Draft for Comments
T4 Case study - TOPCIMA
Strategic Analysis
Papy
Nick Best
with
www.astranti.com
Welcome
Welcome to Nick Best’s TOPCIMA strategic
analysis
For those of you who don’t know me, I’ve
tutored TOPCIMA for BPP, Kaplan, First
Intuition and Reed Business School, am
the author of the official CIMA T4 learning
system, on which I worked together with
one of the TOPCIMA examiners, and now
work for Astranti Financial Training on
their TOPCIMA Personal Coaching
Programme.
For Mock Exams on the latest case, and a
range of other TOPCIMA information visit
www.astranti.com
Draft for Comments
Introduction to the case
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The supermarket industry is the focus for the latest T4 Case Study. That will no
doubt be a relief to many of you, as it is an industry which is very familiar to
us all. We’ve all been to and shopped in supermarkets and have at least a
little knowledge of the competitors and their differences. This should also
make finding industry examples (necessary for the diversity marks) very
easy to find.
The case company (Papy) is a successful company operating in 8 European
countries. It is growing has strong margins, and a loyal an increasing
customer base.
The key twist this time around is the focus on sustainability, which is the
companies key weakness. It lags behind competitors in this increasingly
important area. There is a new CEO, and he is demanding a big improvement
in this area, and has employed a new director to look after this.
Strategic analysis – the rational model
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This analysis uses the rational planning model of strategic
analysis, summarised in the following diagram
Governance
& Ethics
Business Environment
PEST
5 Forces
S W
NOW
O T
Internal
analysis
Business Strategy
Generic strategies
Ansoff’s matrix
Method of growth
Product analysis
-Product life cycle
-BCG matrix
FUTURE
Mission &
Objectives
Stakeholder
Mapping
Strategic analysis – the rational
model
The first stage of
analysis is to ensure we
fully understand where
the organisation is
heading, along with its
approach to meeting
stakeholder needs.
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Governance
& Ethics
FUTURE
Mission &
Objectives
Stakeholder
Mapping
Mission
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The mission statement sets the direction and tone of the organisation, and
guides strategic decision making. As is the case with most T4 Case Study
exams, we are not given the company’s mission statement.
If it were to have one, we could perhaps conclude that it might focus on
good customer service, keeping costs low, looking after employees, and
delivering strong returns for shareholders.
Going forward, it should also include a focus on the CSR – particularly
sustainability.
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Objectives and performance measurement
The objectives provide a focused target to move towards to direct planning,
motivate staff and enable accurate performance measurement
We are given few specific targets in the case study.
They are likely to have more specific strategic targets we are not told about. If the
unseen suggests they do not, then this is a weakness in the company’s planning
approach, which could be the case here, as their has been a lack of strategic
focus for the last 2 years due to the ill-health of the former CEO.
We are also told very little about how director and staff performance is measured
and rewarded. Again you would assume they do have motivating performance
targets but look out for evidence in the unseen for a weakness in this area.
Governance
•
•
•
Draft for Comments
Papy have 7 Non-executive Directors – good, and aligned with good
practise under the combined code
Non-Executive Chairman – some independence on the board, and
separate from the CEO – we like this!
Little evidence in the case of other key governance issues. They are
listed so should conform to governance requirements and probably
do, but look out for weaknesses in the unseen in areas such as:
Committees of Non-execs – Audit, remuneration, nomination
Disclosures of directors and pay
Financial reporting and control
Information for directors
All directors involved in decision making
Regular meetings with institutional shareholders
Good use of the AGM
Ethics and CSR
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•
Ethics is 10 marks in the exam – and hence is a very
important area
•
Lack of clear strategy and integrated approach
CSR weak according to new CEO – who is keen to
improve this
High free plastic bag count compared with competitors
High carbon emissions high compared with competitors
•
New Director taking charge of this area
Ethics and CSR - continued
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•
Some progress recently made:
Reduced waste
Reduced energy consumption 911 (2008) to 858 (2010)
Less plastic (plastic bags) – from 744 (2008) to 549 (2010)
Carbon emissions – 1,109 (2008) to 1,042 (2010)
More fair trade products
Fish – responsible purchasing practises
90% suppliers treated with respect
Suppliers inspection on working conditions
Employees – valued, training
Customer – healthy eating ranges expanded – 100% nutritionally labelled
•
Press statement (appendix 5) – Welcomed but progress must now be made
•
Critical area in this case study
Stakeholder mapping
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•
Doing a stakeholder map as an appendix in the exam is almost always
something which is useful to do. An appendix and done well will usually
gain 2 marks – possibly more.
