strategic management case analysis
TRANSCRIPT
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De La Salle University - Manila
Master of Business Administration
In partial fulfillment of the requirements forStrategic Management Course
(BUS835M)
SSI Group Inc. CASE ANALYSIS
Submitted to:
Professor Joseph Pangilinan
Submitted by:
Karen G. Supapo
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EXECUTIVE SUMMARY
SSI Group Inc. holds majority the luxury brands to be exclusively distributed in the
Philippines. Being in a highly competitive market, SSI Group Inc. needs to consider new entrants
in the market brought about by the ASEAN Integration and the Bilateral Trade Agreements of
the Philippines and other States.
SSI Group Inc. as an institution in the specialty retail industry has a competitive
advantage over its competitors for its services it delivers to its valued clients.
However, due to its large investment for the consolidation of companies and its strategy
to open its corporation to the public, its financial strength became weak for 2013 and 2014. As
such, its generic strategy is on focus differentiation, complementing it with competitive strategies
to enhance its financial strength while maintaining its competitive advantage for it to become
aggressive in the industry.
Indeed, SSI Group Inc. will need to boost its sales through the efforts of the sales and
marketing departments. Also, its finance department and operations will roll out a plan that will
make the strategy financially supported and making its operation more efficient.
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ACKNOWLEDGEMENT
To Almighty God, I trust and believe in you! Thank you for all the blessings!
To the Department of Foreign Affairs Office of Legal Affairs, especially Division I
headed by Atty. John Reyes, Atty. Edgar Adolfo Guibone, and Ms. Cristina Telan, thank
you for the understanding, consideration and unwavering support in allowing me to finish this
paper.
To my parents, thank you so much and I love you both!
To the JD-MBA Batch 2017, this is it! We are almost done.
To my MBA and JD Professors, thank you for the wisdom.
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TABLE OF CONTENTS
!"!#$%&'! )$**+,- ........................................................................................................................ //
ACKNOWLEDGEMENT ................................................................................................................... ///
TABLE OF CONTENTS .................................................................................................................... /0
I. INTRODUCTION .....................................................................................................................1A. Purpose of the Case Study .................................................................................................................. 1 B. Why SSI Group Inc.? ........................................................................................................................... 1
II. AREAS OF CONSIDERATIONS ..........................................................................................2A. External Environment Analysis (Pestled, Porter’s, EFE) ............................................................ 2
1. The Specialty Retail Industry $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ % 2. Analysis of Present Task Environment (Porter’s Five Forces Analysis) $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ % 3. Analysis of Potential Changes in the Macroenvironment (PESTLED) $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ & 4. Threats and Opportunities (External Factor Evaluation) $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ' 5. Industry and Competitive Analysis $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ( Source: Euromonitor International (2014) Luxury Goods in the Philippines $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )* 6. Analysis of the Macroenvironment $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )* 7. Broader Societal Expectations $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ))
B. Internal Environment Analysis (Value Chain, Financial Analysis) ........................................ 11 1. Company Profile $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )) 2. Organizational Chart $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )% 3. Value Chain Analysis $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )% 4. Financial Statement Analysis $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ )+
C. Analysis of Internal Factors ............................................................................................................ 21
III. STRATEGIC PLAN ............................................................................................................... 23A. Vision And Mission Statement (Collins And Porras) ................................................................ 23
1. Vision Statement $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %, 2. Mission Statement $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %, 3. Analysis of the Vision Statement using Collins and Porras Framework $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %, 4. Analysis of the Mission Statement $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %-
B. Objectives ............................................................................................................................................. 24 C. Evaluation of Present Corporate Strategies (TOWS Analysis) ............................................... 25 D. Proposed Corporate Strategies (SPACE Matrix) ....................................................................... 26
1. Competitive Advantage $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %. 2. Space Matrix $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ %'
IV. FUNCTIONAL AREA STRATEGIES .............................................................................. 37A. Marketing ............................................................................................................................................ 37
1. Identifying Target Marketing Segments $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,* 2. Marketing Objectives $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,) 3. Marketing Plan $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,)
B. Operations ........................................................................................................................................... 32 1. Operational Objectives $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,% 2. Operational Plans $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,%
C. Finance ................................................................................................................................................. 32
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1. Financial Objectives $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,% 2. Financial Plan $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,,
D. Information Management ................................................................................................................ 33 1. Information Management Objective $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,, 2. Information Management Plan $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,,
V. STRATEGY EXECUTION .................................................................................................. 34VI. FINANCIAL PROJECTIONS ............................................................................................. 35
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)
I. INTRODUCTION
A. Purpose of the Case Study
The purpose of the study is to determine the present position of SSI, analyze its
environment and know its strengths and weaknesses to come up with a more relevant strategy
that will answer the existing problems and help the company become well prepared for the future
to have a sustainable development.
B. Why SSI Group Inc.?
SSU Group Inc. is the largest distributor of luxury brands in the Philippines. It is the
exclusive distributors of well-known brands such as Lacoste, Prada, Gucci, and Hermes to name
a few. As an established company, it employs approximately 7,000 employees from store
personnel to executive and managerial personnel. As the largest distributor of high-end brands in
the Philippines, it is in the position to introduce premium goods in the Philippine market.
Likewise, the researcher is a former internal auditor of the SSI Inc. a year before it
decided to be a public corporation and consolidate itself as SSI Group Inc.
