Strategicreview[1]

TOPCIMA

V Outsourcing Vendor

Strategic Analysis

Nick Best

Nick Best’s Strategic Analysis www.topcima.biz

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 latest
TOPCIMA case study

For details of courses at Reed Business School and to
learn more about the exam and how to approach it
please see
www.topcima.biz


V Outsourcing Vendor

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

Remember that this is my view, not a definitive view of the
company. You should review this in the context of your
own analysis of the company, and make your own
conclusions.

If would like to hear more of my views on this and the
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, with a clear
niche in ‘fast fashion’ – getting catwalk designs into the market
very quickly. Remarkably customer visit stores an average of 17
times a year compared with an industry average of just 4, so there
is excellent customer loyalty, and a premium price charged for the
quality, brand, design and ‘exclusivity’ of a fast changing product
range.


Strategic analysis – the rational model

This analysis uses the rational planning model of strategic
analysis, summarised in the following diagram
Governance
Business Environment & Ethics
PEST 5 Forces
S W FUTURE
Business Strategy
NOW Mission &
O T Generic strategies Objectives
Internal Ansoff’s matrix
analysis Method of growth
Stakeholder
Product analysis Mapping
-Product life cycle
-BCG matrix


Governance
& Ethics
The first stage of analysis
is to ensure we fully FUTURE
understand where the
Mission &
organisation is heading,
along with its approach Objectives
to meeting stakeholder
needs.
Stakeholder
Mapping


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 to have good governance
procedures. Governance appears to be good, but there 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 independence on the board
• Range of executive directors to bring wide knowledge 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 audit 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 comprehensive
• 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 increasing customer
consciousness of issues such as fair trade and possible breaches
in CSR rules or possible mispractise must be dealt with firmly, and
you should say so in the ethics section of the report.


Stakeholder Analysis
Mendelow’s Matrix
Low Interest High Interest
Casual customers Most suppliers
Suppliers employees Loyal customers
Low
Power
Most employees (could increase
if unionised, but no evidence of
this)
Lenders
Governments Shareholders
Media Building owners
Carla Celli – CEO
High
Frank Bartolli - Chairman
Power Board of Directors
IT outsourcer


Stakeholder Analysis
Mendelow’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.



Business Environment Next we need to analyse the current
PEST 5 Forces position of the business
S W
NOW This helps us ensure the strategies we
O T decide upon are appropriate to the
business’ current position and
Internal issues they face in the industry and
analysis more broadly

Product analysis This position is summed up in a SWOT
-Product life cycle analysis
-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
STRENGTHS WEAKNESSES
1. Clear competitive position and reputation – 1. Possible loss of focus on core strengths by moving
niched on fast fashion, quality, primarily into varied new products
women – retained profits even in poor 2. Lots of small stores – hard to expand into new
economic climate – Loyal customers products in these stores
2. Integrated IT systems, facilities service, 3. Short term leases could give building owners
inventory management and cost reduction power
3. Excellent supplier relationships ensure 4. Lack of accurate product profitability analysis
quality and speed of service 5. Getting into online late in the day – missed big
4. Experienced board of directors and motivated opportunity - weak strategic decision
staff 6. Possible over-reliance on a single distribution
5. The shops are in excellent locations and are centre – creates risk
well fitted out
6. Good profit margins - cost control – strong
financial position helps when raising finance
OPPORTUNITIES THREATS
1. Expansion in new overseas markets 1. Highly competitive market – price reductions could
2. Expand new product ranges hit profit margins
3. Online sales 2. Worldwide recession
4. Improved customer information to improve 3. Low share price – threatened takeover
targeting – data mining/online information 4. Not keeping up with technological changes or
5. Takeover competitor to expand quickly changing customer requirements
5. 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

Possible trade barriers for imports from Asia
Political
Abiding by local laws in a variety of countries operated in

Opportunity to renegotiate shop rentals downwards
Weak economic climate – pressure on prices/people moving to
Economic
value retailers/product mix changes
Exchange rate issues – sales non-€, Buying in Asia
Customer expectations have risen – availability, service, changing
rooms – CeeCee must keep standards high
Social Attitudes changed generally towards lower cost clothing
Increasing awareness of CSR issues

Online shopping – Opportunity and threats + security issues
Technolo Must keep up with technological trends
gical


