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Maya Lim Case Study

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Maya Lim
Explain the nature of the crisis that faced Maya Lim from the perspective of finance, marketing, production and human resources. (20 marks)
In terms of Finance Maya Lim faces considerably amount of debt, on the day of the explosion Maya had overdrawn £7854 as well as £10450 of outstanding trade credit. Therefore, she needs to pay out 18,304 whilst she only has her net profit from the previous year at £4672. The effect of the explosion has left her with no stock and no store, currently she has no way of generating money in order to pay off her debt. As she had an agreed overdraft of £8000 and she has limited finance left as she had already overdrawn £7854 therefore she cannot use that in order to invest into reopening and starting up her business again. Due to her previous sales figures as well as her current overdraft and no income the bank is unlikely to increase her overdraft limit.
The disaster that destroyed her business will have an effect on the marketing. Maya Lim will be unable to promote or sell her goods as she currently has none. ‘Her entire stock was so damaged that none of it was saleable and fixtures and fittings were not worth salvaging.’ She does not have the finance to re stock and without a store; nowhere to sell it. She could continue with market research following consumer changes as it might be a considerable amount of time before the premises is available to start up again and she begins to sell to her customers again. However, she’ll be limited with funding research. In terms of advertising, firstly she cannot afford to but also she cannot advertise while her store does not exist, she is unaware of the current state of her store therefore does not know when she’ll reopen or if she potentially can afford to.
Production will come to a halt whilst she assesses the state of the premises and the time it’ll take to begin trading again. Suppliers/manufacturers will therefore lose a customer for a period of time. Also, she has £10450 outstanding trade credit with suppliers, she will not be able to pay this back until she received a constant stable cash flow. This could affect future relationships with Maya Lim and suppliers. There was also a great loss of production, therefore waste.
With the sudden disaster destroying all aspects of Maya Lim’s business, human resources department would have to deal with the loss of job and income whilst the premises recovered. Dependent on the time taken, the employees may have taken up another job opportunity as Maya Lim did not have insurance on the loss of earning during the time she couldn’t trade therefore employees would receive nothing. This would impact Maya Lim if she was to reopen the business as she would have to carry out recruitment and new training programmes, effectively being time consuming and financially demanding.
Discuss whether any amount of contingency planning would have saved Maya’s business in the aftermath of the crisis (20 marks)
A contingency plan is a plan designed to take account of a possible future event or circumstance. If Maya Lim created a contingency plan for this explosion destroying her business it may have improved the aftermath of the disaster. By creating a contingency plan she would be able to consider all possible events that would affect her business and plan how to overcome those or react to them in order to return to operating and trading normally. It would assess all aspects and functional areas of her business, as well as informing all employees on the plan so they are aware of what would happen in this event. If they were to predict a fire, they could evaluate the storing of stock as her entire stock was damaged due to it being within the premises, this created a huge loss of goods, if she was not to hold all her stock in one place she would have stock to fall back on and have immediate stock to generate money.

Within a contingency plan it also takes into account your business data. As it is valuable data, it allows you to evaluate whether the data is stolen or destroyed. In Maya’s case the data was destroyed in the explosion ‘her business records were particularly badly affected. Some of the records were completely destroyed, whilst others were only useable with difficulty.’ Maya’s business records were stored in the small office at the back of the outlet, if she were to carry out a contingency plan she could have stored her records on the internet that is accessible outside of the premises or having it backed up or another copy of the data in a different area. Therefore, she would not have lost her records.
It would also ensure adequate insurance is in place to cover your business in case of a crisis. Although she had insurance for the damage, it would take time for her to receive that. And she did not have insurance for loss of earnings whilst she couldn’t trade, so she had no income during this time.
The plan would also prepare Maya Lim with what is essential if the business was to close down and needed to reopen after a disaster. Overall, if a contingency plan was implemented she would have been able to deal with the aftermath of the explosion more efficiently and effectively and know what she has to do in order to get her business to reopen. Insurance would have covered her financially for the period of time where she was not trading, her business data would still be accessible and all employees would be aware of what is happening and therefore evaluate their job potential.
However, Maya was not in a good financial state, she had overdrawn £7854 from her bank, had an outstanding trade credit of £10450 and her previous net profit from 2005 was £4672. Despite the greater effect of contingency planning it would still require considerable amounts of money which Maya did not have as the bank are unlikely to increase her overdraft limit and her suppliers demanding their trade credit. Clearly, the business itself was not doing well so I believe even without the disaster the business was heading towards forced closure as it was not financially viable to continue trading.…...

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