Managing firms throughout the business cycle A Davis Service Group case study
Page 1: Introduction
The first decade of the 21st century has been a rollercoaster ride for economic activity. Business confidence was high at the start of the millennium. This was particularly fuelled by the growth of the internet as a means of buying and selling. A lot of companies have developed websites and there has been a rapid increase in online purchasing.
At the same time a number of countries opened up their markets to international trade. For example, Poland and the Baltic States of Estonia, Latvia and Lithuania joined the European Union. China and India have also grown to become world economic forces.
However, during 2008/9 the rapid growth of world markets came to a halt. Many of the problems stemmed from banks lending money to risky borrowers. When some of these failed to pay back this led to a rapid loss of confidence in the banking system. Banks became reluctant to lend - for example, for mortgages or business loans. This led to a sudden dip in people spending which reduced demand for products and services. The effect was catastrophic for many businesses. Many famous companies closed down. Perhaps the best known high street business to suffer was Woolworths which closed its doors in March 2009.
The Davis Service Group provides textile maintenance services in the UK and Europe. This includes linen hire, work-wear rental, dust control mat, laundry and washroom services. The Group consists of two main operating companies each with its own directors and executive team.
These two operating companies delegate responsibility and authority to profit centres throughout the Group. Providing essential services enables the company to grow when economic activity is expanding in its various markets. For example, it has recently been growing quickly in Poland. At the same time because the services it provides are so essential to other businesses it manages to maintain sales in times of falling demand.
This case study examines how Davis Service Group, one of Britain's key service companies, has managed the recent change in the business cycle.