•
You must update the map for changes in the unseen, and add all new
stakeholders which are in your top 4 issues
•
Refer to your map in the main body of your text, adding a comment to say
what 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 regular
meetings, and incorporating their views into the final decision)
Stakeholder Analysis Mendelow’s Matrix Draft for Comments
Low Interest
Minimal interest
Low Employees of suppliers
Power
Keep satisfied
Governments
High
Power Some major shareholders
High Interest
Keep informed
Most customers
Smaller Suppliers
Most employees and minor directors
Small shareholders
Key Players
CEO and Chairman
Major shareholders
Major branded suppliers (e.g.
Unilever, Diageo)
Strategic analysis – the rational model
Business Environment
PEST
5 Forces
S W
NOW
O T
Internal
analysis
Product analysis
-Product life cycle
-BCG matrix
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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
SWOT
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• 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 will not score as well
as points made in more depth, so it is worth writing 5-68
words for each point in your SWOT AND aim for roughly 5
points per heading.
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SWOT
Strengths
•
•
•
•
•
•
•
•
•
Listed, increasing EPS – facilitates raising
finance
Strong financial position = Large revenues,
profitable, stable financial position, cash
generating, increasing margins = well run
Reduced inventory levels, and good IT control
Loyal customers, increasing numbers
Mix of supermarkets and convenience stores
Experienced Chairman
New IT solutions – improve efficiency/cut costs –
order tracking, 70% linked to suppliers,
investment allows for growth
Continued growth in stores (particularly
convenience)
Share scheme – motivation of staff
Weaknesses
•
•
•
•
•
•
•
Opportunities
•
•
•
Expansion outside Europe
Expansion into other European countries
CSR improvement – re branding
CSR lack of overall strategy + Poor carbon emissions
vs competitors, high plastic bags (some improvement
in last year)
Lack of CSR reporting – no EMS
Lack of leadership due to ill-health of old CEO for 2
years + new CEO lacks industry knowledge
Small number of weak convenience stores
Few large supermarkets opened
Paying suppliers earlier (less free finance)
Much smaller than competitors 1 and 2 – difficult to
match their buying power re prices
Threats
•
•
•
Very competitive market – price competition (competitor
2 appears to be growing due to lower prices), new store
locations, etc……
Do not achieve CSR goals – re reputation in market
One off issue affects reputation e.g. food hygiene
PEST analysis
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•
On the following page you’ll find my PEST analysis.
•
The PEST analysis is always an optional appendix in this exam,
although this is one of the best case studies for a long time for this
model as there are so many relevant points.
•
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 to do this 2-3 times in your
script
PEST analysis
Draft for Comments
Political/
Legal
• New laws on – Health and safety, Carbon emissions
• Carbon trading schemes
• Difficult economic times increases importance of price e.g. value range
• Many supermarkets not adversely affected by economic downturn as
Economic
food is a necessity and other products sold at the value end of the market
• Exchange rate impact as overseas operations
• Euro crisis – uncertain impact
• Trend in sustainability – supermarkets slow to and some do not
Social (inc incorporate it into strategic plans (e.g. Papy)
sustainabil
• Global scope for improvement in reporting sustainability
ity)
• Increasing customer awareness and focus on sustainability
• New technologies in procurement, inventory management, purchasing,
Technologi
will be key to continued efficiencies (Papy appear on course except in the
cal
area of environmental reporting)
5 Forces Analysis
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•
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 this industry is on the next page
In this case the average of the forces is medium so the industry would be
deemed averagely profitable.
