Background
Southern Lights CC is a small company, situated in Woodstock, Cape Town, and owned by Marcia and Ricardo Hendricks. Ricardo started the business after he was retrenched five years ago.
Marcia had asked him to make her a wooden lamp base, because she was not able to find one she liked in the shops. She and Ricardo designed one together and it turned out so well that Ricardo designed and made a few more as gifts for family and friends. From this small start the business grew and Ricardo built up a customer base covering all main centres in South Africa.
Although Ricardo has fairly sophisticated lathes and other equipment in his small factory, his lamp bases are not mass-produced. Each one is hand-finished, which gives a quality that sets his products apart from many others. In addition, Ricardo and Marcia enjoy designing new models; as a result, their range is always fresh.
Ricardo employs about 15 local workers, most of who have been with the Hendricks for nearly four years. When a big order comes in, Ricardo can call on another 10 or so temporary worker who have also undergone some training with him. This reserve labor force, if employed permanently, could raise the output of Southern Lights from the present 3 500 lamp bases a month to at least 6 000 a month.
Ricardo and Marcia want to move into exports for several reasons:
· Firstly, Ricardo’s lamp bases are of a high quality and therefore they are fairly highly priced; this means that the local market is limited – exporting would allow him to sell more lamps.
· Secondly, the furniture and houseware stores that sell Ricardo’s lamp bases in South Africa place a few big orders each year; as a result, Ricardo is either very busy or quite slack. By exporting he would be kept busy throughout the year and would be able to take on the 10 temporary workers as permanent staff.
· Ricardo and Marcia think it would be exciting and good for their business to see all the new design trends in Europe and America.
Ricardo and Marcia are fairly conservative by nature but they think that they will be able to handle the additional complexities that would result from exporting.
They have several good reasons to export and they are very committed to developing markets abroad – Ricardo feels it is their main chance of growth. Marcia thinks that she has enough time to handle the extra administration.
Ricardo and Marcia have had several years of experience selling to demanding buyers in the South African market. Because of these buyers, they have implemented quality checks at various stages in the manufacturing process. Ricardo believes that his workers are stable and well trained. He can call on additional workers when he needs them.
Southern Lights CC is running smoothly and at a profit. Marcia and Ricardo feel that they are ready to go.
Answer all the questions.
Question 1 (25 marks)
To the extent possible from the scenario, carry out a SWOT analysis of Southern Lights CC, stating the company’s strengths, weaknesses, opportunities and threats. First explain briefly what is meant by strengths, weaknesses, opportunities and threats.