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This presentation is a growth strategy report of a major kitchen supplier in Australia. The deck has 49 slides. To achieve its growth objectives, the company has engaged a major consulting firm to:
- Define and articulate the business strategy that will deliver its growth and profit targets
- Identify the business model and capabilities the company will need to realise this strategy, and
- Assess what investment in time, effort and money will be called for to execute the strategy (including two alternative roll-out plans)
2. 3
From our analysis we have identified the most promising growth opportunity
for XYZ
We have targeted the 5 major cities as the focus for growth
We have reviewed the multiple sales channel choices available
into three potential go forward options
Further evaluation and costing of these options has brought us to
two strategic alternatives
We have identified the business model and capabilities XYZ will
need to realise the preferred strategies
We have assessed what investment in time, effort and money will
be called for to execute the strategies (including two alternative
roll-out plans)
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3. 6
Ability to Compete – Large Australian Cities(1)
Ability to Compete
Low High
Note: (1) See appendix 5 for rating scale. See appendices 6 & 7 for data, analysis notes, assumptions & sources.
Criteria Sydney Melbourne Brisbane Adelaide Perth
Relative
Market Share
Market
Knowledge
Sales Force
Effectiveness
Marketing
Effectiveness
Brand
Strength
Distribution
Network
Overall
Attractiveness
Distribution
Costs
We have assessed XYZ’s ability to compete in the five largest cities. It is
highest in Sydney and Adelaide.
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4. 9
0
50
100
150
200
250
300
<1000 1000-2999 3000-5999 6000+
Price Points $
0
10
20
30
40
50
60
XYZ
BIS
Wallspan Kitchen
Volume
Note: XYZ raw data doesn't include appliances. Installation and appliances added at industry costs.
Source: BIS Shrapnel 1997, p120, Cost of kitchen renovations by item installed; XYZ Wallspan order Reports, 6 months to Dec 1999.
BIS Annual
Kitchen Volume %
Based on the pricing point distribution of XYZ sales in Adelaide versus BIS
Shrapnel market data, the low cost end of kitchen renovation market has not
been exploited by XYZ.
Appendix 6: Adjusted XYZ ADELAIDE vs BIS Distribution of Price Points
‘Bits and
Pieces’ sales
Low end kitchen
sales ($1500-
$3000) not
currently exploited
by XYZ in Adelaide
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5. 12
Strategic Option 1 – “The One-Stop-Shop”– is a kitchen superstore concept
with a separate trade-direct channel.
Trade
Channel
(ex-factory/warehouse
direct to trade
outlet or site)
ProductMarket SegmentChannel
• Supports Custom Kitchens
• Value Added Services
• Showroom service
• Measure and consult
• CAD Design
• Finance
• Project Coordination
• Installation
• Appliance/
Accessories
dealerships
• No Fuss Standard Flat
Pack Range
• Best Value
(Price/Quality)
• Standard “Easy to
Use’ Range
• Off-Shelf Availability
Every Time
• Loyalty incentives
Kitchen
Superstore
in key locations
World-Class
Manufacturing
Capability
FR
AG
ILE
FR
AG
ILE
FR
AG
ILE
FR
AG
ILE
Price Point(1)
• Medium to High Price
Range ($5K-$9K)
• Low to Medium
Price Range
($3K-$6K)
• Low Price Range
($1.5K-$4K)
Budget Home
Renovator
Home Owner Builder/
Renovator
• Supports Standard
Kitchens
• Value Added Services
• Showroom service
• Measure
• CAD Design
• Installation
Option 1 – One-Stop-Shop
Note: (1) Includes cabinetry price only.
DIY enthusiast
Tradesman/Installer
Small Builder
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6. 15
Strategic Options 3 – “Hardware Multiple Focus” – primarily involves
targeting volume through hardware multiples and, in addition, growing the
number of branded showrooms.
