Barker Ltd analyses-Final part

4.0 Recommendations:

Overall the farm seems to be in a weak state.Two main options: to sell and moving into the crisp market.There are many factors that success depends on such as the financial problems,bargaining position,probability of success,the prices of the product which is produced at the moment(potatoes) and the demand for the product and so on....

There is a small amount of net profit gained for business.The return on capital employed is just 0.83 which is a very small reward for business.So this is the obvious point to be an evidence for moving into crisps market.Also the acid ratio shows the low liquidity of the business.Also the loan is much more that the business actually earned,which may cause risk and difficulties to the business to make decisions and invest in the future.

The proportion of 2008 sales to its main customer is 80%,ehich means most of the products has been sold by the leading UK supermarket.However the prices has been falling down 18% ,plus the forecast shows us that in the future potato prices will rise(+10%)...but actually it will fall because of inflation(an increase in RPI:+18%).So there's no point to stay in this market as the price of the product will fall therefore this will lead to a fall in revenue and probably profit as well.

These 2 reasons are the most important factors to consider about to move into crisp market.Other factors that prove that it's more beneficial to move to a new market is the background of staff.
As Romily has been working in the Walker crisps company and has made a rapid progress there,therfore she has to be very experienced and has knowledge about the new market.
The decision tree shows us that there are more possibilities of success than failure in financial terms of the business.
Furthermore, demand for crisps is likely inelastic(PED=0.6).this is beneficial because the business could have greater control over the price as there are less competitors.

My recommendation is that to move to the crisp market.Eventhough, the proportion of the Uk adult population that is overweight or obese will likely to increase ,plus there is oligopoly in the crisps market so that there are barriers to entry, accepting to move into the crisp market is still more hopefully and beneficial than staying in potatoes farming.