Essays on Small Business Management - Trunki by Magmatic Company Case Study

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The paper "Small Business Management - Trunki by Magmatic Company " is a great example of a management case study.   Trunki is an innovative ride-on children’ s suitcase produced by a Bristol-based design company called Magmatic Ltd. Rob Law is the owner and the director of the company and the brains behind the Trunki suitcase. Law came up with the investment idea in 1997 while at university and turned his investment idea into practice in 2003 but the company that he established collapsed as a result of various obstacles (Bourret, 2012).

However, Law re-established the business in 2006 and a potentially damaging appearance on BBC’ s Dragons Den programme turned his venture into a success. His idea was dismissed by the dragons as unworthy but the fact that he featured in the TV series brought awareness of Trunki to the public. As a result, consumers, distributors and retailers got interested in the product. This led to a tremendous increase in sales of Trunki within a short period of time. By June 2012, Magmatic Ltd had sold over 1,300,000 suitcases and made £ 6m-Turnover and a profit of £ 1m in the previous year (Bourret, 2012).

This paper analyses various issues affecting the production, sales and marketing of Trunki. a) The identifiable risks for Trunki, how can they be planned for and the risk reduced As in any other business enterprises, the sale of Trunki by Magmatic Company is exposed to various risks, which may negatively affect its performance. One of the major risks that this company may be facing currently is financial risk. According to BBC (2009), Law funded the growth of this investment mainly through debt financing from an angel investor and from financial institutions such as Prince's commercial banks and the Small Firm Loan Guarantee.

The company has not completely re-paid the loans and interests and therefore, it is exposed to the risk of inability to re-pay, in case sales and cash flow level reduces greatly enormously (Besley & Brigham 2008, p. 586). This risk may be counteracted by the continued strong performance of this company. Additional financial risks associated with Trunki relates to any changes that may occur in the tax and foreign exchange rates, which may adversely affect the company’ s returns.

These changes are external to the business and hence, difficult to control. Trunki is also exposed to a strategic risk associated with the possibility of change in consumer tastes and preferences in the future. This risk can be counteracted by establishing measures that will help to keep track of consumer feedback (Besley & Brigham 2008, p. 586). Finally, this company is exposed to the risk of compliance with bureaucratic or legislative rules and regulations in all the countries where it operates. These include environmental concerns and employee protection regulations.

Such risks can be mitigated through gaining awareness of the rules and regulations governing the industry and remaining compliant to them in all countries where this company operates (Besley & Brigham 2008, p. 587). b) The possibilities of failures for Trunki, their identification, their outcomes and their effects The possibilities of failure for Trunki are currently low due to its strong performance in recent years and the high possibility of future success in the global market (Smarta, 2012). However, this business may fail under various circumstances. For example, a change in the tastes and preferences of consumers and failure by the company to investigate market changes, leading to lower sales for Trunki.

Also, new competitors may rise, with better products and services compared to Trunki’ s products, thereby snatching the market share for Trunki. Additionally, new laws and regulations may be developed restricting the production and/or sale of Trunki. Under such situations, the company would record negative returns. The declined financial performance would eventually lead to the collapse of this business ((Besley & Brigham 2008, p.

598).

References

Ajami, R A & Goddard, G J 2006, International business: Theory and practice, M.E. Sharpe, Hampshire.

BBC 2009 “Dragon’s Den” Viewed 14, January 2013,

Besley, S & Brigham, E F 2008, Principles of finance, Cengage Learning, New York.

Bourret C 2012, “Magmatic (Trunki): Rob Law MBE” Viewed 14, January 2013,

Ferrell, O C & Hartline, M D 2010, Marketing strategy, Cengage Learning, New York.

Korudi, J 2009, Business Strategy: A guide to taking your business forward, John Wiley & Sons, London.

Shimp, T A 2008, Advertising, promotion, and other aspects of integrated marketing communications, Cengage Learning, New York.

Smarta 2012, “Rob Law – Trunki” Viewed 14, January 2013,

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