Channel
FR
AG
ILE
FR
AG
ILE
FR
AG
ILE
FR
AG
ILE
Hardware
Multiples
(Bunnings &
BBC HardwareHouse)
Brand
Stores
(Nobby’s &
Wallspan)
World-Class
Manufacturing
Capability
Budget Home
Renovator
Home Owner Builder/
Renovator
ProductMarket Segment
• Medium to High Price
Range ($5K-$9K)
• Low to Medium
Price Range
($3K-$6K)
• Low Price Range
($1.5K-$4K)
• Supports Custom Kitchens
• Value Added Services
• Showroom service
• Measure and consult
• CAD Design
• Finance
• Project Coordination
• Installation
• Appliance/
Accessories
dealerships
• Supports Standard
Kitchens
• Value Added Services
• Showroom service
• Measure
• CAD Design
• Installation
• No Fuss Standard Flat
Pack & Uni-Block Range
• Best Value
(Price/Quality)
• Standard “Easy to
Use’ Range
• Off-Shelf Availability
Every Time
• Loyalty incentives
DIY enthusiast
Tradesman/Installer
Small Builder
Option 3 – Hardware Multiple Focus
Price Point(1)
Note: (1) Includes cabinetry price only.
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7. 18
The financial projections are based on several key assumptions.
The financial projections do not include costs and revenues associated with XYZ’s
existing Commercial and wardrobe business
Outlets opened during the year are assumed to have 50% of the sales volume of
established outlets (i.e. outlets opened in prior years)
Funding requirements are met by debt and equity in equal proportions
Interest on debt assumed at 10%
No dividends are paid during the period under review
Tax rate assumed at 30% and tax is paid one year in arrears
Efficiency improvements on materials (2% on cost of goods sold), labour (1%) and
variable overheads (2%) are realised on an annual basis
Key Assumptions1
Notes: (1) See Appendix for detailed assumptions
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8. 21
We have targeted the 5 major cities as the focus for growth
We have reviewed the multiple sales channel choices available
into three potential go forward options
Further evaluation and costing of these options has now brought
us to two strategic alternatives
We have identified the business model and capabilities XYZ will
need to realise the preferred strategies
We have assessed what investment in time, effort and money will
be called for to execute the strategies (including two alternative
roll-out plans)
This document is a partial preview. Full document download can be found on Flevy:
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9. 24
Strategy
Expand geographic presence through multiple
retail outlets in large Australian cities
Develop distinct value propositions for
customer segments in each city – e.g. different
product/service packages, branding, location
& merchandising
Leverage synergies across the national supply
chain network to drive cost-efficiencies in
procurement, manufacturing & distribution
Aggressive... …But Pragmatic
Leverage existing relationships with hardware
multiples and expertise in branded showroom
sales
Improve existing demand & supply chain
planning capabilities
Roll-out sustainable retail offer in ‘bite-size
chunks’ to balance investment risk against
returns
XYZ will require an aggressive, but pragmatic growth strategy to achieve this
vision.
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10. 27
Business Capability Gap Assessment (Cont’d)
Competency
Culture
Facilities
Performance
Current Future
Change
Required
Capability
Component
Impact on
Performance
• Location-specific
• Operations-driven
• Based on origins as family
business
• Based on personal
relationships
• Customer-centric
• Performance-driven
• Corporatised (one-national
identity)
• Channel-specific
• Competitive & innovative
• Pro-active development of
corporate identity & channel-
specific sales cultures
• Development of performance-
driven culture through
performance tracking & incentives
Medium
• Two manufacturing sites
• Showrooms in Sydney,
Melbourne & Adelaide
• Limited distribution through
multiples in large cities
• East & West regional Offices
• Factory-based warehousing
• Manufacturing in Sydney
• 5 regional DCs
• 5 regional offices (in
showrooms)
• More showrooms (32) &
multiples(40) in capital cities
• Consolidation of manufacturing
capability
• Significant growth in retail outlets
• Expanded administrative
infrastructure
• Expanded distribution network
Very High
• Operational skills &
knowledge
• Focus on internal, cross-
functional decision-making
• Lack of analytical & strategic
skills
• Analytical & strategic skill-base
• Improved front-line sales
capability
• Third-party management &
negotiation skills
• Point skills in IT, S&M(1) &
supply chain planning
• Recruitment & training of sales
force
• Recruitment of strategic &
analytical support in marketing
• Training in, and recruitment of,
supply chain planning & Scala
systems expertise
High
• Few performance measures
defined
• Few performance targets
• Ad hoc process performance
measurement
• Incentives not aligned to KPIs
• Comprehensive set of
process performance
measures & targets in place
• KPIs aligned with roles &
incentives
• KPIs aligned with business
strategy & vision
• Development of comprehensive
performance management
framework
• Systems/reports configured to
enable performance measurement
• Shift towards performance driven
culture & behaviours
High
Note: S&M = sales and marketing function.
