strategicreview[1]

Nick Best’s Strategic Analysis www.topcima.biz

TOPCIMA

V Outsourcing Vendor

Strategic Analysis

Nick Best


Welcome

Welcome to Nick Best’s TOPCIMA strategic analysis

For those of you who don’t know me, I’m one of the TOPCIMA tutors at Reed Business School, and the

author of the official CIMA learning system, on which I work together with one of the TOPCIMA examiners.

In this presentation you’ll find my views on the lat est TOPCIMA case study

For details of courses at Reed Business School and to learn more about the exam and how to approach it

please seewww.topcima.biz


V Outsourcing Vendor

On the following pages you will find my strategic ana lysis of CeeCee.

Remember that this is my view, not a definitive view of the company. You should review this in the context of yo ur

own analysis of the company, and make your own conclusions.

If would like to hear more of my views on this and t he exam do consider attending one of the courses at Reed

Business School, or look out for posts on www.casestudyaide.com .


CeeCee

I think most people are pleased with the subject of the case study this season. A fashion retail group is something most of us can

understand (yes even us men!). There are also lots of real life companies to examine to get industry information on .

CeeCee themselves are a highly successful company, w ith a clear niche in ‘fast fashion’ – getting catwalk designs int o the market very quickly. Remarkably customer visit stores an a verage of 17

times a year compared with an industry average of j ust 4, so there is excellent customer loyalty, and a premium price charged for the quality, brand, design and ‘exclusivity’ of a fast c hanging product

range.


Strategic analysis – the rational model

This analysis uses the rational planning model of st rategic analysis, summarised in the following diagram

FUTUREMission &Objectives

NOWBusiness Strategy

Business Environment

Internalanalysis

S W

O T

PEST 5 Forces

Product analysis-Product life cycle-BCG matrix

StakeholderMapping

Generic strategiesAnsoff’s matrix

Method of growth

Governance& Ethics



The first stage of analysis is to ensure we fully

understand where the organisation is heading, along with its approach to meeting stakeholder

needs.


StakeholderMapping

Governance& Ethics


Mission

The mission statement sets the direction and tone of the organisation, and guides strategic decision making. The

scenario does not give us a mission statement, but does set out the next best thing which is the company’s aims. These

are as follows:

•Products aligned with customer needs•Invest in shops, improve customer experience•Manage inventory well to keep good margins•Monitor and improve margins

These principles have served CeeCee well and it has seen excellent growth throughout its life.


Objectives

The objectives provide a focused target to move towards to direct planning, motivate staff and enable accurate

performance measurement

The five year plan gives us some specific targets for the company:

• 800 shops by 2014 up from 630• More larger shops going forward to house wider product range• Revenue = €5156m by 2014 (85% up on 2009)• Profit by 2014 - €1237 (95% up on 2009)• Margins to rise from 22% to 24% by 2014

These are tough targets in difficult economic conditions


Governance

CeeCee is a listed company and as such is expected t o have good governance procedures. Governance appears to be good, but ther e are some key areas where there is no information and upon which suggestions for future development of governance could be recommended:

Good points• Non-executive Chairman and 6 NEDs mean there is inde pendence on the board• Range of executive directors to bring wide knowledg e to decisions • Clear Corporate Social Responsibility focus

No information on:• Committees – Audit, Remuneration, Nomination• Risk management policies and procedures• Internal control systems • Internal audit (I assume there is not an internal a udit department)• Director’s service contracts

Lots of room here to discuss improvements should there be an unseen issue on control weaknesses or significant risks

that need managing


Ethics

• CeeCee have a CSR policy, which appears to be comprehe nsive

• My main critisism is that it is a bit general in places– E.g. terms for supplier audits include “‘decent’ working conditions”

– so what exactly is decent– Some CSR goals are not quantified e.g.“expand fair trade” – by

how much and by when

• CSR is really important in this industry, with incre asing customer consciousness of issues such as fair trade and possi ble breachesin CSR rules or possible mispractise must be dealt with firmly, and you should say so in the ethics section of the repo rt.


Stakeholder AnalysisMendelow ’s Matrix

Carla Celli – CEOFrank Bartolli - ChairmanBoard of DirectorsIT outsourcer

GovernmentsMedia

High Power

Most suppliersLoyal customersMost employees (could increase if unionised, but no evidence of this)

Casual customersSuppliers employees

Low Power

High InterestLow Interest

LendersShareholders

Building owners


Stakeholder AnalysisMendelow ’s Matrix

There are relatively few key players in this scenario compared to some previous ones, which means that it is less likely that the company will be held to ransom by stakeholders.