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II. AREAS OF CONSIDERATIONS
A. External Environment Analysis (Pestled, Porter’s, EFE)
1. The Specialty Retail Industry
In general, the specialty retail industry consists of the apparel, computer and electronics,
home improvement, specialty stores, automotive and hoe furnishing retail sectors.1 The apparel
retail segment accounts for a further 16.2% of the industry. Its main activity is the operation of
retail luxury brands.2
2. Analysis of Present Task Environment (Porter’s Five Forces Analysis)
a) Supplier Power
Source: MarketLine (2014)
The key suppliers in this industry are clothing manufacturers and wholesalers. The
wholesale and clothing manufacturing sectors are fairly fragmented. Supplier fragmentation is
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0
1
2
3
4
5Differentiated input
Forward integration
Importance of quality/
cost
No substitute inputs
Oligopoly threatPlayer dispensability
Player independence
Supplier size
Switching costs
Supplier Power in the Apparel Retail Industry in
the Philippine 2014
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,
made greater by the ability of retailers to source from foreign manufacturers. Although retailers’
switching costs are not very high, switching includes the risk of choosing a supplier with a more
extended supply chain or who may not be able to cope with sudden changes in demand on the
market. The lack of diversity between suppliers weakens their power as the apparel retail
industry is highly important to their business. As apparel manufacturing is labor intensive due to
difficulty of automating processes, the existence of minimum wage in many countries slightly
increases the power of suppliers of labor. Overall, supplier power in this industry is assessed as
moderate.
b) Buyer Power
Source: MarketLine (2014)
According to MarketLine (2014), buyer power in the apparel industry is weakened by the
small size of buyers: virtually all buyers are individual consumers. Likewise, retailers tend to
have large numbers of individual customers, which further weakens buyer power, as the loss of
one is unlikely to have a significant impact on revenues.
Brand loyalty is not the absolute overriding factor in decision making of buyers despite
their prevalent brand consciousness. Buyer power is enhanced by a high level of choice, which is
generated by the absence of switching costs. Brand loyalty within the top end of the apparel
*
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Buyer Power in the Apparel Retail Industry inthe Philippines 2014
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retail industry is connected more with the particular designer than the retailer, although some
labels also have their own retail operations. The depth of price sensitivity varies regionally,
although clothes are perceived as closely linked to lifestyles and social status, which grants
retailers the opportunity to influence consumer behavior. Buyer power is weakened as retailers
can differentiate themselves fairly strongly through the styles of clothing offered and its price
range. As apparel is an essential item for consumers and the players are significantly exposed to
the penetration of marking icons and images into most forms of media.
Despite consumers lacking financial muscle, the position of retailers at the end of the
value chain makes it impossible to integrate forward. This means that they are obliged to offer
buyers what they demand, in a market often subject to unpredictable and rapid changes in
fashion. These factors strengthen buyer power. Overall, buyer power is assessed as moderate as
illustrated above.
c) Degree of Rivalry
Source: MarketLine (2014)
The Philippines’ retail industry is typically composed of large numbers of similar retailers.
Nonetheless, large small industry players can still compete in this industry.
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d) New Entrants
Source: MarketLine (2014)
Based on past sales by large retailers, there is an increasing trend on the consumption,
which means that the industry is growing despite the worldwide recession and because of the
influx of dollars brought about by the BPO industry and the remittances from OFWs. Likewise,
barriers to entry are not high, with capital requirements being low enough for individuals to
enter. However, a small number of large corporations, such as Fox Wizel and Fast Retailing,
account for a significant share of total market revenues. They benefit from scale economies that
allow them to build brands in multiple retail outlets, and greater buying power when negotiating
with suppliers. The latter allows them to compete more intensely on price. There is little
regulation as such for retailers in the market, but there are some self-imposed conventions related
to child labor, working conditions and workers’ wages. New entrants who are known to have
items manufactured outside of such conventions may lose customers and suffer long-term
reputational damage. Low switching costs for buyers and a low level of product differentiation
make it easier for new entrants to compete with existing players. Overall, there is a strong threat
of new entrants to this market.
0
1
2
3
4
5Distrbution accessible
Incumbents
acquiescent
Little IP involved
Little regulation
Low fixed costs
Low-cost switchingMarket growth
Scale unimportant
Suppliers accessible
Undifferentiated
product
Weak brands
New Entrants in the Apparel Retail Industry in
the Philippines 2014
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.
e) Substitutes
Source: MarketLine (2014)
As there are no substitutes to apparel, there are alternatives to retail. It can be purchased
directly from the manufacturer as opposed to the conventional distribution chain. This is
facilitated by the growth of online sales. All major apparel retailers now have their own online
stores as there is an increased consumer acceptance of the internet, as an alternative shopping
channel.
A growing number of “pureplay” online fashion stores have emerged in the market, as
they look to take advantage of lower running costs from not having to pay for the overheads
incurred by running a high street store. The online retail avenue opens the door for manufacturers
who may be tempted by the opportunity of selling directly to end users without the need for the
retailer.
Homemade and custom-made (couture) clothing are also niche alternatives to the retail of
ready-made clothes. Counterfeit clothing can be a significant threat to the revenues of
manufacturers. Another option is purchasing second-hand clothing from charity shops and
internet sites such as eBay.
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Threat of Substitutes in the Apparel Retail
Industry in the Philippines 2014
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The threat of substitutes to the apparel retail industry is assessed as weak overall.
3. Analysis of Potential Changes in the Macroenvironment (PESTLED)
a) Political
ASEAN countries will have its full integration as one economic community by 2016.
This is brought about by the desire the all ASEAN member countries to boost its economy and
have a free trade between member states.
b) Economic
The Philippines is a booming economy, as it no longer considered as a sick man in Asia.3
c) Social
Consumers desire to upgrade their lifestyle through luxury goods as until now, one’s status or
social class is being attributed to brands bought by consumers. There is also an increasing trend
for disposable incomes
d) Technological
Though internet retailing is emerging in other countries, this is not the case in the
Philippines as consumers prefer store-based retailing when it comes to luxury items as
proliferation of fake goods sold in the internet is prevalent.4
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e) Law
As the Accelerated Integration of the ASEAN members will be fully implemented in
2016, a lot of investors from non-ASEAN countries are eyeing to invest in the Philippines. As
such, bilateral trade agreements are created between countries promoting free trade and exchange
of knowledge.
f) Environment
As more and more countries are experiencing the effect of climate change, a pressure to
be socially responsible for the environment pushes the textile and retail industry to be conscious
in closing the loop from acquiring raw materials to recycling its products to avoid dumping it as
garbage.
