Chong Wholesale is based out of San Leandro, CA where it has its headquarters and manufacturing operations in a leased warehouse. Currently, the company does not have an online presence and lacks a functioning website.
Mr. and Ms. Park both own the company jointly as a sole proprietorship. Mr. Park registered the company as a sole proprietorship in 1999. Ms. Park is responsible for the companies accounting and payroll. Mr. Park also oversees the placement and delivering of orders.
Since Chong Wholesale is a sole proprietorship, it is ultimately the reasonability of the owner, i.e. Mr. Park has to make all decisions of the company. Mr. Park has never hired third party consultants to help the company make more sound decisions. Mr. Park does not have to answer to anyone regarding decisions about his business operations.
The main goal of Mr. Park is to gain a profit in the company and ensure he pays all of his business’ vendors and creditors on time. When Mr. Park is out of the office, he has authorized the most senior employee to make certain types of decisions. These decisions done by these employees in limited score because the company runs as a sole proprietorship, Mr. Park’s personal finances have intertwined with the organization. If the business requires funds to keep it operational state, Mr. Park will often put money for the operations through his own funds. If the business requires financing, Mr. Park will use his own personal financing streams for any investments.
Context of the Business Challenge
Over the past five years, Chong Wholesale has lost several of its clients because they shut down their business. All of the company’s sales are business to business and Chong Wholesale sales primary to small “mom and pop” clothing retail stores, mainly in urban areas of the San Francisco Bay Area and the Sacramento Area. The main reasons why these stores are closing is the shift of consumer shopping preferences to online shopping. As of 2017, Chong Wholesale sells directly to 24 retailers grossing net revenue of $3.2 million dollars. Back in 2012, Chong Wholesale sold directly to 48 retailers and had gross net revenue of $5.2 million dollars. Mr. Park is aware of the problem since 2012 but he has not made proactive measures to redirect the company’s sales to new markets. Instead Chong Wholesale has tried to cut prices on its products in order to attract new retailers with negative results.
Chong Wholesale lacks an online presence and currently does not have a website. Mr. Park is aware of the problem but does not have the technical knowledge to create a website or an online website. Nearly all of Chong Wholesale sales are in custom printed shirts, jackets and sweetheart. Chong Whole custom prints its clothing at its San Leandro Warehouse. Chong Wholesale relied on two screen printers it bought back in 1998. The screen prints were originally bought for $50,000 each but lack the technology needed to build customer printed clothing items at a high rate.
Since the beginning of 2017, several of the business’ major clients have gone out of business and ended orders of the company’s products. Consequently, there has been a decrease in orders from existing clients because more consumers are buying clothing online. Mr. Park has been aware of the problem since 2015 and has seen a steady decline in orders and demand. In 2015, Chong Wholesale had 62 retail stores; hence it was a wholesaler, but the number has declined to 45 in the year 2017.
Another observation as to why there exist business challenges in Chong Wholesale is due to the fact that Mr. Park has not put in place any proactive measures to expand the business. At the expense, he has tried to compete with the company’s competitors on pricing. In order to attract new customers, Chong has cut its profit margin on many of its stock by 25% and offered significant wholesale discounts to existing customers, which according to him, will sustain the business.
Chong Wholesale has not made any changes in its marketing or ordering system for the past ten years and has greatly relied on an advertisement by word of mouth to reach new customers. Word of mouth advertising is not a suitable method of spreading the news about businesses since it is traditional way that does not spread faster. In the wake of the emergence of the online market, companies relying on such advertisement are bound to fail. Besides, Chong Wholesale has reached a limited audience for the past decade. Considering that the business has five employees, the staff only reach out to clients they come into contact with on a regular basis.
Chong Wholesale is run by Mr. Park and Ms. Park who are first generation of Korean Americans. The business has relied on expanding its business with networking efforts in the Korean community. The attempts to gain new clients in the Korean community has had minimal impact on the company’s bottom line and has seen success by gaining two new clients.
Three Areas of Responsibility and its Contributions
Change or Leadership Management
The first area to be addressed in this section is change or leadership management. Considering that Chong Wholesale has been in operation for almost two decades, and understanding the fact that it is still under a sole proprietorship, the business can be perceived to require some form of change. As has been stated earlier, Mr. Park is involved in major decisions of the business, and in most instances, it becomes difficult for him to alienate operations of the business from personal activities. In terms of major decisions, the sole proprietor (Mr. Park) is not answerable to anyone in regard to the operations of the business. With such powers, there arises increased likelihood for Mr. Park to make unsubstantiated decisions that could jeopardize the success of the firm.