I have hedged my bets a little with the lenders, shareholders and building owners because relatively little is known about these stakeholders. Shareholders could come into any of 3 different positions depending on their exact shareholding and nature of the shareholder, so you must see what information is given in the unseen to make a clear decision on these.



Next we need to analyse the current position of the business

This helps us ensure the strategies we decide upon are appropriate to the

business’ current position and issues they face in the industry and

more broadly

This position is summed up in a SWOT analysis

NOW

Business Environment

Internalanalysis

S W

O T

PEST 5 Forces

Product analysis-Product life cycle-BCG matrix


SWOT

• On the following page you’ll find my SWOT analysis.

• Remember that you MUST do a SWOT analysis as Appendix 1 in your answer.

• You will score 1 mark in the technical section for this, and up to 3 further marks in the application section - if done well.

• You must update this SWOT for unseen issues (underline or bold these in your exam script), and should aim to include ALL your top 5 issues in your SWOT.

• A recent CIMA student script review I read, also made it clear that 2-3 word points in the SWOT are NOT sufficient. Aim to write at least 7-8 words for each point in your SWOT AND roughly 5 points per heading.

• I’ve shown my points in priority order as I see it. You don’t need to do this in the exam, but it can help at this stage as you can replace the less important points with those from the unseen.


SWOT

STRENGTHS1. Clear competitive position and reputation –

niched on fast fashion, quality, primarily women – retained profits even in poor economic climate – Loyal customers

2. Integrated IT systems, facilities service, inventory management and cost reduction

3. Excellent supplier relationships ensure quality and speed of service

4. Experienced board of directors and motivated staff

5. The shops are in excellent locations and are well fitted out

6. Good profit margins - cost control – strong financial position helps when raising finance

WEAKNESSES1. Possible loss of focus on core strengths by moving

into varied new products2. Lots of small stores – hard to expand into new

products in these stores3. Short term leases could give building owners

power4. Lack of accurate product profitability analysis5. Getting into online late in the day – missed big

opportunity - weak strategic decision6. Possible over-reliance on a single distribution

centre – creates risk

OPPORTUNITIES1. Expansion in new overseas markets2. Expand new product ranges3. Online sales4. Improved customer information to improve

targeting – data mining/online information5. Takeover competitor to expand quickly

THREATS1. Highly competitive market – price reductions could

hit profit margins2. Worldwide recession3. Low share price – threatened takeover4. Not keeping up with technological changes or

changing customer requirements5. Currency changes


PEST analysis

• On the following page you’ll find my PEST analysis.

• The PEST analysis is always an optional appendix in this exam.

• Do aim to add one or two additional issues from the unseen into your PEST if you do one in the exam

• You MUST cross reference your PEST in your script however, and many students do not do this well. Aim for 2-3 cross references

• There are lots of PEST issues in this pre-seen but they are very broad and general, so look for more specific ones in the unseen to improve this one.


PEST analysis

Online shopping – Opportunity and threats + security issuesMust keep up with technological trendsTechnolo

gical

Customer expectations have risen – availability, service, changing rooms – CeeCee must keep standards highAttitudes changed generally towards lower cost clothingIncreasing awareness of CSR issues

Social

Opportunity to renegotiate shop rentals downwardsWeak economic climate – pressure on prices/people moving to value retailers/product mix changesExchange rate issues – sales non-€, Buying in Asia

Economic

Possible trade barriers for imports from AsiaAbiding by local laws in a variety of countries operated inPolitical


5 Forces Analysis

• The 5 forces analysis enables the analysis of the industry according to a range of key factors affecting that industry

• Each force can be given a strength (e.g. High, Medium, Low). Where all the forces are high, the profitability of the industry is low, and divestment may be a good strategy.

• The lower the forces the more attractive the industry is.

• Companies may look at the areas where forces are high and develop strategies which may lower these.

• The 5 forces analysis for the clothes retailing industry as a whole is on the next page– In this case the average of the forces is medium so the industry

would be deemed averagely profitable, although CeeCee are doing better than average due to a clear niched position.


