURCES MANAGER/OFFICE MANAGER
SALES/MARKETING MANAGER
ASSISTANT PRODUCTION MANAGER/DISTRIBUTION & QUALITY CONTROL
WEAVING SPVSR
FIBERGLASS SPVSR
FINISHING SPVSR
UPHOLSTERY SPVSR
WORKSHOP SPVSR
BOARD OF DIRECTORS
CHAIRMAN
GENERAL STAFF
BRANCH MANAGER
BRANCH MANAGER
Chart 1 (Hummingbird Furnishings) Diagnosis of Human Resources
Management Situation
There is no job security.
There are no motivational instruments in place for the staff.
There are no staff incentives
There are no plans in place for further development of staff.
Internal Factors
Strengths
Safe working environment.
Cooperative & unified work environment..
On the job training.
Paid for overtime.
Two weeks paid vacation yearly.
At least one skilled employee for each area e.g. Weaving Dept., Upholstery Dept. etc.
Weaknesses
No Job Security
No Insurance Policy
Lack of retirement and benefit plans.
Lack of structured reward system
Most Important Problems
There is no Group Insurance.
There are no motivational instruments in place for the staff.
Corrective Measures
Develop Group Insurance Plan.
History of the Organization
Due to the nature of the business, employees are required to have at least a minimal level of knowledge and skills.
The policies and procedures are relatively informal at the present time.
Staff is encouraged to have at least a working knowledge of several posts to act as a cushion for unexpected situations.
External Factors
Opportunities
Develop structured reward system.
Complete and approve retirement package.
Provide for additional training and staff support.
Organize staff activities.
Threats
No Job Security
No Insurance Policy
Lack of retirement and benefit plans
Lack of structured reward system
Chart 2 (Hummingbird Furnishings) Diagnosis of Management
Management Situation
There is no Business plan.
There are no long term goals and objectives to guide directions of the business.
There is no Retirement Package.
Internal Factors
Strengths
Extensive experience in Business.
Different areas of expertise among Managers for well balanced mix.
Knowledge of Accounts & Inventory
Personal dedication to business
Weaknesses
Failure to develop business plan.
Lack of defined long term goals.
Most Important Problems
There are no plans for the future.
There are no set long term goals.
Corrective Measures
Develop future long term goals.
History of the Organization
Hummingbird Furnishings presently has a Board of Directors. Each person on the Board specializes in different area of the business including sales, Human Resources & Finance and Warehousing.
External Factors
Opportunities
Exposure to a variety of situations and learning experiences.
Complete and approve retirement package.
Inspire employees to provide excellence services.
Self actualization.
Threats
Economic downturn.
Government Regulations.
Health, safety environment & security.
Chart 3 (Hummingbird Furnishings) Diagnosis of Sales & Marketing
Management Situation
Resources such as blogs, face book, local media are underutilized.
No payment plan.
Competition has not been identified.
Internal Factors
Strengths
Knowledgeable sales experts.
Recognized as investment rather than expense.
Promotional & Seasonal Offers.
Weaknesses
Limited Advertisement.
There is no payment plan in place.
Failure to identify and exploit competitive advantages.
Most Important Problems
Underutilization of available resources (web page).
Limited Marketing Strategies.
Corrective Measures
Upgrade Website
Invest & plan more advertising.
History of the Organization
The Marketing and Sales department engages in limited advertising, promotions, community service projects and other campaigns in order to educate the customers about the value they are providing to them.
External Factors
Opportunities
Greater customer awareness.
Develop marketing skills.
Develop tactics to connect with customers.
Increase in technology.
Threats
Sudden or Drastic changes in consumer preferences.
Inflation
Aggressive competition with better quality at a lower cost.
Chart 4 (Hummingbird Furnishings) Diagnosis of Finance
Management Situation
Proper Budgeting.
There is no Internal Auditor Specialist.
Internal Factors
Strengths
Audited financial statements
Ability to borrow and attract capital if necessary.
Established procedures to ensure accountability.