Leadership in the business is contributing to the challenge since Chong Wholesale lacks a future vision. In any business under a sole proprietorship, there is the problem of perpetual succession (R. Gill 307). For instance, despite Mr. Park stressing that the vision of the business is to serve all the clients effectively and pass it on to future generations, there are no clear regulations and policies to guide the succession. Therefore, the business can exist only so long as the owner exists, hence in case of death or insolvency, the business could come to an end.
Besides, the business proprietors are reluctant to operate under the norms of the business, particularly if there is a decline in sales. For instance, the current problem with Chong Wholesale pertains to its clients moving to the online market; hence the sales drop significantly. Chong Wholesale greatly relies on selling the existing vendors, and since clients are increasingly embracing online markets, the business is at a hard place. As per the organizational structure, Chong Wholesale has no sustainable business plan which would otherwise propose shifts in market share. As a result, numerous vendors of the company are going out of business, considering the current market dynamics. The proprietors, in this case, have no clear strategy to make changes in their business plan necessary to adapt to changes in the modern market.
The next way in which change management or leadership is contributing to the existing challenge is that it becomes increasingly difficult for the owners to hire or retain workers. It is challenging to expand Chong Wholesale beyond the point of traditional advertisement by word of mouth as the proprietors are not experts in every aspect of business management that workers need (Gill 308). For instance, Mr. Park and Ms. Park’s business is in great need of online market share in order to retain its vendors. With the current leadership at Chong Wholesale, good quality workers are difficult to attract as the sole proprietor has individual centric characteristics.
Information Technology (IT) Management
This area of responsibility (IT) has contributed to the problem as Chong Wholesale lacks a way to capture prospective clients in the online market. Lack of such a way is due to the ineffective or traditional business plan that since it only focuses on in-store markets. Therefore, existing clients have to be physically present at Chong Wholesale in order to make orders.
The other aspect is that the present clients do not have electronic tools as those seen in online platforms meant for placing or tracking orders. This sheds more light on the inefficiency of the business to shift to a modern online market since there is a minimal investment in the same. Information technology management has been made possible by the advancement in technology, leading to value creation. For the attainment of such organizations goals, the existing technology ought to be aligned with business strategies. In the case of Chong Wholesale, the shortcomings in the business IT made it difficult to deliver goods to the clients.
Nonetheless, there is the need to understand that information technology cannot improve the delivery of services if the executive managers (in this case Mr. and Ms. Park), functional personnel and supervisors fail to embrace it, and further change their approaches towards delivering services (Bryan et al. 309). Bryan, Young, and Goldstein further explain that change can be effected anywhere in the business, but its success calls for a full embrace from the top level management (309). There is the need to first establish clear business requirements, and endeavor that is followed by the creation of an information system that will see the realization of the requirements. The shift from a manual to an electronic system requires full support or initiative from the manager. In the case of Chong Wholesale, the decision to reach out to clients in the online market will lead to more revenue, but it has to be supported by the proprietors, i.e. Mr. Park and Ms. Park.
This area of responsibility is contributing to the problem of reduced number of clients as new equipment is required to attend to the demands of the customers, whereas the needed capital for buying the equipment is unavailable. The problem of lack of capital is a common one in sole proprietorship as the single person controlling the business finds it difficult to raise capital. Due to the lack of separation of the firm from the proprietor, there is a challenge in the flow of capital as well as the expansion of the business size, and even the level of success of the business or the products sold (Fabozzi and Drake 542). Being in a sole proprietorship, Mr. Park and Ms. Park have unlimited liability. This implies that in a situation the owner fails to meet business obligations or his or her debt, and a lawsuit if filed by a consumer, then personal or private properties of the owner can be used to settle the debt (Fabozzi and Drake 542).
The owner (Mr. Park) has never hired third party consultants who would assist the business to make more sound decisions. The major factor leading to this is the unavailability of finances which confers the company the potential to hire consultants. The consulting costs involved are considerably high, and as the company is facing problems of declining clients, there are minimal reserves to pay for the consultation. Nonetheless, Mr. Park does not have to answer to anyone regarding any managerial, financial or even hiring move. Moreover, financial management has affected the problem of declining clients as the failure to reach out to the clients leads to a loss in reputation as Chong Wholesale competitors with online markets absorb the customers.