Opportunities and Threats5 forces analysis

Very few substitutes for clothing Subs Low

Very competitive marketExpensive to enterMany small start ups, but hard to build a competing large business – takes many years

Online shoppingNew Entrants

Low

CeeCee have strong niche – protecting their profitability

Intense competition – influx value retailers –high street (Primark) – Supermarkets – also dept storesOnline shopping, Easy to copy designsIncreases in difficult economic times

Competi-torsHigh

Long payables period (155 days) – suggests CeeCee have most power with suppliersMany international manufacturersCeeCee are large – manufacturers want their business

Short term rental of shops, with large fitting costs – increases power of shop ownersSome power to IT outsourcerDependent on long term relationships and quality increasing power

Supplier Power

Medium/low

Individual customers have little powerLots of choice – easy to switch – easy to compare online

Buyer Power

Medium

Factors lowering forceFactors increasing Force


Opportunities and ThreatsProducts/Generic Strategy

Focus

Differentiate

Cost leadership

Design and service increasingly important for differentiation

CeeCee – Fashion at low cost –Young professional women but now mens and childrens could threaten focused position and brand

Men’s clothes – branding unclearHome furnishings is higher margin, but probably has a lower return per m2 of floor areaProduct profitability unclear

Weaknesses

Branding critical for differentiationWomen’s clothing – still known for this

Accessories Strengths

High fashion – fast changing PLC

BCG/Product Life

Cycle

Generic StrategiesProducts



Next we need to analyse the strategic options, and m ake a conclusion on the way forward for the business


NOWBusiness StrategyS W

O T Generic strategiesAnsoff’s matrix

Method of growth


Ansoff’s Matrix

Gift cards

Sportswear

Country clothing

AccessoriesShoes. Underwear.JewelleryPerfumesCosmeticsMature clothing range

New Product

Only in 18 countries – fewer than many competitors – key opportunity

Franchising

More shops - within current countries

Increase marketing spend – currently low

Concessions within department stores

Online – new channel

Franchising

Existing Product

New MarketExisting Market


Methods of Growth

Mens clothing is a possibility – unclear branding of this product – not focused on core customersHome furnishings – Is this too far from successful business model, and too low a return for floor area? More information needed.Retail outlets in poor locations (although fewer than 10)

Divest

Franchising may provide a low risk way to enter new markets and gain local experience and share risk (and rewards)

A Joint Venture or alliance may be useful to enter vastly different markets, like in Asia, to gain local knowledge.

Joint Venture

Could buy a competitors-Enable expansion into new countries-Must take care to ensure consistent with current business model

-Online – long term in future

Acquisition

New products

New markets

Distribution development

Internal Development


SWOT

STRENGTHS1. Clear competitive position and reputation –

niched on fast fashion, quality, primarily women – retained profits even in poor economic climate – Loyal customers

2. Integrated IT systems, facilities service, inventory management and cost reduction

3. Excellent supplier relationships4. Experienced board of directors – motivated

staff – teamworking amongst staff5. Shops – locations and fittings6. Good profit margins - cost control – strong

financial position – e.g. raising finance

WEAKNESSES1. Possible loss of focus on core strengths by moving

into varied new products2. Lots of small stores – hard to expand into new

products in these stores3. Short term leases 4. Lack of accurate product profitability analysis5. Getting into online late in the day – missed big

opportunity - weak strategic decision6. Possible over-reliance on a single distribution

centre – creates risk

OPPORTUNITIES1. Expansion in new overseas markets2. Expand new product ranges3. Online sales4. Improved customer information to improve

targeting – data mining/online information5. Takeover competitor to expand quickly

THREATS1. Highly competitive market – price reductions could

hit profit margins2. Worldwide recession3. Low share price – threatened takeover4. Not keeping up with technological changes or

changing customer requirements5. Currency changes


My suggested strategy going forward

Continue- Shop expansion programmes in current countries- Investment in IT- Good relationships with suppliers- Employment of young designers- Teamworking in stores- Focus on CSR- Online sales – big new market – continued investment


My suggested strategy going forward

1) Expand into new countries1) Very successful brand and concept which is likely to work in new

markets2) Examine market position and social trends in potential markets3) Plan ongoing programme of gradual expansion4) Internal expansion – funds need to be raised

2) Negotiation of long term leases going forward, particularly as there are likely to be good terms available in current markets

3) Product profitability analysis4) Refocus of product portfolio stick to key niche focusing on professional

women1) Depending on product specific data to the contrary – stop home

furnishings and mens fashions due to inconsistency of branding, and store space required

2) Trial related products such as cosmetics and jewellery


Reed Business School

So that’s what I would do. I’m sure you’ll have your own views. Just remember not to hold onto these too tightly in t he exam

– you must primarily deal with the unseen issues!

If you don’t pass this sitting please do consider co ming to our residential centre in the Cotswolds for retakes in the future where you’ll get focused tuition on how to pass thi s exam,

and detailed feedback on mock scripts.

I also work with individual’s one-to-one, usually w here people have failed in the past and need more personal guida nce to help them get through. Although I’m now fully booked for

this sitting, should you not be successful this tim e and feel this would be useful for the next sitting, please do get in

touch at [email protected].

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Education

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stage of analysis

rational modelthis analysis

strategic decision making

governance ceecee

ethics ceecee

reed business school

good governance procedures