McLoughlin and Son Case Study

Final case- McLoughlin and Son Decorators

Tóth András

2015.04.26.

1. Introduction

McLoughlin and Son Decorators is a family-owned company, which provides painting and decorating services in Ballincollig, Ireland.  The firm addresses mainly the local market and operates with approximately 40 employees at the moment. They are not only focusing on the domestic decoration market, but they have customers like building constructors, hospitals, educational institutions, leisure institutions and government departments. Brian McLoughlin the owner and manager of the company created a strong hierarchical structure. He manages the finances, the recruiting and deals with the contracts. Brian employs a senior foreman, who is responsible for employee safety and job assignments, so he has to supervise all of the company’s projects. To run the larger projects and report to the senior foreman there are two senior foremen, they are also accountable for meeting the deadlines. Last but not least there are a number of senior decorators/painters who supervise the work of junior employees and the four apprentices.

Thus far the firm is operating successfully and they are constantly profitable.  But on the other hand by evaluating the company’s performance it is easy to see, that there are several issues and problems, which need to be solved to keep the business growth constant. So the main purpose of this report is to analyze the cardinal problems and to recommend solutions to them.

2. Industry and macro environmental analysis

To understand the situation of McLoughlin and Son Decorators better it is inevitable to examine the industry and the macroeconomic trends.

First of all to analyze the macro environment I used the PESTEL framework, hoping to identify the key influences, which might affect the company. The most significant political factor is the increasing governmental support in the construction sector with tax incentives, aiming to help companies recover from the recession, but there are also stricter rules for work safety and welfare regulations in Ireland. If we are talking about the economic influences one should mention the increasing insurance and labor costs and secondly the gradually improving economic growth of the country. The main social factor is the fact that people nowadays are more worried about building or decorating their houses financed by loans, so there are fewer customers than before. In the technological category the development of less expensive and more efficient decorating techniques can play a major role in the future. But right now as we can see most of the companies use the same equipments in this sector. The environmental part of the analysis in case of McLoughlin and Son is less significant because the materials they use are all meet the environmental requirements. On the other side the legal factors are way more important: the compulsory union membership makes it harder for companies to plan the finances of their projects, because the wages are regulated four times a year.

To measure the attractiveness of the industry I used Porter’s five forces analysis. The threat of new entrants is very high because new companies can come out of the blue and take projects from their competitors really quickly. On the other hand there is a low or nonexistent threat of substitutes, due to the fact that there are not any similar services available, which aim at the same needs of customers.  Furthermore the bargaining power of buyers is also a huge threat to the prosperity of the company. Nowadays customers demand the best quality with the lowest price making it hard for decorators to maintain profitable. In addition the sector has diverse buyers so it is more difficult to fulfill their needs, and their switching costs for different projects are low. The bargaining power of suppliers is low because there is a huge amount of suppliers and they usually make long term contracts with partners. So the competitive rivalry in the industry is also really high: the market is saturated, moreover the lowest bid always wins the project making a fierce competition between the decorators.

3. Analyzing the situation of the company

To maintain the profitability it is vital to identify the strengths, weaknesses, opportunities and threats that are likely to have an impact on the future of the company. The strengths of McLoughlin and Son Decorators are its wide range of services including spray-painting, floor-coating and wallpapering. Their long term trustworthiness and reliability can also be a major strength based on their reputation. And last but not least one should highlight the company’s flexibility. The weaknesses are: the lack of long term strategic planning and the lack of innovation, research and development. These two factors can be the results of an overburdened manager, which is also a weakness. In my opinion there are a few opportunities for the company to improve performance for example aiming at different niches of the market, breaking the firm into subsidiaries, subcontract more employees, developing an in-house training system and last but not least expanding in Ireland. I am going to explain these ideas in the recommendation part of the report. There are also a couple of threats for McLoughlin and Son Decorators, like the threat of competitors with lower prices. These competitors might be able to get the customers of the company because their painters are doing undeclared work for less than the regulated salary. Another threat is the seasonality of the decorating market, which makes the human resource management and staffing really hard.