g) Demographics
Based on Marketline, the total population in the Philippines from 2011-2014 increased in
a constant rate of 1.7% year-on-year as indicated in Table 1 below:
Table 1. Population Growth in the Philippines
Year Population
(in millions)
%
Growth2010 94.0 1.90%
2011 95.6 1.70%
2012 97.3 1.70%
2013 99.0 1.70%
2014 100.7 1.70%Source: MarketLine (2014)
Based on the analysis of Euromonitor International, the Philippines’ middle class will
expand by 24.9% by year 2030.5
4. Threats and Opportunities (External Factor Evaluation)
+
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5. Industry and Competitive Analysis
a) Strategic map
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b) Market definition
The apparel retail industry consists of the sale of all menswear, womenswear and
childrenswear. The menswear market includes men’s activewear, casual wear, essentials, formal
wear, formalwear-occasion and outerwear. The womenswear market includes women’s
activewear, casual wear, essentials, formal wear, formalwear-occasion and outerwear. The
childrenswear market includes baby clothing, boys activewear, boys casual wear, boys essentials,
boys formalwear, boys formalwear-occasion, boys outerwear, girls activewear, girls casual wear,
girls essentials, girls formalwear, girls formalwear-occasion, girls outerwear and toddler
clothing.
c) Market distribution
Clothing, foot/sportswear & accessories retailers form the leading distribution channel in
the Filipino apparel retail industry, accounting for a 59.7% share of the total industry’s value as
indicated in the table below:
Channel % Share
Clothing, foot/sportswear & accessories retailers 59.7%
Department Stores 27.7%
Hypermarket, supermarket & discounters 8.2%
Discount, variety & general merchandise retailers 3.3%
Other 1.1%
Total 100.0%Source: MarketLine
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)*
Source: Euromonitor International (2014) Luxury Goods in the Philippines
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6. Analysis of the Macroenvironment
External Environment Effects on Barriers,
Determinants and
Factors
Effects on 5-Forces Conclusion
(Threat or
Opportunity
P Accelerated integration of ASEANEconomic Community
Number of key playersin the market will
increase
The degree of rivalry will be intensified as the
competition becomes stiffdue to new entrants
Threat
E Rising economy of the Philippines Buyer size increases asmore Filipinos can now
Buyer power increases Opportunity
LVMH Moet
Hennessy, 17.8
Lacoste SA, 7.7
Rolex SA, 5.7
Others, 38.4
Company Shares of Luxury Goods: % Value 2014
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))
afford luxury goodsdue to rising disposable
income of middle-income earners
S Rising living standards of the Filipinos
brought about by the increase of theirdisposable income
Financial muscle of
consumers strengthen
Buyer power increases as
it demands quality andselection of choices
Opportunity
T Internet usage will continue to grow andadapted by Filipinos
Internet-based sales asalternative to retail
Increases threat ofsubstitutes of store-based
retailing
Threat
L Relaxing of laws for economic trades
between ASEAN countries and othercountries thru bilateral trade agreements
Number of key players
in the market increases
Increases new entrants in
foreign markets
Opportunity
E Growing concerns to act for climatechange
Players in the industryare pressured to self-
regulate as a matter of
concern for theenvironment
Threat of new entrantsdecreases
Opportunity
D The population in the Philippines has an
average 1.7% growth
Oligopsony threat
decreases
Buyer power decreases Opportunity
7. Broader Societal Expectations
a) Corporate Social Responsibility
Key players in the textile and apparel industry are now conscious on how its products inthe after sales affect the environment and how it should be address by these key players.
B. Internal Environment Analysis (Value Chain, Financial Analysis)
1. Company Profile
SSI Group, Inc. is the leading specialty retailer in the Philippines with an extensive
portfolio of established international brand. SSI Group Inc. leads the Philippine specialist retail
market in terms of the size and breath of its international brand portfolio and store footprint. It
was incorporated in 2007 as Casual Clothing Specialists Inc. (CCSI) and undertook restructuring
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in 2014. Nonetheless, the operations began in 1987 as Stores Specialists Inc, now a subsidiary of
SSI Group Inc with a retail pedigree dating back to the founding of the Rustan’s Group in 1951.
Brand management and specialty retailing is the Group’s principal business. The Group’s
position as exclusive franchisee of well-known and prestigious international brands and its
extensive and diversified portfolio enable it to secure prime retail space appropriate to the
brands. SSI Group’s brand portfolio can be broadly classified into five categories: 1) luxury and
bridge, 2) casual, 3) fast fashion, 4) footwear, accessories and luggage, and 5) others. SSI Group
manages more than 106 brands, which includes Hermes, Prada, Gucci, Michael Kors, Tory
Burch, Jimmy Choo, Zara, and Burberry among others.
2. Organizational Chart
3. Value Chain Analysis
a) Primary Activities
(1) Supply Chain Management
100%
100%
60%
50%
60%
Samsonite
Philippines, Inc. (21)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
40%
50%
100%
100%
SSI Group, Inc. (1)
Stores Specialists, Inc. (2)
Specialty
Investments, Inc. (3)
Global Specialty
Retailers, Inc. (4)
SIAL SpecialtyRetailers, Inc. (5)
SIAL CVSRetailers Inc. (6)
PFM (20)
Rustan Specialty Concepts,
Inc. (7)
Specialty Office Concepts,
Inc. (8)
Footwear Specialty Retailers, Inc. (9)
International Specialty Concepts, Inc. (10)
International Specialty Fashions, Inc. (11)
International Specialty Retailers, Inc. (12)
International Specialty Wear, Inc. (13)
Luxury Concepts, Inc. (14)
Rustan Marketing Specialists, Inc. (15)
Specialty Food Retailers, Inc. (16)
Casual Clothing Retailers, Inc. (17)
Fastravel Specialists Holdings, Inc. (18)
International Specialty Apparel, Inc. (19)
Varejo
Corporation
SamsoniteCorporation, Inc.
50%50%
SKL International, Limited (20)
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),
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(2)
Operations
SQ4 C47421A 0171M42 J171M4= 5Q4 ?F4215"?7$ SQ4 d241 0171M42= 124 51=3 5?
