vyp-t4 nick strategic analyses

8/8/2019 VYP-T4 Nick Strategic Analyses

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T4 Case study - TOPCIMA

Strategic Analysis

V&Y Productions

Nick Best


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Welcome

Welcome to Nick Bests TOPCIMA strategic analysis

For those of you who dont know me, Im one of theTOPCIMA tutors at Reed Business School, and the

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

In this presentation youll find my views on the latestTOPCIMA case study

For details of courses at Reed Business School and tolearn more about the exam and how to approach itplease see

www.topcima.biz


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V & Y Productions

On the following pages you will find my strategic analysisof V & Y Productions (VYP).

Remember that this is my view, not a definitive view of thecompany. You should review this in the context of your

own analysis of the company, and make your ownconclusions.

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

Business School, or look out for posts onwww.casestudyaide.com.


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Strategic analysis the rational model

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

FUTUREMission & Objectives

NOW Business Strategy

Business Environment

Internal

analysis

S W

O T

PEST 5 Forces

Product analysis-Product life cycle

-BCG matrix

StakeholderMapping

Generic strategiesAnsoffs matrix

Method of growth

Governance& Ethics


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The first stage of analysisis to ensure we fully

understand where theorganisation is heading,along with its approachto meeting stakeholder

needs.

FUTUREMission & Objectives

StakeholderMapping

Governance& Ethics


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Mission

The mission statement sets the direction and tone of the organisation, andguides strategic decision making. Unfortunately there is no missionstatement given in the pre-seen material. However there are a number of

quotes from the pre-seen which sum up its key purpose and principles:

To make successful programmes for profitTo Nurture artistic and visionary skills

Innovative programme ideas that will appeal to target audiencesApplying Campbells 4 elements of mission, we might say:

Purpose Deliver profits to shareholdersStrategy High quality TV programme productionValues Visionary, Artistic, Customer focusBehaviour standards Support charities, no CSR policy


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Objectives and critical success factors

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

The case tells us that a KPI in this industry is revenue per hour, but does not

state specific targets. Critical success factors are mentioned throughout the case,and these could be used to create a set of further KPIs. Those mentioned include:

Good ideasGood production skills

Selling programme ideas to TVPeople

ReputationTrack record

Accurate budgetingCost control

Computer graphics

They may well have more specific targets we are not told about, but if not, this is aweakness in the companys planning approach.


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Governance

As a company owned by its directors, Governance is a minor issuecompared to listed companies. Firstly VYP do not need to abide by anylegislation (e.g. the UKs combined code) and secondly they do not have theagency problem which typifies companies with governance issues (i.e.thepeople running the company are also the people who own it, so theirinterests are aligned.)

While you might normally expect the Non-executive Chairman to beindependent (here he is not), it does not really matter in the case. In fact, thefact that there is someone in his position with good experience andknowledge is something to be commended

My only concern with VYP is that the two founders own 60% of shares andso minor shareholders have little control if the two founders work together.

Of course all this will need to change should VYP list on the stockmarket!


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Ethics and CSR

VYP act with good corporate social responsibility in two respects: Charitable donations Supporting a programme of education for children

There is little evidence of good or bad ethics either way, so I would assumetheir ethics are good

There is certainly a case for a more formal ethical code or formal statementof their views on CSR.

A quick tip for you then for the ethics section - on a specific ethicalissue (10 marks in the exam) state and explain the issue, make yourrecommendation to deal with that issue and then add a follow onrecommendation to avoid that similar situations in the future a formalethical code should be written and communicated to all staff..


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Stakeholder mapping

Doing a stakeholder map as an appendix in the exam is almost alwayssomething which is useful to do. An appendix and done well will usually gain2 marks possibly more.