Source: ABC client experience; interviews with XYZ business representatives; analysis of XYZ key performance indicators.
XYZ’s performance metrics, and our interviews and analysis have identified
capability gaps which must be bridged for XYZ to achieve its vision.
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11. 30
Business Process Alignment
Manage Performance
Procure Manufacture Distribute Market Sell Serve
Core
Processes
Process
Attributes
• Collaborative – based
on long-term supplier
relationships
• Joint forecasting with
suppliers
• Backward integration
(acquisition of key
suppliers)
• Vendor-managed
inventories where
possible
• Fact-based,
performance-driven
supply agreements
• Formal non-
compliance & return
policies
• Tight controls on
Kanban process
• Orders routed by
MTO & MTS
• Demand planning
done collaboratively
with trade & XYZ
• Product versions
controlled
• Product
standardisation &
design for
postponement
• Increased IT-
enablement of
inventory, materials
requirements &
production planning
• Transport network
optimised
• Warehousing &
transportation
outsourced
• 3rd-party
kitting/installation
considered
• Performance-driven,
3rd-party SLAs
• Regional DCs in
place
• IT-enabled factory-
DC-store
replenishment
process
• Formal allocation
process developed
• Marketing processes
driven by customer
insight/research
• Centralised, channel
specific marketing
function
• Analysis &
performance-driven
marketing planning
• Segment specific
value propositions &
brand strategies
• Marketing strategies
developed by cross-
functional teams
(including trade
partners)
• Formal channel-
specific sales
processes
• Channel-specific
sales training
programs rolled out
• EDI and Internet-
enabled sales/order
processes
developed
• Rigorous channel-
specific performance
measures in place
• Regional or
centralised customer
service (based on
cost/benefit analysis)
• Formal, segment-
specific customer
service processes
• Customer service
KPIs tracked and used
to improve process
• Development of in-
house installation
service considered
(based on cost/benefit
analysis)
Note: DC = distribution centre, MTO = made-to-order, MTS = made-to-stock.
Source: ABC client experience; interviews with XYZ business representatives.
Integrating supply and demand-side processes and extending processes
across business boundaries will be critical to achieving XYZ’s operating
vision.
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12. 33
High-Level Organisation Structure(1)
Chief
Executive
Officer
INDICATIVE
Note: (1) Analytical & administrative support will be required across all functions.
Source: ABC client experience; interviews with XYZ business representatives.
Supply Chain
Director
Shared Services
Director
Sales & Marketing
Director
Manufacturing
Manager
Logistics
Manager
Production
Engineer
Quality
Assurance
Engineer
Planning &
Scheduling
Manager
Procurement
Manager
Materials &
Inventory
Manager
Channel
Manager
(multiples)
Channel
Manager
(showrooms)
Recruitment &
Training
Manager
IT
Manager
Management
Accountant
Financial
Accountant
IT
Supportx4
Payroll
x2
Accounts
Payable
x4
Accounts
Receivable
x3
Regional
Managers
x5
Regional
Managers
x5
Product
Development
Manager
Production
Supervisor
An expanded, process-driven organisation structure will enable XYZ to
effectively manage operational performance.
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13. 36
Performance Management Framework
ILLUSTRATIVE
Source: ABC client experience; interviews with XYZ business representatives.
To My Shareholders
Financial Perspective
To My Customers
Customer
Perspective
With My Internal
Management Processes
Internal Business
Perspective
With My Ability to
Innovate & Grow
Growth & Learning
Perspective
Organisation Vision & Strategy
Examples
• Profitability
• Cash management
• Sales revenues
Examples
• Customer satisfaction
• Trade satisfaction
Examples
• Forecast/plan accuracy
• Marketing effectiveness
Examples
•Employee productivity
•Supply chain efficiency
Examples
• EBIT
• EVA
Examples
• Referrals
• Satisfaction scores
Examples
• Marketing spend/sales
• Deviation from forecast
Examples
• Units per head
• Delivery accuracy
What are our
strategic
objectives?
What are the
critical success
factors?
What are the
critical
measurements?
What is our
Vision?
Performance Reporting
To meet its growth targets, XYZ needs to implement a rigorous, organisation-
wide performance management framework.
