Theory of Business (TOB) – What is it? Explained with case study of Sassy Scrubs

The main problem areas that Doran focuses on are Money management and Planning. It would be interesting to reflect on how the lack of a well defined Theory of Business (TOB) must have affected Sassy Scrub’s failure. Looking at the circumstances under which the company originated, it is hard to believe that it had a well formulated TOB. Analyzing various resources, the initial TOB (the current company has changed a lot in its outlook and services), might have been as follows –

• Designing and producing fashionable scrub suits that is most comfortable for varied consumer segments (nurses, doctors, surgeons etc.) during their official working hours and on special occasions, focusing on “cottage industry model”. (Neal J., 2000)

A well defined TOB will focus on changing business environments (markets, customers, technology, financial conditions and society), company mission and core competencies required to meet the mission. Sassy Scrub’s initial TOB has the following positive aspects –

• It had identified the major market segment.
• The main goal or mission i.e of producing fashionable and comfortable scrub suits is identified.

When it comes to adaptability to change and core competencies, the following drawbacks can be noted –

• It had the necessary technology and creativity to produce goods, but lacked the management skills to run the business profitably.
• Focus on too many directions without strong foundation in measuring, monitoring and controlling progress. Deviates from the initial goal of remaining as a cottage industry.
• Most importantly, it lacked the business model which can adapt to constant changes in environments such as late receivables, reduced cash inflow, increased sales, growing customer base and thus multiplied requirements in new designs and appearance.

The following ideas might have been considered in the plan to setup a flexible TOB.

• Set up plan for diversification into large scale industry from a cottage industry considering all aspects of management.This would have helped to tackle the unexpected growth rate.
• Alternate sources for building company capital by alliances and contacts.
• Establishing Just-in-Time manufacturing technology which is most suited for a medium sized manufacturing firm.

References:

1.Neal J. (n.d.). Entrepreneur Cleaning Up by Making Medical Scrubs. Retrieved on April 07, 2007 from http://www.thefreelibrary.com/