Draft for Comments
5 forces analysis
Factors increasing Force
Buyer Power
Medium
Supplier
Power
Medium/Low
Factors lowering force
• Lots of competitors allows for easy switching
• Some loyalty – most people shop in same
between competition
store each week
• Often people choose most convenient
• Buyers are small and not able to negotiate
special terms individually
• Large brands can dictate terms as
• Many suppliers of undifferentiated products
supermarkets are forced to stock these items
(e.g. Fruit, Milk, Own Brand manufacturers)
have little power
• Many large international competitors –
Competitors
High
New
Entrants
Low
Substitutes
Low
globally recognised brands
• Wide coverage – international, large and
convenience
• Price is key to being competitive
• Global competitors do enter local markets
• Lots of competition – they have economies of
using organic growth
scale – this deters new entrants
• Difficult to get planning permission on new
large stores
• Food is a necessity
• Clothing a necessity
Strategic analysis – the rational model
Draft for Comments
Next we need to analyse the strategic options, and make a
conclusion on the way forward for the business
S W
NOW
O T
Business Strategy
Generic strategies
Ansoff’s matrix
Method of growth
FUTURE
Mission &
Objectives
The usual approach to defining a business strategy is to begin with a
definition of the generic strategies, followed by analysing options in
Ansoff’s matrix, looking at how these might be implemented with the
‘Methods of Growth’ and then deciding upon a final strategy
Opportunities and Threats
Products/Generic Strategy
Draft for Comments
Products
Generic Strategies
• Wide range of productsBCG/
Product Life
Cycle
food<75%
• Branded, Own Brand, Value
range
• Value range important in difficult
economic times
•Convenience vs large
supermarkets
• VITAL to success in this industry
• Most competitors must keep costs
Cost leadership
• Growing convenience stores
Strengths
low
• Papy may find it difficult to
compete on price long term against
much larger competitors with high
Economies of Scale
• Papy are potentially ‘Stuck in the
Middle’
• Products are mostly generic –
Differentiate
hard to differentiate
• Some competitors such as M&S
and Waitrose operate in the higher
quality area
• Papy do not appear to have clear
differentiating factors
• Convenience stores – increasing
Weaknesses
• Few new large stores
• Limited economies of scale vs
larger competitors
focus
Focus
Ansoff’s Matrix and methods of growth
Draft for Comments
•
Ansoff’s matrix enables the generation of strategic options.
•
Those you’ll find in my analysis over the page are just ‘options’, not my
recommendations.
•
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
•
The final stage is then to decide on the methods which the organisation can
use to take the options (as generated in Ansoff’s matrix) – again these are
just possibilities at this stage
Ansoff’s Matrix and methods of growth
Existing Market
• Value chain review – remove nonvalue adding activities – cost
reduction
• Improve CSR
Existing
Product • New technologies – increase
efficiencies + reporting (EMS)
• Continue focus on customer
satisfaction and service, and
achieving efficiencies
• Some uncertainty exactly what their
New
Product
product range incorporates but could
expand wider like Tesco into areas
such as financial services
Draft for Comments
New Market
• Expand into new overseas markets
– South America, Africa, other
European countries
• Food production
• Logistics (e.g. to competitors or
other retailers)
• Other retail areas e.g. Coffee
shops, PC sales
Methods of Growth
Internal Development
Acquisition
Joint Venture
Divest
Draft for Comments
•Cost reduction
•New products
•New markets
•Competitors
•Small companies
•Suppliers
•Companies which are in new markets e.g. India, China
•New markets (e.g. India, China)
•Some new products e.g. Coffee chain within large stores
• Unprofitable stores
• Unprofitable profits lines
Defining a business strategy
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•
On the following page you will find my recommended strategy for
the company.
•
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
way forward like this – you MUST deal with the unseen issues and
only those issues
•
However, dealing with those issues in light of a strong logical
approach to how the business should be taken forward can help you
make a strong argument in your recommendations.
Nick’s Strategies going forward
Draft for Comments
• Continue with the successful areas of the business
Keeping costs low
IT investment (inventory, ordering)
Customer service and satisfaction
• Clear generic strategy – undertake strategic review of existing
products and markets – perhaps with a focus on convenience stores
which is a growing area with higher margins
• Continued organic growth in existing markets – consider profitability
and viability of growth in areas convenience vs large stores
• Wider expansion into new markets through acquisition – particularly
high growth markets
• CSR strategy devised and implemented, with clear targets and CSR
reporting
Nick’s TOPCIMA Coaching Programme
Draft for Comments
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!
Remember to use www.astranti.com for more
specific guidance towards the exam, and if you
don’t pass this time, perhaps consider working
with me in my personal coaching sessions for the
next sitting.