UST BE COMPLETELY ORIGINAL WORK Address questions from Case Study attached. Which staffing framework do you recognize in this case study? Explain its characteristics and the advantages to using….
performance management targets
LLP206 Understanding Business Failure
Corporate Governance Tutorial Case Study: Baldwin’s – the corner shop that went global
In 1964, Monica Baldwin, aged 20, opened a small grocery shop in her home town of Manchester, England. She had no qualifications and no other obvious opportunities for employment. She was passionate about offering quality food at a good price. Because her parents and grandparents owned a farm in her home country of Jamaica, she had tried to build good relationships with a network of local farmers who could provide fresh fruit and vegetable at competitive rates. Moreover, Monica paid particular attention to offer good service to making people always feel welcome and cared for in the shop, and occasionally making the extra effort to deliver the goods to her clients herself. Demand was high. She soon had the opportunity to open a second and then a third shop in other parts of the town. A business was born.
During that time, the first supermarkets were getting off the ground in the USA, Canada, and soon France, the UK, Belgium and other countries. Monica travelled to several places in order to learn from others, and soon decided to launch her own supermarket: a large shop where customers could help themselves and pay at the cashier. After a few months of trial and error, she found a successful formula based on her past success of offering good quality and service at affordable price, and the business took a new turn: industrialization of her concept could start.
Supermarkets are known to be good businesses in terms of working capital requirements, with customers paying cash and suppliers being paid well after the delivery and sale of goods. However, buying land and building the supermarkets required funds: she turned to her family and friends to seek capital, and to her local bank for loans. Her parents gave her part of her inheritance in the form of a plot of land and some cash. She made an application for bank funding but was declined. A family friend, David, contributed to a capital increase and David ended up with 10% of equity in Monica’s firm.
During the early years of her business, Monica recruited talented managers from other companies, and set aside a total of 10% of the ownership shares to reward and incentivise them. As part of the expansion, she also started to develop franchisees: independent store owners who used the brand for a franchise fee, and bought most of the merchandise through a newly-created central buying structure.
A Family Business
Monica’s husband, Michael, always supported her in the family ventures. At the beginning he helped with the accounting, and when the business grew he occasionally travelled with Monica to visit stores and participate in social events with key managers, franchisees or suppliers. Their friend David was often invited to their home with his wife Linda and only son, David Jr. It was through these occasions that Monica and Michael’s daughter Elizabeth, and David Jr, met and discovered that they enjoyed each other’s company. They were married in 1986.
Monica had three children: Edwin, Elizabeth and Timothy, whom she fully expected to work with her in the business. She made sure that Elizabeth and Timothy worked in the shop during their childhood, although Edwin, who was sent to boarding school, did not have the opportunity to work in the family business during his schooldays. As soon as all three finished university, they were invited to join the business, at which point Monica gave each of them 5% of the shares. The rest of the shares were split between the managers (10%), David Sr (10%), Michael (10%), and herself (55%). Edwin and Timothy started as trainees in stores and worked their way up the ladder. Elizabeth chose to work abroad for 5 years, in the supermarket business, before rejoining the firm.
Monica encouraged a competitive spirit between the three. She put all three of her children onto demanding performance management targets, and ensured that they were closely watched by non-family managers. Elizabeth and Timothy found their work challenging, but rewarding and thrived in their roles. However, Edwin, the eldest son, was unhappy with his situation. After a few years, Edwin left the family business with some bitterness and set up his own logistics company to work with other supermarket stores. Elizabeth was put in charge of the consumer credit division and Timothy managed a growing number of stores, gradually taking over the operations.
Monica recently celebrated her 70th birthday, surrounded by her husband, their three children and their spouses, and their grandchildren. Additionally, her eldest son Louis, from a short-lived first marriage, also attended Monica’s birthday celebrations. Louis had been raised by his father and his stepmother, and had worked in a multinational online retailer for many years. Louis had become closer to Monica in recent years and frequently asked her for career advice.
Monica was still very active in the key decisions of the business, and employees both feared and cherished her regular visits to the offices and stores. However, she was becoming less prone to taking risks, and had a number of disagreements with her children who wanted to try new ideas, such as reorganising the franchise system, trying new distribution channels, increasing their digital business, and managing the real estate as an independent entity. These topics made for difficult conversations and, as a result, were raised once but not re-addressed. The company was becoming slow to adapt to new market conditions and the rate of growth was decreasing.
From the beginning the business had a legal board of directors, consisting of Monica, Michael and David Sr. They formally met once a year, signed the legal documents of the board, the general assembly of shareholders, and enjoyed the bonds of family, friendship and business success. When her children joined the company, Monica invited them to join the board, which they gladly accepted. However, when Edwin left the business, he refused to leave the board, in spite of the fact that he was setting up his own logistics company which counted a rival supermarket amongst its main clients.
David Sr passed away in 2014. His shares went to David Jr, who had a business background and took his father’s seat on the board. The board was now meeting twice a year but spent significantly more time reviewing the business results and attending to minor details than on discussing future strategy.
Planning the future
Monica and Michael’s grandchildren were growing up, and some of them had completed their university education. Elizabeth and David Jr., in consultation with Timothy, invited their older children, James and Lucie, to join the business. James started working in the supermarkets as a shelf manager, while Lucie was asked to investigate how to start international expansion in neighbouring countries. During that time, Elizabeth’s younger son, Peter, had started a digital venture selling high-quality wines online, putting into action his project from his Management Studies degree. He had approached his parents and Uncle Timothy to talk about possible synergies with the Baldwin group.
At this point, action was needed to prevent the business and the family from facing major issues. The board of directors was not fulfilling its responsibility for governance. Two younger family members had recently joined the business, raising the question of whether the firm should readily accept all cousins who may show a future interest in joining, and if so, how this could be managed. Together, Timothy, Elizabeth and David Jr owned 20% of the shares, sat on the board of directors, as well as managed large parts of the business. What should happen to Edwin and his children? What were the opportunities and challenges for links with Peter’s venture? What about Louis? Finally, although Monica and Michael were mostly retired, what would happen when they were no longer around? Thus, at the last board meeting, it was decided that they would bring in a family business consultant, who could advise the on the way forward for governance. A number of options would be offered, and the board would vote on the best way forward.