Proper budgeting and forecasting procedures.
Weaknesses
There is no long term financial budget.
Lack formal risk assessment.
Lack of formal market ratio analysis.
There is no internal auditor.
Most Important Problems
There is no specialized Auditor.
Corrective Measures
Employ a certified Auditor to work in the business.
History of the Organization
Financial Statements used for the purpose of this study are estimates however they are reflective of the business situation. Actual statements are audited every year.
External Factors
Opportunities
Increased availability of financial programs and training.
Develop financial skills.
Increase availability of information and advice.
Optimization of business performance.
Threats
Increase in business Taxes.
Caribbean Single Market Economy.
Global Recession.
Economic instability.
Chart 5 (Hummingbird Furnishings) Diagnosis of Purchasing & Warehousing
Management Situation
There is over reliance on a few suppliers which could lead to detrimental bottlenecks in the event that any of the threats should materialize.
There is limited storage capacity.
Internal Factors
Strengths
Knowledgeable of product lines.
Utilize services of several suppliers.
Both business and suppliers are solid and have good name.
Monitor inventory levels to determine what is necessary and avoid excess.
Weaknesses
Over reliance on few key suppliers.
Limited staff for purchasing and inventory taking.
Limited Storage capacity
Most Important Problems
Dependence on limited suppliers cause delay in production.
Corrective Measures
Make contact with new suppliers to increase supply of raw materials.
History of the Organization
The purchasing department has three major suppliers that provide goods. Inventory is monitored and raw materials are purchased on time from outside suppliers.
External Factors
Opportunities
Gain new suppliers and form alliances.
Increase in global connectivity.
Development of new product lines.
Negotiate for better prices.
Threats
Natural disaster.
New entrants to the market.
Accidents resulting in loss of goods.
Unexpected delays in delivery of goods.
Summary of Problem by Area
Division
Problem
Cause
Recommendation
Priority
HR
There is no job security system and motivational tools in place for employees.
Lack of Insurance Plan and employee benefits
Implement Insurance Plan and provide motivation/incentives
1
Management
There are no business plan, and no set long term goals.
Lack of business orientation at initial start-up.
Coordinating a business plan including long term goal setting.
2
Marketing
There is no payment plan available to customers.
Dependability on sales to produce.
Implement a credit system with reasonable payment plan.
5
Finance
No specialized auditor.
Dependability on an outside auditing firm.
Employ an internal auditor.
4
Purchasing
Over reliance on a few suppliers.
Alliances developed with limited suppliers.
Establish new relationships with other suppliers.
3
The year ended 31 March 2012 was not a record setting year by any standard, however, given the state of the overall economy Hummingbird Furnishings did experience a growth in sales of 10.0%. Net sales (after discounts and returns) amounted to $6.0 million compared to $5.46 million the previous year.
The following is a financial performance summary with comparatives for the previous years.
Y2012
Y2011
Y2010
Y2009
Y2008
Y2007
Net Sales
6,017,601
5,466,570
6,910,088
6,520,796
6,044,491
5,131,147
Cost of sales
4,796,028
4,394,576
5,687,002
5,301,407
4,998,794
4,166,491
Gross Profit
1,221,573
1,071,995
1,223,086
1,219,389
1,045,697
964,656
% of Sales
10.2%
9.8%
8.9%
9.4%
8.7%
9.4%
Operating Expenses:
Administration
110,563
109,223
93,703
90,434
55,605
101,927
Establishment
77,381
67,809
65,361
55,179
33,647
39,084
Selling and Distribution
716,143
617,872
522,103
459,948
388,599
284,560
Finance
57,405
82,731
119,182
114,026
102,395
107,490
General and Farm
1,310
2,445
1,221
4,222
6,071
10,841
Total operating Expenses
962,816
880,079
801,570
723,809
586,315
543,902
% of Sales
8%
8.1%
5.8%
5.6%
4.9%
5.3%
Net Operating Income
258,757
191,916
421,516
495,581
459,382
420,754
Non-operating Income
0
0
0
0
0
0
Tax
105,308
95,665
120,927
114,114
105,779
89,795
Net Income
153,449
96,251
300,589
381,467
353,603
330,959
% of Sales
1.6%
1.2%
2.2%
3.0%
2.9%
3.3%
Sales
In light of the prevailing economic conditions, this is a remarkable achievement having come from a 21% loss in sales for Financial Year 2011.
