Recommendation
BAVC currently attains its competitive advantage through a niche, best cost provider strategy.
The company’s sole arena is the Bay Area, which it serves by providing access to video equipment and offering technical assistance with video production for non-commercial purposes. This key arena has served the company well in the past because of its tight-knit community of independent media and artistic talent. Over the years, BAVC has grown through internal development by expanding its services and adding new services. We recommend that BAVC continues to execute its current strategy, with a few proposed changes. Our recommendations will focus on the internal development of the human resources department and the MediaLink Progam, and foster overall company growth through external development.
Implementation
In brief, we have made three recommendations that we believe will support your company’s current strategy. First, we recommend that your company expands into the Silicon Valley region. Second, we recommend that your company institutes an evaluation process for all applicants seeking employment at BAVC, whether they are recruited or otherwise. Third, we recommend that your company increases the web-design training in the MediaLink program. The sections below outline the implementation of each recommendation and the reasoning behind them as well.
Continued growth for the company is crucial to guarantee that BAVC maintains its position at the forefront of the non-commercial media field. For this reason, we recommend that BAVC expand into the Silicon Valley area. BAVC must gradually begin to shift back to its’ 1992 state of having more earned income than support revenue. It is extremely risky and detrimental to the company to have the majority of total income come from support revenue. In order to reach this goal, we believe it would be beneficial for your company to expand the geographical reach of its services into the Los Angeles area. Los Angeles has a much larger population than the Bay area with nearly ten million inhabitants. This is a mostly untapped market where BAVC can offer its services, and have a much greater chance of being successful. Over time, the expansion into Los Angeles will increase our earned income, which means there will be less dependence on support revenue.
In a perfect world, your company’s income would double immediately from the expansion into Los Angeles. Realistically however, it could take up to five years before your company can generate the same level of revenues in this new location. Although BAVC will offer the same amount of classes it has in the past, it will take time to build up a customer base and establish brand awareness in the new market. What will double almost immediately however, are your company’s expenses. Some of these expenses include: renting or buying a new building in Silicon Valley, utilities, new equipment, marketing and promotion, and the salaries of the new technicians and trainers that would need to be hired. Although the expenses are high, Silicon Valley offers a lot of service potential because of its’ large and diverse population. Along with increasing our earned income by offering classes and training, there also will be many new donors that can be sought out for support revenue. When donors choose to financially support a certain service or program that BAVC provides, your company has an ethical responsibility to use those support funds only as the donor intended. Another option that BAVC should consider is checking to see if it qualifies for any government funding. The move to this new location requires a heavy financial investment early on, but it will pay for itself in the long run.
In order for your company to financially support our recommendations, we estimate that you will need to grow at a rate of $1.1 million annually; this number represents BAVC’s financial growth from 1999 to 2000. Exhibit 1 in the appendix shows our five-year projected income statement for BAVC. This increase of $1.1 million annually is essential to paying for the new Silicon Valley location and offering BAVC’s wide array of media services in that area. Exhibit 2 in the appendix shows our proposed shift in income, which would allow BAVC to depend less on support revenue and more on earned income. Realistically, BAVC could simultaneously shift its’ income dependence by five percent per year in favor of earned income. For example, in 2001, BAVC’s total income will be roughly $4.6 million, assuming the company grows at the specified rate. Instead of having sixty percent of the $4.6 million come from support revenue, only fifty-five percent will. Your company’s overall revenue will continue to increase at a rate of $1.1 million per year. The only change will be where the revenue comes from. Relying more heavily on earned income is better for BAVC because of the variability of support revenue.
BAVC’s trouble with retaining employees is partly because of the low salary it offers and partly because of inefficient human resource management. We believe BAVC is losing their employees to the private sector because they are hiring people whose number one concern is money. When it comes to salary amounts, there is absolutely no way BAVC can compete with organizations in the private sector. The solution is to hire people who have the same ideals, values, and ethics as BAVC in addition to the correct skills. We recommend that BAVC’s human resources department institutes an evaluation process for all applicants seeking employment at BAVC, whether they are recruited or otherwise. Candidates will be chosen based on both skill and how closely their values, ideals, and ethics align with the values, ideals, and ethics of BAVC. The evaluation process could include pre-screening, followed by structured interviews and situational testing, both of which have high criterion validity. The costs of initiating this recommendation include the costs of making the test and having managers prescreen and interview employees, and the time and effort it takes to grade and rank applicants. In doing this, BAVC has a better chance of retaining quality employees because the people it hires will not only be qualified, but they will be more likely to fit in with the company’s culture and be satisfied with their jobs.
The decreasing placement rate of the MediaLink program is BAVC’s third largest problem. In order to increase the placement rate of the MediaLink program, the program needs to be made more relevant. After an analysis of the current market we have found that web-design is the most needed skill set currently in demand in the Bay Area market. For this reason, we recommend that your company increases web-design training; internet training will remain the same. This initiative would require BAVC to hire additional training personnel, which would result in an increase in salary expense depending on how many new employees were hired. Also, there would be costs associated with offering more classes. This initiative is socially responsible and has the potential to greatly benefit the MediaLink program. If BAVC is able to provide more training in web-design as a part of its MediaLink program, its’ graduates will have obtained the newest and most relevant skills required to find a job in the changing economy. Companies will then be more likely to hire from our pool of graduates because they will have the same skills as the laid-off talent, but will not have to be paid as much. Potentially, BAVC could also see an increase in the overall enrollment number for the MediaLink program because of its high relevancy to what media companies are currently looking for regarding the skills of new employees.
Conclusion
In closing, we have recommended three changes for your company: (1) Move into Silicon Valley and open a new building, (2) Implement an evaluation process for all applicants based on both skill and how closely an applicant’s values and ethics align to those of BAVC, (3) Increase web-design training. These recommendations have been tailored specifically to maintain your company’s current competitive advantage while ensuring that BAVC remains socially responsible. The first recommendation will improve BAVC’s performance by generating a greater percentage of earned income which can then be reinvested back into the company. The second recommendation will ensure that BAVC has a qualified staff of trainers and technicians that will stay with the company; this will save BAVC money because new employees will not need to be hired as often as they currently are. The final recommendation will reenergize the MediaLink program by making it more relevant to the current job market; this will result in an increased job placement percentage of your graduates, and should encourage more students to join the program. It is imperative that these changes be implemented now so that your company can begin building a more solid financial base for its’ future growth.