Quiz 16: Professional Small Business Management


Synopsis from the Case: AP Company originated in the year 1940; the basic business is to punch hole in the sheet metals. CT Bank scheduled a meeting with LC to discuss about the running out of operating capital. The bank gave LC two options. They are: • Liquidate the business • Find a new lender AK becomes the General Manager: The company has been running for decades, and LC finally thought they were an outdated business model. AK, a youngster in the family, took over LC in the year 2001 as a general manager. He found that the culture maintained in the company resisted change as he had been working in the company since graduation. Future of AP Company: In the year 2002, with LC's approval, AK borrowed $1.5 million from CT Bank. He purchased "SS Perforated and Expanded Metals Company"; he also hired two top executives from the company along with 40 factory workers. The top executives of the new company requested to break the 1960s marketing, which was rejected by AK. During the Iraqi invasion, LC liquidated half a million dollars in real estate to pay overdue bills. The company laid off 13 of its 85 employees to reduce the cost incurred. AP lost more than $500,000 in 2003; the CT Bank gave LC few weeks for constructing a plan. Later, they borrowed $400,000 from their friends as loan, which enabled the company to purchase 3 months worth steel. LC was deciding the future of AP Company and found that AK is not the best person to save the company. Immediate problem of AP Company: • The company has to sort out its liability with the CT Bank. • The time period of 90 days is the last resort given to the company. • The company has to decide the ways to handle the situation and yield profit quickly. • The precautionary action of recruiting a new chief executive officer is considered to be more costly. Long-term Problems of AP Company: • Retaining the workforce becomes a problem. • Lack of money for marketing a product and attracting customers. • Research and development could not be processed enforcing stagnant growth. • The fluctuations in cash flow and the monthly earnings are used to repay debts than to make investments.

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Examples of efficiency and effectiveness in managing everyday life: Efficiency is the effort or cost utilized for completing a task in an intended time period. Effectiveness is producing an accurate result desired in a stipulated time period. Efficiency and effectiveness seem to be the same, but it is not as it has a minute difference. Efficiency is producing an output with minimum waste ; including time, materials, and resources. But, effectiveness gives major importance to the accuracy achieved in the targeted objective through individual or team performance. Example: • Team 'X' decides its monthly deliverables and weekly deliverables in a meeting which is conducted at the beginning of production schedule. • Here, the meeting determines the effectiveness the team carries forward in advance to avoid interruptions in the production. • But the time spent on the meeting along with the time involved to communicate the minutes in other consecutive meetings is the inefficiency produced by the team.