Operating Expenses
Operating Expenses have increased by 9.4% over the previous year. Much of this increase was attributed to increases in payroll expenses, insurances and fuel prices; the latter having shown sharp increases during the year in review.
Net Operating Profit
With the growth in sales and tight fiscal management of operating expenses, a net operating profit increase of some 34% over the previous year was realized.
Logistics
The efficient operation of deliveries is critical in providing quality service to the company's customer base. Although they do not have an accurate measure, a significant amount, perhaps the majority, of customer orders are shipped from inventory through the delivery system, generally on a timely basis. They also accommodate special orders from customers and facilitate the shipment of certain large volume order directly from the vendor to the customers (e.g. San Pedro). It becomes extremely critical, to have a means of transportation to facilitate and enhance customer service.
Internal Control
Management is responsible for establishing and maintaining adequate internal control over financial reporting. However, internal control systems, no matter how well designed, have inherent limitation, including the possibility of human error and the circumvention or overriding of controls; this particularly so in family owned and operated businesses. Furthermore, because of changes in conditions, the effectiveness may vary over time, hence the need for periodic reviews.
Risk Factors
As in all businesses, there are certain risks that Hummingbird Furnishings is exposed to. Outlined below are a few that could impact the business and adversely affect the financial condition and results of operation and could cause actual results to differ materially from expectations and projections.
Rising Costs, Weather and Other
Interest rates, fuel, labor, and other related costs, the state of the residential construction and housing markets, consumer confidence and general economic outlook, weather and natural disasters, are all conditions that could adversely affect the business.
Hummingbird Furnishings buy the majority of their products and supplies from outside suppliers; and as such they have no control over the timely availability of their products and the relations they have with their suppliers. The ability to identify and develop relationships with additional suppliers who can satisfy reasonable standards for quality and their need to access products and supplies in a timely and efficient manner is a significant challenge. It becomes increasingly important to form alliances and exclusive relationships with other suppliers in order to broaden the availability of materials to be able to produce their furniture.
Conclusions
The diagnostic report and analysis of the departments revealed that there are many sound and commendable practices set in place by the management and staff of Hummingbird Furnishings. However, some key point will be noted.
One of the most pressing concerns in the human resource area is the lack of a group insurance, especially for injuries on the job. There is no additional incentive packages offered, with the exception of end of year bonuses.
While the Marketing and Sales departments have done an excellent job in keeping sales consistent, they have failed to take advantage of many opportunities that are available to them such as promoting and advertising the business. They have not used the social networks that many people access on a daily basis. This includes face book, blogs, and my space. Local media interviews can also be used to promote special offers and new product lines.
The company is highly dependent on a few suppliers based on the availability of the raw materials needed to produce their goods, which limits the growth of the business, in that it limits the ability to form beneficial alliances with new suppliers who, perhaps may be able to provide better prices and links to others.
Finally, although there has not yet been an accident or injuries on the job, there are yet more preventative measures that can be put in place to ensure the safety of the employees.
Recommendations
While financial statements for 2012 reflected moderate success, it is important to keep in mind that the key to success in any business is to focus on what the company can control.
Based on the diagnosis of the individual departments and the conclusions made the following recommendations are also being suggested:
Implement an insurance plan and provide motivation incentives to boost up employees productivity.
Coordinate a business plan which will include long term goals to increase planning and controlling in the management system.
Implement a credit system which will provide customers with reasonable payment plan to increase customer relations.
Employ an internal auditor to assist and keep the financial department in place.
Establish new relationship with other suppliers that may serve as cushion in the event that some unexpected event occurs, also negotiate for better prices.
