Meeting Our Business Owner

By Gary –  From Laktawan, it takes 20 minutes to the Concordia. Beside the intersection in Concordia, there is a shop called RTW store.

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I am very nervous about meeting a business in the beginning, although I know it is the purpose of the whole course, that is, try to help a local business with the knowledge learning in the school. I wonder if I really have the ability to help them. I also wonder if the three weeks is too short to give some constructive advice. Furthermore, we didn’t meet her on the meeting day. She seemed very busy. We tried to meet her the next day, but she was still not available. We sat on the bench and waited for 5 hours. Maybe it is ridiculous, I still come up with the idea that she is going to hide from us and I have nothing to do until the end of the program.

Finally, and fortunately, we met her on the third day.
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Berna is a very friendly mother who has three little kids. The oldest one is only 8 years old. She has another occupation as an insurance agent in Iloilo and that is why she cannot show up for these days. She talks to us about her dream, which is to expand her store into two-story buildings and open a branch store in San Miguel. Also, in order to get more stable income, her husband planned to Qatar to meet his cousin and work there. He will not come back until I graduate from the university, which means she will finally meet her husband again after two years. I am sorry about hearing this, but at the same time I admire their eager and perseverance in making their children lead more decent life and her ambition to make her business thrive. I believe she can make it because she has the talents and also disciplines. She had successfully made the business grow from one to two by using only 10,000 pessos. She separated her business expense and personal expense and kept a good record of sales and gross profits already. Having the experience of being a sales agent before, she also knows how to deal with customers and give them discounts if possible.
But apart from her current success, we also find some room to improve. There exist three major problems: inventory system, cash flow and human resource management.
Despite the good sales record, her inventory system is not complete. Because she needs lots of time to write down every inventory by hand without the assistance of computer, it is difficult to track different kinds of items and products and easy to miss some small gadgets without notice. Furthermore, because she has another occupation as an insurance agent in Iloilo, she is too busy to record the inventory regularly. As a result, she delegates this job to her helper, Den Den. It makes especially trust critical in sustaining the business system because she needs to spend much spare efforts and time to check all the inventory record by herself again if any incidents appear. Just now, Den Den forgot to write down one entry of cellphone and it hurt the relationship between Berna and Den Den even it is just an accident.
Also because the store does not locate in the big city, the number of customers every day is very volatile. Sometimes there are many people in one day, but sometimes it takes a few hours to wait for one customer to come. It causes unstable cash flows. Although it sounds quite reasonable to reinvestment all the revenues and borrow capital from financial institutions in hope of faster expansion, there are limited ways to get capital here. The normal bank here costs too much interest rates and has too much requirements difficult to fulfill for Berna’s small business. Furthermore, unexpectedly, microfinance is also rejected by Berna because the interest rate is still too high, about 20 percent a month despite already lower than normal bank’s, and the repayment time specified in the contract is too strict for business expansion. According to our conversation, Berna’s capital resources come from her family, especially her sister-in-law since the transaction costs involved are the lowest. It requires only trust, and has lowest interest rates and flexible repayment time. But as it borrows from family,  it may bear too much risks and threaten the business and also the life of the family with making all the cash stuck into inventory if any unpredictable emergencies happen. So after hearing that Berna uses all her business revenues to buy the inventory stock and was sometimes under strain with cash flow, we think that maybe it is better for her to keep a portion of cash in hand, in order to hedge.
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As for human resource management, there are also some problems. Recently, the relationship between Berna and Den Den deteriorated because the revenue of the business dropped by 50 percent and Den Den forgot to record the entry. Although it seems that the surrounding businesses also suffered from decreasing profits, the problem of monitoring cannot be ignored. Furthermore, due to the same monitoring problem, shirking appears. Instead of greeting coming customers like Berna, Den Den chooses to sit on her chair and does nothing, and it makes customers feel dissatisfied. Some customers don’t even come when Berna is not here. Some customers come to Berna’s house to pay and buy goods. Although Berna was furious about Den Den’s inertia, I think it is quite reasonable for people to shirk with no further supervision especially under the fixed monthly payment with the medium wage of 4000 pessos. I am not to say that the wage is too low because Den Den’s job is not difficult and easy to replace, but just under the fixed monthly wage, people tend to just keep chill and fulfill the time instead of doing truly productive things. In the developed countries, since the labor market is less segmented and information asymmetry is less severe, if Berna is not satisfied with Den Den’s working performance, she can easily fire her and find a new person to train. But in Guimaras, it is difficult to find a new employee. If Berna fire Den Den now and post for finding a new employee outside the store, it is unknown for her to await even an applicant to come and interview. Berna employed Den Den actually by her friend’s introduction.We also have asked for Berna whether it is possible to find another employee from a job agency, but she said that it costs too high for her to post there. As a result, under the aforementioned constraints, and we also aims at transferring customers’ recognition from Berna herself to the store, we propose to create some simple rules for Den Den to memorize and observe like greeting greeting customers within three seconds and asking their needs. Hearing Den Den wants to open her own store in the future, we also suggest that Den Den can learn and observe the customers in preparation for the future. I actually do not know whether this solution is effective or not, since it takes long time to foster the culture and intrinsic incentives for learning.  We can only hope this solution to mitigate the problem.
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