?#42=44 =4#421A =5?24= <7;42 Q42 =<F42#"="?7$ EE: C2?<F :7G$ Q1= =45 <F =5?24= "7 5Q4
@?AA?L"7M A?G15"?7=
(3) Distribution
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=<F42#"="?7 ?@ 5Q4 F2"7G"F1A @2?J 5Q4 A1>?<5 17; Q?L 5Q4 F2?;<G5= 124 12217M4; "7 5Q4
=4AA"7M 1241$ EE: C2?<F :7G$ A41=4= 17 1241 "7 J1AA= L"5Q =F4G"@"G15"?7= <7;42 =<F42#"="?7 ?@
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D> "5= ?L7 47M"7442"7M ;4F125J475$ 6"34L"=4[ EE: C2?<F :7G$ Q1= 5Q4 @?AA?L"7M 7<JD42 ?@
D217;=[ =5?24= 17; M2?== =4AA"7M =F1G4B
As of December 31
2012 2013 2014
Number of Brands 81 91 106
Number of Stores 524 597 723
Gross selling space 82,593 98,126 133,640
Growth in Gross Selling Space (%) 17.6 18.8 36.2
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)-
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U?2F?215"?7[ EQ17M2"P61 U?2F?215"?7$
(4) Sales and Marketing
EE: C2?<F :7G$ Q1= 1 012345"7M _4F125J475 5Q15 "= 51=3= 5? G?7521G5 L"5Q @1=Q"?7
J1M1N"74=$ :5 1A=? G?7;<G5= 4#475= 5? F2?J?54 5Q4 D217;= ?2 LQ474#42 A1<7GQ"7M 1 74L
G?AA4G5"?7$ EE: C2?<F :7G$
(5) Service
Customer satisfaction is very important to SSI Group Inc. It conducts trainings for its
sales consultants and cashiers. As an after-sales customer service, SSI Group Inc. offers a
significant longer period for its return and exchange policy. It also issues gift receipts with a 30
days expiration dates for products bought as gifts. It also has service centers for some items or
communicates to the service centers of every brand it handles like Charriol. It also has gift cards
and loyalty cards.
b)
Supporting Activities
(1) Product Research and Development, Technology and
Systems Development
SSI Group Inc. has no research and development. For its inventory management, SSI
Group Inc. uses SKU system. It uses POS system for its transactions.
(2) Human Resource Management
E1A4= U?7=<A5175= 124 <=<1AA> Q"24; 1= G?7521G5<1A 17; G17 ?7A> D4 1D=?2D ?2
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@2?75A"74 17; "7 5Q4 D1G3 ?@@"G4 ?2 =<FF?25 M2?<F$
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)+
(3) General Administration
0?=5 D217;= Q1#4 17 1GG?<75"7M =>=54J 4VG4F5 @?2 W42J4= 17; K#AM12" 1= "5 "=
J17<1AA> 24G?2;4;$
4. Financial Statement Analysis
a) Vertical Analysis
Stores Specialists Inc.
COMPARATIVE STATEMENT OF FINANCIAL POSITIONAs of years ended December 31, 2012, 2013 and 2014
(Amount In Pesos)
Common-size
2012 2013 2014 2012 2013 2014
ASSETS
Current Assets
Cash and Cash Equivalents 1,300,000,000.00 1,134,749,837.00 2,527,828,209.00 14.16% 9.55% 14.00%
Trade and other receivables 375,411,682.71 499,297,538.00 584,872,648.00 4.09% 4.20% 3.24%
Merchandise inventory 5,400,000,000.00 5,898,907,758.00 7,980,070,099.00 58.80% 49.66% 44.19%
Amounts owed by related parties - 8,668,359.00 6,941,758.00 0.00% 0.07% 0.04%
Prepayments and other current
assets 226,600,000.00 331,649,745.00 590,339,738.00 2.47% 2.79% 3.27%
TOTAL CURRENT ASSETS 7,302,011,682.71 7,873,273,237.00 11,690,052,452.00 79.51% 66.28% 64.73%
Noncurrent Assets
Investment in an associate - 42,937,695.00 49,117,530.00 0.00% 0.36% 0.27%
Interests in joint venture 136,900,000.00 369,074,715.00 479,455,513.00 1.49% 3.11% 2.65%
Property and equipment 1,300,000,000.00 2,592,700,507.00 4,680,064,601.00 14.16% 21.83% 25.91%
Deferred tax assets - 185,264,695.00 254,727,150.00 0.00% 1.56% 1.41%
Security deposits and construction bonds 444,900,000.00 565,049,456.00 806,968,668.00 4.84% 4.76% 4.47%
Other noncurrent assets - 249,618,459.00 99,591,385.00 0.00% 2.10% 0.55%
TOTAL NONCURRENT
ASSETS 1,881,800,000.00 4,004,645,527.00 6,369,924,847.00 20.49% 33.72% 35.27%
TOTAL ASSETS 9,183,811,682.71 11,877,918,764.00 18,059,977,299.00 100.00% 100.00% 100.00%
LIABILITIES AND EQUITY
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).
Current Liabilities
Trade and other payables 6,600,000,000.00 3,497,635,725.00 3,248,120,916.00 71.87% 29.45% 17.99%
Short-term loans payable 672,500,000.00 3,810,985,777.00 3,596,635,490.00 7.32% 32.08% 19.91%
Current portion of long-term debt - 108,333,333.00 328,514,924.00 0.00% 0.91% 1.82%
Amounts owed to related parties - 155,236.00 24,220.00 0.00% 0.00% 0.00%
Deferred revenue - 22,507,779.00 24,100,045.00 0.00% 0.19% 0.13%
Income tax payable - 210,269,251.00 192,460,335.00 0.00% 1.77% 1.07%
TOTAL CURRENT
LIABILITIES 7,272,500,000.00 7,649,887,101.00 7,389,855,930.00 79.19% 64.40% 40.92%
NONCURRENT LIABILITIES 511,311,682.71 1,461,523,238.00 1,798,261,376.00 5.57% 12.30% 9.96%
TOTAL LIABILITIES 7,783,811,682.71 9,111,410,339.00 9,188,117,306.00 84.76% 76.71% 50.88%
EQUITY 1,400,000,000.00 2,766,508,425.00 8,871,860,253.00 15.24% 23.29% 49.12%
TOTAL LIABILITIES AND
EQUITY 9,183,811,682.71 11,877,918,764.00 18,059,977,559.00 100.00% 100.00% 100.00%
Stores Specialists Inc.