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 Threats
5 forces analysis

Factors increasing Force Factors lowering force
Buyer Lots of choice – easy to switch – easy to Individual customers have little power
compare online
Power
Medium
Supplier Short term rental of shops, with large fitting Long payables period (155 days) – suggests
costs – increases power of shop owners CeeCee have most power with suppliers
Power
Some power to IT outsourcer Many international manufacturers
Medium/ Dependent on long term relationships and CeeCee are large – manufacturers want their
low quality increasing power business

Intense competition – influx value retailers – CeeCee have strong niche – protecting their
Competi- high street (Primark) – Supermarkets – also profitability
tors dept stores
Online shopping, Easy to copy designs
High
Increases in difficult economic times

New Online shopping Very competitive market
Expensive to enter
Entrants
Many small start ups, but hard to build a
Low competing large business – takes many years
Subs Low Very few substitutes for clothing

Opportunities and Threats
Products/Generic Strategy

Products Generic Strategies

High fashion – fast changing PLC

BCG/
Cost
Product Life
leadership
Cycle

Women’s clothing – still known for Branding critical for differentiation
this
Strengths Differentiate
Accessories

Men’s clothes – branding unclear Design and service increasingly
Home furnishings is higher margin, important for differentiation
but probably has a lower return per
Weaknesses m2 of floor area Focus CeeCee – Fashion at low cost –
Product profitability unclear Young professional women but now
mens and childrens could threaten
focused position and brand


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

S W FUTURE
Business Strategy
NOW Mission &
O T Generic strategies Objectives
Ansoff’s matrix
Method of growth


Ansoff’s Matrix

Existing Market New Market
More shops - within current countries Only in 18 countries – fewer than many
competitors – key opportunity
Increase marketing spend – currently low
Franchising
Existing Concessions within department stores
Product
Online – new channel

Franchising

Accessories Gift cards
Shoes. Underwear.
Jewellery Sportswear
Perfumes
New Cosmetics Country clothing
Product Mature clothing range


Methods of Growth
New products

Internal Development New markets

Distribution development

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

-Online – long term in future
Franchising may provide a low risk way to enter new markets and gain local
experience and share risk (and rewards)

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

Mens clothing is a possibility – unclear branding of this product – not
focused on core customers
Divest Home 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)

SWOT
STRENGTHS WEAKNESSES
1. Clear competitive position and reputation – 1. Possible loss of focus on core strengths by moving
niched on fast fashion, quality, primarily into varied new products
women – retained profits even in poor 2. Lots of small stores – hard to expand into new
economic climate – Loyal customers products in these stores
2. Integrated IT systems, facilities service, 3. Short term leases
inventory management and cost reduction 4. Lack of accurate product profitability analysis
3. Excellent supplier relationships 5. Getting into online late in the day – missed big
4. Experienced board of directors – motivated opportunity - weak strategic decision
staff – teamworking amongst staff 6. Possible over-reliance on a single distribution
5. Shops – locations and fittings centre – creates risk
6. Good profit margins - cost control – strong
financial position – e.g. raising finance

OPPORTUNITIES THREATS
1. Expansion in new overseas markets 1. Highly competitive market – price reductions could
2. Expand new product ranges hit profit margins
3. Online sales 2. Worldwide recession
4. Improved customer information to improve 3. Low share price – threatened takeover
targeting – data mining/online information 4. Not keeping up with technological changes or
5. Takeover competitor to expand quickly changing customer requirements
5. 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 countries
1) Very successful brand and concept which is likely to work in new
markets
2) Examine market position and social trends in potential markets
3) Plan ongoing programme of gradual expansion
4) 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 analysis
4) Refocus of product portfolio stick to key niche focusing on professional
women
1) 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 the exam
– you must primarily deal with the unseen issues!

If you don’t pass this sitting please do consider coming to our
residential centre in the Cotswolds for retakes in the future
where you’ll get focused tuition on how to pass this exam,
and detailed feedback on mock scripts.

I also work with individual’s one-to-one, usually where people
have failed in the past and need more personal guidance to
help them get through. Although I’m now fully booked for
this sitting, should you not be successful this time and feel
this would be useful for the next sitting, please do get in
touch at nickbest@live.co.uk.


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