Holmesafe Ltd

Three years ago George Holmes, an engineer, hit upon an idea for a novel security device and produced a successful prototype in his workshop. He made some enquiries through friends to try and find a buyer and was introduced to Frank Jackson, a buyer for the wholesale company of Dawson’s Ltd. Jackson offered to discuss the marketing of the product with his immediate superior, Harry Thomas who was the chief buyer with Dawsons. A meeting was arranged between the three men at which Holmes had a chance to form an opinion of the characters of Jackson and Thomas. He judged that Thomas was a somewhat distant man of high integrity who was prepared to leave action to his more vigorous subordinate Jackson, whose influence with Thomas appeared to be considerable.

On the other hand, Holmes felt that Jackson was warm, unscrupulous where the interests of his company, and possibly himself, were concerned, and very active in furthering a cause in which he was interested. A trial batch of the devices was made for Dawsons and these were easily sold. Further quantities were made and sold in the same way and by the end of the first three months it became clear that the demand for the product was going to increase. There was also an increase in demand for an advisory service on the installation of the new device and mare generally on the problems of electronic security.

With the demand on his time increasing Holmes recruited first one friend, and then two more, and between them they were able to manage the business on a part-time basis for the first year. Holmes spent some time cultivating Jackson, and generally being as friendly and affable as circumstances permitted. In turn Jackson assisted Holmes by pushing sales of the new product and, just as important, ensured that Dawsons paid all bills promptly. The first year’s “trading” produced good results and the four friends celebrated with a theatre and supper party to which Jackson and his wife were invited and they made a present of a crate of whiskey to Jackson. Sales continued to increase and the four decided to form a company, Holmesafe Ltd with themselves as directors.

They asked Jackson to become the fifth director. When he mentioned this to Thomas the latter pointed out that as Jackson would be purchasing goods for Dawsons from Holmesafe this would involve a conflict of interests for him. Jackson recognised the force of this argument and with expressions of regret he turned down the invitation to become a director of Holmesafe. During their first year of operation as a limited company it became clear that the market had been underestimated.

Dawsons demands were greater than anticipated and a large retail chain also took a substantial volume of goods. Sales to smaller companies also became appreciate and fees from the advisory service also increased. The company could no longer manage on a part-time basis and an old school friend of Holmes became the company’s first full-time employee.

Half way through the year a contract was signed with a large national building contractors for Holmesafe to provide an advisory service on home security. Later in the year the company moved into new rented premises and took on a full time secretary. • Table 1 shows income and expenditure for first year of operations. Table 2 shows the company’s projected income and expenditure for the second year of operation.

Table 2 Projected Income & Expenditure, year 2 Income From Dawson’s From Rowan’s Other sales Advisory services Expenditure Materlals Salarles Other expenditure Total 158,000 184,000 72,000 414,000 270,000 162,000 71,000 63,000

Activity

• • • Comment on the role of each person in this case. How well has the company performed so far? What gaps, if any, exist in the information you would like to have about the situation? What, in your view, is the company’s mission? To what extent does this case demonstrate entrepreneurship in action? What do you think is going to happen on Saturday? How well placed is the company to grow and survive in the future?

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About midway through the second year Holmes received a phone call from Jackson which after the usual greetings proceeded as follows: Jackson I thought I’d better let you know that I’m coming under increasing pressure to buy security devices from Brown’s. They are very similar in performance to yours. Browns have improved their manufacturing methods and are now extremely competitive and very reliable. But surely our reputation is worth a great deal. You have put a lot of effort into this yourself; it would be a pity if it were all wasted.

Sure, and I’ll obviously do what I can. But I thought I should let you know how the land lies. Incidentally, there is a bit of personal advice I’d like from you. You remember I used to play in a band a few evenings a week. Well, for personal reasons I have had to give that up and it has left me a bit short of cash. So I’m looking for an evening job that will bring me in a few pounds a week. Got any ideas? I don’t know of anything off hand, but let me have a think about it. Let’s meet for lunch next Saturday to talk things over.