You must update the map for changes in the unseen, and add all newstakeholders which are in your top 4 issues

Refer to your map in the main body of your text, adding a comment to saywhat the position of that stakeholder on the map means in relation to this

specific issue (e.g. a key player should be involved fully through regularmeetings, and incorporating their views into the final decision)


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Stakeholder AnalysisMendelows Matrix

Key Players (Involve)

Essential outsourcersMajor TV broadcasters2 founders (want freedom)(Directors + Shareholders)

Programme directorsMajor TV personalities

Keep satisfied

Studio ownersGovernmentHigh

Power

Keep informed

Most staffSmall outsourcers

Minimal effort

ViewersLow

Power

High InterestLow Interest

UncertainBank


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Next we need to analyse the currentposition of the business

This helps us ensure the strategies wedecide upon are appropriate to the

business current position andissues they face in the industry and

more broadly

This position is summed up in a SWOTanalysis

NOW

Business Environment

Internalanalysis

S W

O T

PEST 5 Forces

Product analysis-Product life cycle-BCG matrix


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SWOT

On the following page youll find my SWOT analysis.

Remember that you MUST do a SWOT analysis as Appendix 1 in youranswer.

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

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

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

Ive shown my points in priority order as I see it. You dont need to do thisin the exam, but it can help at this stage as you can replace the less

important points with those from the unseen.


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SWOT

1) Downward pressure on revenues from customers dueto economic pressures

2) Continued recession in UK and overseas3) Not using latest technology expensive to update e.g.

HD/3D TV4) Web TV/You tube5) Offensive programming

1) Increase overseas sales2) Further cost reduction use supplier power,

finance training for directors, control3) Off peak programming4) More in-house operations to gain control and

reduce costs5) Use Activity Based Costing to improve product

profitability analysis

ThreatsOpportunities

1) Just 4 key customers with significant power causedfalling profit margins

2)Margins lower on re-commissioned works

3) Artistic staff are not cost conscious some producersare poor at forecasting some cost overruns +frustration about cost cuts

4) Little equity finance available + few assets to securedebt finance

5) Some falling margins documentaries +scriptedcomedies + low on drama

1) Experienced directors and staff with good teamspirit and good incentives

2)Skilled in most CSF areas innovative, quality,people

3) Good reputation in industry, and meetingcustomer needs - Large growth in revenues

4) Flexible cost base5) Some elements of good cost control budgets,

finance team at meetings, strong FD6) Good cashflow and low debt

WeaknessesStrengths


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PEST analysis

On the following page youll find my PEST analysis.

The PEST analysis is always an optional appendix in thisexam.

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

You MUST cross reference your PEST in your scripthowever, 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 arevery broad and general, so look for more specific ones in

the unseen to improve this one.


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PEST analysis

Website broadcasts/you tube channels both an opportunity and possible threatGraphics key development Must retain lead in this areaNew technologies e.g 3D TV could be costly to adopt

Technological

Rise in popularity of documentariesOffensive programming could affect reputation quality control is criticalSocial

Difficult economic circumstances may make it hard to raise finance (although they do have a highinterest cover)The industry has Increasingly delayed payments which could affect cashflow in futureFalling ad revenues and funds for customers putting pressure on fees average revenue perhour has dropped

Economic

Threat of cuts to BBC license fees which could impact available fundsPolitical


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5 Forces Analysis

The 5 forces analysis enables the analysis of the industry according toa range of key factors affecting that industry

Each force can be given a strength (e.g. High, Medium, Low). Whereall the forces are high, the profitability of the industry is low, anddivestment 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 developstrategies which may lower these.

The 5 forces analysis for the TV production industry is on the nextpage In this case the average of the forces is medium so the industry

would be deemed averagely profitable, although VYP are doingwell.


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Opportunities and Threats5 forces analysis

Customers want original, innovative

programming so always likely to be a marketif produced for fair price

In-house production Close substitute

Acquired programmes - Close substituteOther forms of entertainment internet, sport more distant substitute

Substitu-tes

Medium

Already lots of competition in a market whererevenues are under pressure

Renting facilities, and availability ofoutsourcers enable start up at relatively lowcost and limited expertise

NewEntrantsMedium

Growing market 2007 to 2008Lots of competition many small + some morepowerful super-indies.Reducing revenues cost more of a focus towin work

Competi-tors

Medium

Small companies who work exclusively for VYPhave low powerNot overreliant on any one outsourcerAble to exert pressure to reduce fees ofsuppliers

Powerful staff programme directors wellpaid Famous actors/personalitiesExperienced programme makers - outsourced

SupplierPower

Medium

Large powerful customers V &Y have only 4BBC, ITV, Ch4, Ch5Willing to pay 10% above costsCustomer able to reduce fees paid