COMPARATIVE STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended December 31, 2012, 2013 and 2014
(Amount In Pesos)
Common-size
2012 2013 2014 2012 2013 2014
NET SALES 11,609,762,839.00 12,787,581,909.00 15,213,323,956.00 100.00% 100.00% 100.00%
Costs of Goods Sold
Cost of Merchandise sold
Merchandise inventory, beginning 4,651,662,778.00 5,394,140,577.00 5,898,907,758.00 40.07% 42.18% 38.77%
Net purchases 6,914,021,561.00 6,613,957,018.00 8,200,682,848.00 59.55% 51.72% 53.90%
Cost of merchandise available for sale 11,565,684,339.00 12,008,097,595.00 14,099,590,606.00 99.62% 93.90% 92.68%
Merchandise inventory, ending 5,394,140,577.00 5,898,907,758.00 7,980,070,099.00 46.46% 46.13% 52.45%
Cost of Merchandise sold 6,171,543,762.00 6,109,189,837.00 6,119,520,507.00 53.16% 47.77% 40.22%
Personnel costs 68,048,461.00 86,919,485.00 180,237,387.00 0.59% 0.68% 1.18%
Advertising 145,992,013.00 149,465,083.00 162,641,469.00 1.26% 1.17% 1.07%
Royalty fees 45,367,456.00 47,728,817.00 83,460,981.00 0.39% 0.37% 0.55%
travel and transportation 28,057,188.00 31,880,439.00 45,556,239.00 0.24% 0.25% 0.30%
Rent 21,387,393.00 26,036,041.00 33,588,866.00 0.18% 0.20% 0.22%
Depreciation and amortization 6,569,806.00 12,856,742.00 19,889,501.00 0.06% 0.10% 0.13%
Security and safety 3,365,634.00 2,502,001.00 10,192,718.00 0.03% 0.02% 0.07%
Utilities 5,361,759.00 8,374,478.00 11,105,076.00 0.05% 0.07% 0.07%
Repairs and maintenance 1,138,783.00 4,411,945.00 7,183,052.00 0.01% 0.03% 0.05%
Insurance 1,171,652.00 1,104,727.00 1,843,788.00 0.01% 0.01% 0.01%
Supplies and maintenance 1,158,296.00 976,024.00 1,463,570.00 0.01% 0.01% 0.01%
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)&
Taxes and licenses 150,051.00 144,913.00 404,564.00 0.00% 0.00% 0.00%
Outside services 818,566.00 592,070.00 45,825.00 0.01% 0.00% 0.00%
Others 10,132,038.00 13,401,086.00 3,711,909.00 0.09% 0.10% 0.02%
Total Cost of Goods Sold 6,510,262,858.00 6,495,583,688.00 6,680,845,452.00 56.08% 50.80% 43.91%
GROSS PROFIT 5,099,499,981.00 6,291,998,221.00 8,532,478,504.00 43.92% 49.20% 56.09%
Operating expenses
Selling and Distribution
Rent 1,126,350,766.00 1,418,371,779.00 1,705,386,223.00 9.70% 11.09% 11.21%
Personnel costs 729,985,628.00 943,124,768.00 1,019,935,414.00 6.29% 7.38% 6.70%
Depreciation and amortization 528,463,537.00 553,875,321.00 917,892,527.00 4.55% 4.33% 6.03%
Utilities 353,575,011.00 435,557,082.00 554,521,919.00 3.05% 3.41% 3.64%
Credit card charges 172,681,925.00 143,186,687.00 270,505,097.00 1.49% 1.12% 1.78%
Supplies and maintenance 167,188,847.00 234,295,289.00 250,089,287.00 1.44% 1.83% 1.64%
taxes and licenses 115,672,645.00 134,221,490.00 162,454,489.00 1.00% 1.05% 1.07%
security services 100,936,360.00 137,423,007.00 170,587,881.00 0.87% 1.07% 1.12%
advertising 101,668,541.00 134,895,271.00 100,531,934.00 0.88% 1.05% 0.66%
global marketing contribution fee 54,651,819.00 71,234,407.00 93,987,925.00 0.47% 0.56% 0.62%
repairs and maintenance 41,738,227.00 45,984,020.00 69,897,861.00 0.36% 0.36% 0.46%
travel and transportation 31,330,737.00 35,494,763.00 53,590,474.00 0.27% 0.28% 0.35%
delivery and freight charges 50,727,533.00 39,595,133.00 41,313,876.00 0.44% 0.31% 0.27%
communication 30,464,108.00 38,554,785.00 28,954,612.00 0.26% 0.30% 0.19%
insurance 15,621,844.00 18,221,544.00 27,006,452.00 0.13% 0.14% 0.18%
Entertainment, amusement & recreation 4,481,464.00 5,936,966.00 11,501,434.00 0.04% 0.05% 0.08%
outside services 17,157,484.00 25,758,158.00 8,559,742.00 0.15% 0.20% 0.06%
professional fees 18,803,846.00 30,594,218.00 6,533,482.00 0.16% 0.24% 0.04%
telegraphic transfer 1,499,430.00 2,265,146.00 3,073,835.00 0.01% 0.02% 0.02%
others 83,286,203.00 135,265,367.00 33,909,596.00 0.72% 1.06% 0.22%
Total Selling and Distribution Expenses 3,746,285,955.00 4,583,855,201.00 5,530,234,060.00 32.27% 35.85% 36.35%
General and Administrative expenses
Personnel costs 327,990,247.00 362,322,982.00 425,607,374.00 2.83% 2.83% 2.80%
Taxes and licenses 26,954,909.00 30,250,242.00 106,709,144.00 0.23% 0.24% 0.70%
Rent 66,085,763.00 65,846,124.00 106,907,950.00 0.57% 0.51% 0.70%
Depreciation and amortization 57,579,269.00 66,943,776.00 101,522,369.00 0.50% 0.52% 0.67%
Advertising 17,643,496.00 53,500,578.00 86,054,909.00 0.15% 0.42% 0.57%
Supplies and maintenance 28,902,123.00 30,340,899.00 41,212,235.00 0.25% 0.24% 0.27%
Utilities 24,286,427.00 24,828,452.00 39,101,467.00 0.21% 0.19% 0.26%Professional fees 18,459,205.00 14,719,591.00 36,561,512.00 0.16% 0.12% 0.24%
Travel and transportation 33,351,002.00 24,802,366.00 34,863,630.00 0.29% 0.19% 0.23%
Security services 10,977,433.00 11,075,933.00 23,660,394.00 0.09% 0.09% 0.16%
Repairs and maintenance 28,454,447.00 16,084,053.00 22,031,820.00 0.25% 0.13% 0.14%
Insurance 10,642,997.00 10,561,476.00 14,390,334.00 0.09% 0.08% 0.09%
Communication 13,986,894.00 17,148,386.00 12,344,058.00 0.12% 0.13% 0.08%
Entertainment, amusement & recreation 15,491,270.00 8,655,315.00 9,516,353.00 0.13% 0.07% 0.06%
