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Introduction
The case study "Superior Engineering in Texas: Stay or Go?" focused on the issues of Superior Engineering and its Texas SBU. In this paper, the identification of Superior as a small business or an entrepreneurial venture will be made; measures offered in addressing the concerns of the executive team on Texas's poor performance getting it to realize improved profitability for Texas the reasons for its poor performance will also be highlighted; Recommendations for future of the Texas operation will also be made. But it will also examine how; financial statements in the small business planning for its human resources.
Comparing Small Business and Entrepreneurial Venture
Superior Engineering directly addresses all the requirements of a small business. The U.S. Small Business Administration defines a small business as an independent and more likely a non-profit business entity, which does not control a large market share in the industry it operates in and which meets the practicing revenue and employee limits. Superior Engineering has kept the human resource that has never exceeded the mentioned limits and has its own functioning without a monopolistic control of the engineering industry. (Richardson et al. 2016).
But it also has some features of an entrepreneurial venture – the company has many engineering solutions and actively searches for new opportunities in the markets. For instance, the company incessantly searches for new markets and adopts engineering technology to enhance productivity and client satisfaction. Thus, at the same time, it can be stated that it complies with the definition of the category small business, however, is also representative of the entrepreneurial venture since it is linked to innovation and to increased market share.
Balancing the Executive’s Concerns with Financial Data
Superior Engineering’s executive team feels that the Texas SBU has been performing poorly hence raising alarm. This can be explained with reference to the case study financial analysis presented in Figures 1–3. Explaining what this is, a vertical analysis is a technique in which each line item on a financial statement is stated as a percentage of another line item, thus it will be more convenient to compare other segments of the business.
Structural Analysis of Superior Engineering without the Texas SBU: Vertical Analysis
First, let’s look at the Vertical analysis based on Superior Engineering excluding Texas SBU. Let the total revenue be equal to $10, 000, 000 and the operating expenses be equal to $6, 000, 000. In this case, the vertical analysis would indicate that the operating expenses are at 60 per cent of the total revenues. This analysis reveals that the company is within an acceptable measure of the expense-to-revenue ratio signifying sanity in overall operation.
Vertical Analysis of the Texas SBU.
However, the analysis of the Texas SBU data offers significantly different results when treated independently. For the purpose of this exposition, Texas SBU has an overall gross income of $2,000,000, yet has total operating costs of $2,500,000. In this case, as demonstrated from the vertical analysis the operating expense ratio of the Texas SBU is 125%. This means that the Texas operation is not only unable to meet its operating costs but is equally contributing to the deepening of the losses for Superior Engineering. The declining performance benchmarked against the general company performance shows that the executive team has been worried about SBU’s sustainability. (Tarifi, 2021).
Possible Factors Explaining Why Texas Has Never Made Profit
I share several reasons why Texas has been operating under non-profitability. Firstly, it is evident that the industry structure competition is high whereby SBU has to under-bid its competitors and get contracts which may not be commercially viable. In case of domination by many players, the important effects being observed are able to undermine a company’s profit-making ability by forcing it to reduce the price in its bid to attract the target market.
Secondly, the inefficiency in the operation has characterized the Texas branch. This can comprise anything from high overhead costs to bad project management. For instance, in regard to failing to meet project deadlines or misallocating inputs, there is result in loss of money and time. (Hisrich et al. 2017).
Finally, issues such as ineffective market communication and weak customer relations management have also led to declined revenue prospects. If customers do not feel valued or if the customers have no idea what services are out there from that particular company, they will not come back or refer people to that company. Thus, vertical analysis of Superior’s financials demonstrates that Texas operation disrupts the company’s financial health. The performance comparison is very explicit suggesting that resources could more effectively be deployed elsewhere than being invested into an unprofitable line of business.
Recommendations for Superior and the Texas operation
Based on the financial statements and operational issues identified, it is advised that Superior consider entirely closing the Texas unit. This decision is based on the findings that have pointed to the fact that the Texas SBU is a drag on the company’s financial performance. Nevertheless, it is very important to ensure that before reaching the end decision, the impact of Human Resources has been dealt with appropriately. (Musi et al. 2018).
In the case of shutting down the Texas SBU, there is a need to implement a strategic corporate policy to support those employees. It could mean providing local human resources as separation benefits, consulting and outplacement services, and assistance in acquiring new positions. Another positive effect great for morale in other parts of the company is that by keeping employees in this category well-supported, Superior can uphold its image as a socially responsible employer.
On the other hand, if the general management decides to continue with the Texas facility, critical restructuring activities should revolve around increased operational efficiency, more effective product promotion, and better customer interface management. These are the key steps required to reverse the fortunes around the Texas SBU and make the venture profitable.
Furthermore, an entrepreneurial action that could be useful for the company is to shift the Texas SBU business model into a new untapped market that is not well served in Texas. By distinguishing some specific fields in Texas which would need engineers to design specific solutions, Superior could turn into a niche and maybe even earn more in Texas. For instance, aiming at green building engineering solutions can be useful to Superior since it may meet the existing industry requirements and customers’ demands.
The Utilization of Financial Statements in HR Planning
From a general business management perspective, such financial statements prove very vital in human resource planning within small businesses. These papers show the position of a business organization’s financial health, leading to influence change on HR processes like staffing, training, and methods of remunerations.
For instance, if a financial statement records low revenues, then based upon records of decreased sales, HR might be required to review the operations and possibly lay off individuals or transfer workers to the more productive line of business. Through its analysis, HR gains insight into the company’s financial situation enabling it to make sound decisions on certain issues such as hiring or laying off employees which are very sensitive issues within any organization. (McFarlane, 2006). On the other hand, if the firm’s financial position is good there might be increased investment in the employees and increased employment. In this case, the company may opt to employ more people or serve to train the current staff to acquire new skills.
Besides, when HR uses financial statements to analyze cost structures, this helps HR connect the dots between recruiting and retaining talent by considering organizational finances. For instance, if an organization is experiencing a poor financial position, then it may be strategic for HR to retain the existing employees rather than recruit new ones since this could be very expensive. Therefore, correct accounts are useful for human resource planning; they increase the ability of small businesses to manage their future.
Conclusion
Moreover, the study of Superior Engineering’s Texas venture highlights that there are substantial problems and prospects for change. Texas SBU’s issues are revealed by aligning executive narratives with financial information: The following management decision on the Texas operation must take into consideration human resource management implication and this must also determine that entrepreneurial solutions may point the business in a profitable direction. Another factor will be the field of ensuring HR planning is backed by financial statements so that the company would be able to coordinate its resources and employees.
References
Hisrich, R. D., Peters, M. P., & Shepherd, D. A. (2017). Entrepreneurship. McGraw-Hill Education.
McFarlane, D. A. (2006). Entrepreneurship: Successfully launching new ventures. Journal of Applied Management and Entrepreneurship, 11(3), 90.
Musi, Y. W., Mukulu, E., & Oloko, M. (2018). Influence of Strategic Planning on Firm Performance in Agricultural Research Based Institutions of Kenya. J. Mgmt. & Sustainability, 8, 83.
Richardson, W. D., Machande, K. D., & WO'Hara, P. (2016). Superior Engineering in Texas: Stay or Go? SAGE Publications: SAGE Business Cases Originals.
Tarifi, N. (2021). A critical review of theoretical aspects of strategic planning and firm performance. Open Journal of Business and Management, 9(4), 1980-1996.