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14. 39
Branded Stores and Hardware Multiple Option
Our sensitivity analysis around the base case indicates that the upside
potential is significant.
Number of outlets
Volume of kitchens
Revenue ($000)
EBITDA ($000)
EBIT($000)
Return on capital employed (%)4
Return on sales (%)
Funding requirement ($000)
82
17,056
89,024
10,596
8,348
9.4%
82%
4,194
Base Case1
82
19,240
105,040
16,256
14,007
13.3%
140%
2,251
Additional Volume
Branded Stores2
82
19,136
95,264
12,071
9,822
10.3%
96%
3,180
Additional Volume
Hardware Multiple2
82
19,240
107,770
18,538
16,289
15.1%
166%
1,218
Additional Volume
Branded Stores2
and
Price Increase3Key Figures
Notes: (1) See Appendix for details of business case and assumptions
(2) Volume increased by 1 kitchen to 5 kitchens per week for branded stores, and to 4 kitchens per week for hardware multiples in FY2001 (5 kitchens per week from FY 2002)
(3) Increase in average selling price of $250 (approximately 2.5%) for cabinetry only for the same cabinetry configuration - relates to branded stores only
(4) Return on capital employed (EBIT divided shareholders funds plus debt) for FY 2004
82
19,240
91,208
12,421
10,172
11.2%
101%
2,213
Price
Increase3
Sensitivities
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15. 42
The Branded Stores and Kitchen Barn option (Option 6) assumes that XYZ
can capture the low to medium price segment of the kitchen renovation
market.
Key Assumptions
Additional 30 Nobbys / Wallspan outlets and 19
Kitchen Barns are opened in the five largest cities,
plus Canberra and Newcastle
Nobbys / Wallspan outlets sell 4 kitchens per
week
Kitchen Barns sell 14 kitchens per week
Both Nobbys / Wallspan outlets and Kitchen Barns
sell appliances with 50% of kitchens sold
Installation revenue / margin excluded from
projections
Funding profile assumes $8 million in FY2001 and
$4 million in FY2002
Upside Potential
Increase Nobbys / Wallspan selling prices
Additional kitchen sales per outlet
Import appliances and include wholesale margin
in projections
Offer installation service
Up-selling opportunities from Kitchen Barns to
Nobbys / Wallspan outlets
Include the Trade channel as a ‘bolt-on’ (through
Kitchen Barns or factory direct)
Internet channel through Kitchen Barn format
Brand strategy and repositioning
Retail wardrobes through Kitchen Barns
Branded Stores and Kitchen Barn Option
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16. 45
Branded Stores and Kitchen Barn Option
Notes: (1) See Appendix for details of business case and assumptions
The Branded Stores and Kitchen Barn option has a peak funding requirement
of $12.7 million in FY2002, and is cash positive in FY2004.
EBIT
Add back depreciation
EBITDA
Capital expenditure
Interest (paid) / received
Working capital
Tax (paid) / recovered
Funds (required) / generated
(3,126)
1,773
(1,353)
(4,843)
(913)
(848)
(223)
(8,180)
FY2001
(1,173)
2,884
1,711
(6,283)
(1,131)
1,211
(6)
(4,496)
FY2002
3,280
3,738
7,018
(4,488)
(1,032)
691
(15)
2,175
FY2003
9,215
3,305
12,520
(250)
180
(674)
97
11,872
FY2004Cash Flow ($000)1
BASE CASE
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17. 48
Program Management
Structure
Our recommended Program Management structure will perform the critical
integration role to align all projects and change to the objectives of the
program.
Program
Control
Program
Control
Issue / Scope
Management
Issue / Scope
Management
Business Case
Management
Business Case
Management
Financial
Control
Financial
Control
Supply Chain
Subject Experts
Supply Chain
Subject Experts
Program
Quality Assurance
Program
Quality Assurance
Change Management
& Communication
Change Management
& Communication
Program
Management
Program
Management
Executive Steering
Committee
Executive Steering
Committee
Program SponsorProgram Sponsor
Generate Demand
Process Development
Generate Demand
Process Development
Fulfil Demand Process
Development
Fulfil Demand Process
Development
Resource
Development
Resource
Development
Infrastructure
Configuration
Infrastructure
Configuration
Performance
Management
Performance
Management
IT
Configuration
IT
Configuration
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18. 1
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