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)'
Impairment loss on security deposits - - 4,870,502.00 0.00% 0.00% 0.03%
Outside service 8,772,780.00 10,301,361.00 754,970.00 0.08% 0.08% 0.00%
Others 33,405,321.00 43,688,640.00 54,651,055.00 0.29% 0.34% 0.36%
Total Gen and Admin Expenses 722,983,583.00 791,070,174.00 1,120,760,076.00 6.23% 6.19% 7.37%
Total Operating Expenses 4,469,269,538.00 5,374,925,375.00 6,650,994,136.00 38.50% 42.03% 43.72%
Other income (charges)
Share in net earnings of an associate 16,129,065.00 17,628,250.00 24,179,835.00 0.14% 0.14% 0.16%
Interest accretion on security deposits 2,505,521.00 6,165,280.00 8,510,623.00 0.02% 0.05% 0.06%
Foreign exchange gains-net 10,942,751.00 21,117,594.00 6,167,211.00 0.09% 0.17% 0.04%
Interest income 13,037,077.00 3,887,650.00 4,473,664.00 0.11% 0.03% 0.03%
Interest expense (21,506,046.00) (92,226,440.00) (281,585,421.00) -0.19% -0.72% -1.85%
Share in net losses of joint ventures - (20,275,285.00) (144,869,202.00) 0.00% -0.16% -0.95%
Others-net 5,089,873.00 48,125,922.00 (1,692,202.00) 0.04% 0.38% -0.01%
Total other income (charges) 26,198,241.00 (15,577,029.00) (384,815,492.00) 0.23% -0.12% -2.53%
Income Before Income Tax 656,428,684.00 901,495,817.00 1,496,668,876.00 5.65% 7.05% 9.84%
Provision for (Benefit from) Income tax 0.00%
Current 222,775,520.00 347,374,886.00 551,119,917.00 1.92% 2.72% 3.62%
Deferred (28,487,333.00) (59,622,162.00) (52,733,938.00) -0.25% -0.47% -0.35%
Total Tax 194,288,187.00 287,752,724.00 498,385,979.00 1.67% 2.25% 3.28%
NET INCOME 462,140,497.00 613,743,093.00 998,282,897.00 3.98% 4.80% 6.56%
Other Comprehensive Income 0.00%
OCI reclassified to profit (7,696,234.00) 1,833,736.00 9,758,244.00 -0.07% 0.01% 0.06%
OCI not reclassified to profit (4,060,882.00) (34,395,164.00) (38,903,557.00) -0.03% -0.27% -0.26%
TOTAL OTHER COMPREHENSIVE
INCOME (11,757,116.00) (32,561,428.00) (29,145,313.00) -0.10% -0.25% -0.19%
TOTAL COMPREHENSIVE INCOME 450,383,381.00 581,181,665.00 969,137,584.00 3.88% 4.54% 6.37%
Basic/Diluted EPS 0.24 0.30 0.42
b) Financial Ratio Analysis
LIQUIDITY RATIO 2012 2013 2014
Current ratio 1.00 1.03 1.58
Acid test ratio 0.2304 0.2136 0.4212
Working Capital P29,511,682.71 P223,386,136.00 P4,300,196,522.00
Interpretation:
In determining the liquidity of a company, the short-term creditors as well as the long-
term creditors and the shareholders will enable to gauge if the company has the ability to pay its
short-term debts as it falls due. The current ratio measures the number of times that the current
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)(
liabilities could be paid with the available current assets. For SSI Group Inc. the current ratios for
2012-2014 indicate that the company maintains just enough current assets to pay its current
liabilities. Apparently, SSI Group is a bite more liquid in every year compared to previous year,
as there’s an increasing trend in its current ratio. However, the current ratio for 2012 and 2013
are too low because SSI Group might find it difficult to pay its current obligations when it
mature as the ratio is close to 1 meaning that for every one peso of current liabilities, SSI Group
reserves only1, 1.03, and 1.58 pesos for 2012, 2013 and 2014, respectively.
Affirming the interpretation above, SSI Group Inc. acid test ratios indicate and confirm
that the company might have difficulty in paying its current obligations at it is not all close to at
least 1. However, since SSI is in the retail industry, where investment is more on consumer
goods and considering the items being sold are luxury items, which are not easily sold, and
considering it was restructured in 2014, the company might still be in good condition despite
these and considering the factors mentioned above.
Nonetheless, SSI Group Inc. is not liquid based on the ratios determined above.
PROFITABILITY RATIO
Gross Profit Rate 0.44 0.49 0.56
Contribution Margin Rate 0.76 0.73 0.65
Break-even Sales 2,077,009,280.23 3,519,949,026.45 5,329,143,364.11
Margin of Safety 4.59 2.63 1.85
Return on Sales 0.04 0.05 0.07
Return on Assets 0.05 0.05 0.06
Return on shareholders' equity 0.33 0.22 0.11
Return on Invested Capital - 8.58 10.71
Times interest earned 21.49 6.65 3.55
Interpretation:
SSI Group Inc.’s gross profit ratios for 2012-2014 indicate that there are changes in the
company’s pricing policy, which is at an increasing trend. Likewise, the gross profit ratios
indicate that the company has an average mark ups of 44%, 49% and 56% for 2012, 2013 and
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%*
2014, respectively. These are acceptable considering the industry and the inventories it tries to
sell in the market. Looking at the return on sales ratio, the company is negligibly earning a profit
as indicated by 4%, 5% and 7% for 2012, 2013 and 2014, respectively. Nonetheless, the
company is still said to be earning a profit though the ratios are low.