BuyerPowerHigh

Factors lowering forceFactors increasing Force


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Next we need to analyse the strategic options, and make aconclusion on the way forward for the business

FUTURE

Mission & Objectives

NOWBusiness StrategyS W

O T Generic strategiesAnsoffs matrix

Method of growth

The usual approach to defining a business strategy is to beginwith a definition of the generic strategies, followed by analysing

options in Ansoffs matrix, looking at how these might beimplemented with the Methods of Growth and then deciding upon

a final strategy


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Opportunities and ThreatsProducts/Generic Strategy

Focus

Differentiate

Costleadership

They have a broad focus across arange of different types ofprogramme

Margins on drama weak (but new)

Hard to maintain margins on re-commissioned worksWeaknesses

Quality a key to success innovation, skilled staff they aredoing this well

Peak hour programmingRange of programme types reducesrisk exposure to any one

Strengths

Not their focus, although costs are

increasingly important

Most programmes in maturity phase

but constant innovation needed tokeep up with trendsBCG/Product Life

Cycle

Generic StrategiesProducts


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Ansoffs Matrix

Ansoffs matrix enables the generation of strategic options.

Those youll find in my analysis over the page are just that options not myrecommendations.

You might like to add your own options(1) Based on your own ideas to take the business forward(2) Based on those in practise exams you undertake


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Ansoffs Matrix

Commission programmes forbusinesses/individuals training video,promotional video, wedding videos, advertising Hire out individuals to rivals Straight to internetFeature filmsBroadcast company

Off-peak This morning, chat shows, cookery

Game shows, Talent shows Childrens programmes

Educational programming

Sport

NewProduct

New overseas countries - resales highmargins

Sony marketplace/itunes/downloads

Commission programmes for new customerse.g. Sky, Non-UK based organisations e.g. US,India ..

Focus on high margin areas e.g. Entertainment, opportunity to expand this area

Should be able to lower costs of drama in futureto increase margins

Could move to a more in-house model (studios,staff) may save costs, but much less flexible

Continued expansion

ExistingProduct

New MarketExisting Market


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Methods of Growth

Seems unlikely

Divest

Overseas to get cultural expertiseFeature films (due to expense)Internet companyAd agencyJoint Venture

Buy studioNew genre with expertiseOverseas production companyAnother production company to expand

Acquisition

Employing staff, buying studios

New programme formats e.g. childrens TVInternal Development


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Defining a business strategy

On the following page you will find my recommended strategy for taking VYPforward.

Remember that this is my view and is not a definitive answer

Also remember that in the exam, you are NOT expected to define a wayforward like this you MUST deal with the unseen issues and only thoseissues

However, dealing with those issues in light of a strong logical approach tohow the business should be taken forward can help you make a strongargument in your recommendations.


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Nicks Strategy

Continued growth in revenues in current markets Maintain skills, innovation, reputation Continue to sell to current customers

New areasBuild on success in drama, keeping costs lower in futureIn long term move into other areas e.g. childrens TV, Off-peak

Grow new markets Increasing resales overseas More overseas sales staff

Start building relationships with overseas TV companies to directlycommission work for them Good cost control

Strict cost control on programming budgeting, forecasting training forprogramme directors, continued attendance of finance staff at meetings,with power to act to keep costs down if going out of control

Introduce Activity Based Costing to more accurately show product costs Continue to keep up with new technology changes required by major

customers Invest in HD/3D TV technology Investigate market for TV on demand/internet TV mostly resales

Improve margins on recommissioned works through better negotiating dueto increased power available on successful programmes


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Reed Business School

So thats what I would do. Im sure youll have your own views.Just remember not to hold onto these too tightly in the exam

you must primarily deal with the unseen issues!

Remember to use www.topcima.biz for more specific guidancetowards the exam, and if you dont pass this time, perhaps

consider attending one of the Reed Business Schoolcourses for the next sitting.

I also work with individuals one-to-one, usually where peoplehave failed in the past and need more personal guidance tohelp them get through. Although Im now fully booked forthis year, should you not be successful this time and feelthis would be useful for the next sitting, please do get in

touch at [email protected].

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