Micro Enterprise Project (SOP)

How is it relevant to our current concepts?

Sajjad Ali (21010009)

Overview of Project
The project which I was involved in was based on a small optics shop called Javed Naveed
Optical Store located on Bedian road in R.A. Bazaar in Lahore. It was a general prescription
glasses, sunglasses and basic eye testing shop which was owned by a Mr. Javed and run together
with his two sons and nephews. It was solely a family-based enterprise which can be traced back
to 1990s when he started the business. It has since grown to be confined to this shop.
Major Challenges
In order to establish the relevance of current concepts with their business model, it is pertinent to
mention the major challenges we identified.
Scalability
The shop was fairly small (180 sqft.) given the market it was located in. In a dense and dedicated
market such as Shah Alami offers significantly more exposure in terms of business and scale
even with a smaller shop. However, the section of Bedian rd. it was located was populated by
auto-repair shops which offers no complement to services such as optics, rather serving as a
deterrent. The problem of scalability here figures in such a way that there was simply not enough
business to allow him to accelerate his growth.
Location
Another problem conjoint with the above was the location which was a lot less ideal. Given the
above attributes, the shop firstly does not allow the volume of customers which it potentially can
despite being located here more than a decade. Secondly, the client is also discouraged or simply
would not approach this shop if it’s a first buyer and this shop particularly focuses on services
which has a long life.
Supply chain dependence
Lastly, Mr. Javed was primarily dependent on Shah Alami market for its sourcing of stock. This
entails dependency in terms of availability of stocks and cost, because he was exactly a
wholesaler and hence could not dictate rates as much.
Relevant concepts
Diversification
My group’s EL focus was on diversification hence it is prudent to mention the absolute need for
the shop to diversify. Now the level of diversification which we recommended was cross-
industry, however Mr. Javed can simply practice diversification by engaging in wholesale side of
the business as well. The argument would be the level of expertise which they already have,
there would be no fixed costs involved (they already have a place for their current stock),
high volume, hedging and scalability. Presently Mr. Javed has been primarily exposed to
consumer end of business where customer acquisition cost is not only high, but the volume is
also quite limited.
Performance Systems
Since this is more like a custom-made product as opposed to standardized production, it would
be more relevant to incorporate the notion of performance systems which pertains to establishing
goals, gaps and concrete quantifiable measures to check if they are fulfilling the criteria of a
good product. The good part of their enterprise is that their business model supports such
kind of undertaking because the manufacturing entails machines and specific numbers fed
into the machine coupled with ta trained staff. What is a common occurrence is the disparity
of what the customer has requested and the final product? In this system, if they can review each
of their product specification, they can reduce the throughput rate of their final product, resulting
in a better customer consumer satisfaction and more volume.
Cost identification
Here the concept of costing can be borrowed from Managerial Accounting and Control. The idea
is basically to accurately trace as many costs as possible directly to the product in order to come
up with the proper pricing and deciding which products to focus on. This would allow him to
discontinue products which are no longer required and focus his workers on servicing customers
who are demanding the high margin products. This may seem a trivial concept, however what is
usually the case that businesses usually assign the only apparent variable cost as the direct
cost of the product, potentially distorting the true cost of the product which may be made
of other costs not included because they may not have been traced, resulting in over or
under priced products.
Optimization
This is a neat tool taken from Decision Analysis called the solver in Excel. The concept of EoQ
states that the business should keep a certain amount of stock which would result in least holding
cost. We can take this step even further by incorporating the concept such as financing
costs, stock needed, target sales etc. to come up with the optimum stock to be purchased
each week. This optimization can be done with the use of a tool called solver in Excel. This is a
basic but extremely powerful tool that presents us with identifying the most cost-effective
decision.
Other concepts
A miscellaneous concept which would worthwhile to include but is already too apparent would
be the use of social media by their younger staff to gather as much traction. Identify their key
customers and work on maintaining and increasing their lifetime value and developing proper
SOPs for their front-end salesman to deal with the customer in a more streamlined manner.