CASH FLOW RATIO
Operating Cash Flow Growth %
YOY - - -
Free Cash Flow Growth % YOY - - -
Cap Ex as a % of Sales 7.44 15.25 20.67
Free Cash Flow/Sales % -2.68 -34.38 -22.19
Free Cash Flow/Net Income -0.67 -7.16 -3.38
Interpretation:
SSI Group Inc. has negative free cash flow. This is brought about by the large investment
of the company when it had its IPO last 2013. This means that the company needs other source
of financing to be reinvested in the company if it wants to have additional investment.
LEVERAGE RATIO
Debt-to-equity ratio 5.56 3.29 1.04
Debt ratio 0.85 0.77 0.51
Equity ratio 0.15 0.23 0.49
Interpretation:
Leverage ratio refers to the company’s ability to pay all its debts, whether current or
noncurrent. Despite the fact that the ratios are at a decreasing trend from 2012-2014, the
company is assessed to be solvent. As indicated by the debt and equity ratio, SSI Group heavily
relies on outside financing, which exposes the company to greater financial risks.
EFFICIENCY/ACTIVITY
Days' Sales Outstanding 11.64 14.06 13.84
Receivable Turnover 30.93 25.61 26.01
Days' supply in inventory - 331.46 379.13
Inventory Turnover 1.21 1.15 0.96
Days' payables outstanding 252.01 201.53 108.58
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%)
Payables turnover 1.05 1.31 2.43
Cash Conversion Cycle - 149.4 208.04
Fixed Assets Turnover - 4.93 4.18
Asset turnover 1.42 1.43 1.05
Interpretation:
SSI Group Inc. efficiency ratio indicates that the company is efficient in settling its due
but is very relax in its collections.
Overall, SSI Group Inc. is said to be financially stable and doing well in running its
operations for years 2012-2014.
C. Analysis of Internal Factors
Value Chain Analysis and
Financial Ratio Analysis
Impact on Value
Chain Elements
Effect on SSI Group
Inc.'s Business Model
Conclusion
Strength or
Weakness
Supply Chain Management Absence of demand
management as the
Principal determineswhat items are to beallocated for the
Philippine MarketAbsence of
integration to thesupply chain
processes asinventories go through
series of process before delivering it to
the stores.
Increases cost of
ownership as
inventory cost areincurred for storingthe goods.
Weakness
Operations Presence of resource
and activity
Increases firm cost
structure
Weakness
Outbound Logistics Presence of activity
and resource
Increases cost of
ownership asmaintaining the
delivery cargoes addsto the overhead cost of
Strength
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%%
the company but at thesame time adds
convenience for the benefit of the
company
Sales and Marketing Presence of skill,resource and
capability
Increases perceptionof value and customer
relations
Strength
Service Presence of resource Increases perception
of value and customerrelations
Strength
Firm Infrastructure Absence of activityfor value
configuration as theactivities and
resources are not
undergoingcontinuousimprovement for
alignment
Increases firm coststructure
Weakness
HR Management Presence of
mechanism forcustomer interface
Improves relationship
with customers
Strength
Technology Development Absence of capabilityand resource
Undermines valueconfiguration and core
competencies toexecute the business
model
Weakness
General Administration Presence of resource,
activity andcapability
Improves firm cost
structure
Strength
Liquidity Cost disadvantage Undermines revenuemodel
Weakness
Profitability Cost advantage Undermines cost
structure
Strength
Gearing Cost disadvantage Undermines revenue
model
Weakness
Free Cash Flow Cost disadvantage Undermines revenue
model
Weakness
Leverage Cost disadvantage Undermines revenue
model
Weakness
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%-
Core Ideology Envisioned Future
Core Values 10-30 years BHAG
World-ClassFinestGod-centered
InnovationLuxury
To be the undisputed leader in brand management ofspecialty retail concepts in the
Southeast Asian Region
Core Purpose Vivid Description
To provide the ultimateshopping experience
Wide-presence of specialtyretail boutiques in all
Southeast Asian Market
4. Analysis of the Mission Statement
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B. Objectives
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%*)+$
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%+
C. Evaluation of Present Corporate Strategies (TOWS Analysis)
Opportunities:
1. Rising economy
2.
Rising livingstandards3. Free Trading
Agreements4. Pressure to
change forclimate change
5. Increase in population
growth
Threats:
1. Influx of
foreign playersin the market2. Increasing
trend of onlineshopping
O/T:
Tap foreign markets to
spread the risk and sellthe slow movinginventory to other
market
Strengths:
1.
Outbound Logistics2. Sales and Marketing
3. HR Management4. Service
5. General Administration6. Profitability
S/O:
Adopting severalmarketing
campaigns to takeadvantage the rising
disposable income
S/T:
Differentiateservices to clients
SO/T:
Improve the servicesto the niche market to
make their shoppingexperience in stores a
delightful one.
Weaknesses:
1. Supply Chain
Management2. Operations
3. Firm Infrastructure
4.
TechnologyDevelopment5. Liquidity
6. Gearing7. Leverage
8. Free Cash Flow
O/W:Invite other brands
in countries wherefree trade
agreements exist to
counteract lossfrom discontinued brands
W/T:Make the business
efficient to be at par with foreign
companies
O/WT:Increase distribution
channels
S/W:
Enhance the revenue model togenerate more cash to the
company
SO/W:
Offer luxury goodsto different markets
to improve thefinancial health of
the company
S/WT:
Enhancemarketing and
service will keepthe clients
shopping thrustore-based as part
of their experience
TOWS:
Improve the financial
health of the
company while
maintaining its
competitiveadvantage over the
niche market
(Focus
Differentiation)
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%.
D. Proposed Corporate Strategies (SPACE Matrix)
1. Competitive Advantage
a) Present Competitive Advantages
(1) Strategic Direction
SSI Group Inc’s initial public offering in 2014 signals the company’s commitment in
bringing more international brands into the local market. Although not limited to apparel and
footwear, the company is expected to prioritise apparel and footwear, taking advantage of urban
consumers’ increasing propensity to spend on these products. While most of its outlets are in
Metro Manila, it is expected that more SSI brands will be seen in key cities outside Manila like
Cebu and Davao, where consumers’ disposable income is steadily rising. Within SSI’s portfolio,
fast fashion is growing fastest in terms of store network and sales which will encourage the
company to pay greater attention to this category.6
(2) Competitive Positioning
Stores Specialist Inc distributes a wide range of international apparel and footwear brands
in the local market, each of which contributes only marginal shares. Some of these brands are
Zara, Calvin Klein Jeans, Diesel, DKNY, Gap, Lacoste, Payless ShoeSource and Massimo Dutti,
among others. Its portfolio includes brands at different price points and classified under luxury
and bridge, casual, fast fashion, and footwear, accessories and luggage.7
SSI reported that compared to 31 December 2014 it added 19 brands from its portfolio by
September 2014. Some of these are apparel and footwear brands that include Pull and Bear,
Alexander McQueen, Old Navy, Reiss, and A2 by Aerosoles among others. In addition, SSI
opened 87 more stores housing a number of apparel and footwear brands. With these
developments, the company’s shares in both apparel and footwear continued to grow.8
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%&
Compared to other brands in the market, SSI’s portfolio had upscale positioning as they
are mostly located in high-end shopping centres and malls. SSI successfully carved a niche
among more affluent buyers wanting to buy international brands. The company’s fast fashion
portfolio was expanding more vibrantly than other categories indicating its growing interest in
brands which are at a lower price point and are more affordable to a wider consumer base.9
SSI launched its IPO in November 2014, raising PHP5 billion which will be used to
expand its speciality retailing business. The company also noted that some of the proceeds will
be used to make additional investments in its Family Mart convenience store chain and
establishment of more Wellworth Department Stores.10
(3) Retail Operations
By the end of 2013, SSI had 587 stores carrying both apparel and footwear and non-
apparel items. This number grew to 657 by the end of September 2014. Recognising the high
potential of international brands in the local market, SSI continued to open new stores to house
its new brands as well as expand the presence of its rapidly growing brands.11
Introduced in 2014, Wellworth Department Stores is “a value-based, midmarket
department store chain, aiming to exploit the country’s growing aspirational yet price-conscious
shoppers.” Wellworth Department Stores house its apparel and footwear brands, together with
health and beauty, sports, luggage and stationery products. The company is keen to establish
more Wellworth Department Stores in more locations within Metro Manila, aiming for 20 stores
in the forecast period.12
SSI does not use innovative in-store technology, relying instead on traditional methods.
13
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%'
(4) Internet Strategy
SSI maintains a website where visitors can find information about its brands, company
news, new collections and store locations. SSI unveiled its plan of entering e-commerce which
will allow it to distribute its products online. Starting with 20 brands, SSI is expected to launch
its e-commerce portal by the first quarter of 2015. This is to grow strategically with its
customers’ evolving lifestyles. SSI launched its mobile app in 2013, which provides information
about company’s store locations, new launches and promotions to smartphone users.14
Catering to the upscale market, the company was less aggressive in the use of social
media like Facebook and Twitter. Payless ShoeSource Philippines has a Facebook fan page
where it posts new products available inside the stores and answers customer queries. Newly-
launched Wellworth Department Stores also has a Facebook fan page that features selected
products and their prices.15
b) Proposed Competitive Advantages (WHARTON Model and Value
Chain)
SSI Group Inc. has a competitive advantage on its relationship with brand principals. It
has the majority share in terms of brand portfolio. It has
2. Space Matrix
As net result of the SPACE Analysis Matrix, SSI Group Inc.’s alternative strategies are
thrust in the Competitive Posture. As such, the implicit strategy is to raise its financial strength
while maintaining its competitive advantage.
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%(
a) Financial Strength
Assessing the factors for financial strength (i.e. return on sales, return on assets, cash
flow, gearing and working capital intensity), SSI Group Inc. is scored with 2 (weak). Compared
to its competitors, Although it has wide selection of brand portfolios and is earning more than its
competitors, SSI Group Inc.’s cash flow ratio is at the negative based on the cash flow ratio from
2012 to 2014. This is reasonable since it only consolidated its companies under one parent
company and made its IPO in 2013. Such strategy is costly for the company as indicated in its
Financial Statements.
b) Competitive Advantage
For the Competitive Advantage, market share, quality, customer loyalty, cost levels and
product range were assessed. SSI Group has the majority share for specialty retail industry based
P.
P+
P-
P,
P%
P)
*
)
%
,
-
+
.
P. P+ P- P, P% P) * ) % , - + .
Current Strategy of SSI Group Inc. using SPACE
Matrix
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,*
on the sales per value in 2014. As such SSI’s competitive advantage is scored minus 1 (very
strong)
c) Industry Attractiveness
Based on MarketLine (2014), the apparel retail industry in the Philippines is very
attractive to new entrants. The growth potential is predicted to shoot up as the disposable income
and the number of middle income earners increases. Entry barriers are weak although the Bureau
of Customs regulates importation of goods. Likewise, apparels have no substitutes. However,
there are alternatives to the products sold by SSI Group Inc. As such, Industry Attractiveness is
scored 5 (very strong).
d)
Environmental Stability
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IV. FUNCTIONAL AREA STRATEGIES
A. Marketing
1. Identifying Target Marketing Segments
Geographic segmentation: Customers who are living in the urban upscale area.
Demographic segmentation: Men, women and children who are in the socialclass A and upper and broad B ages 15 and up;
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,)
customers whose annual disposable income is atPhp400,000
16
Psychological segmentation: Customers who prefer to buy high-end brands.
2. Marketing Objectives
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J12345"7M$
3. Marketing Plan
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B. Operations
1. Operational Objectives
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2. Operational Plans
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C. Finance
1. Financial Objectives
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,,
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2. Financial Plan
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;9
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D. Information Management
1. Information Management Objective
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2. Information Management Plan
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1<5?J15"G1AA> M4742154 5"J4A> 24F?25=$
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V. STRATEGY EXECUTION
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