T4 Case study - TOPCIMA
Strategic Analysis
N Retailer
Nick Best
with
www.astranti.com
Welcome
Welcome to Nick Best’s T4 Case Study
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 Courses.
For Mock Exams on the latest case, and a
range of other TOPCIMA information visit
www.astranti.com
Introduction to the case
The retail 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 department stores and have at least a little
knowledge of N’s competitors (in the UK companies like Debenhams, John
Lewis, House of Fraser and Marks and Spencer. This should also make
finding industry examples (necessary for the diversity marks) very easy to
find. What a relief after the Vehicle Maintenance industry last time around!
The case company N Retailer was a successful company operating
internationally, but has struggled to be successful over recent years, with
more dynamic competitors and the insurgence of internet retailing into the
market. With the European economies continuing to face difficulties, N is
facing a challenging future.
There is a new CEO however who has been charged with turning the business
around – and it is in this context that we must advise the business on the
key issues it now faces; as will be revealed on exam day.
Strategic analysis – the rational model
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.
Governance
& Ethics
FUTURE
Mission &
Objectives
Stakeholder
Mapping
Mission
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.
However, we are told the traditional basis for success of the firm:
• Quality products
• Excellent service
• Focused on middle income consumers
This is a clear focus differentiation strategy (according to Michael Porter’s
Generic strategies model).
Clarifying their mission statement going forward would be a good
suggestion in this case – to cement their future strategic position.
Objectives and performance measurement
The objectives provide a focused target to move towards to direct planning,
motivate staff and enable accurate performance measurement
A goal mentioned in this case is:
New CEO to take “decisive steps to put N back amongst the leading competitors”.
Financial targets are in the 3 year plan, that by 2016:
Profits Z$104.8m
Sales Z$ 2,185.9m
These are not ambitious targets – expect these to be revised by the new
CEO, given the changes they are expecting to make
The company 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 in the past.
We have no indication of non-financial performance measures so perhaps a
balanced scorecard would be a good suggestion.
Critical Success Factors
The following are critical success factors:
•
•
Excellent store locations
Supply factors
Inventory and distribution management to ensure shelves remain fully
stacked
Good supplier relationships = good quality and quick delivery of products
•
Products
High quality
Meeting customer needs e.g. e.g. latest fashions, latest technology, high
quality
•
•
•
•
•
Excellent customer service
Innovation – keeping ahead of competitors in a fast changing industry e.g.
fashions, latest product trends, online, mobile
Integrated online and bricks and mortar operations - consistency
Good management information
Branding and marketing
Astranti TOPCIMA Courses
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Detailed video exam guides
Full video debrief of the preseen
2 day long live master-classes covering:
The exam and marking criteria
Prioritisation of Issues
Preseen analysis and discussion
Keys to passing the exam
Industry example knowledge share
5 full mock exams
Marking and personal feedback on 3 mock exams
60 industry examples to use on exam day
3 mini-mock exams
Personal feedback on 2 mini-mock exams
Detailed course notes
Calculations e-book to practise vital calculations
Ethics e-book – perfect your ethics sections
Issues e-book to master issues structure and timings
Private forum:
debate the case with others
focused tutor support
Ongoing e-mail support
Progress reviews
Keeping you on track for a pass
“Hi Nick,
I passed with 62% - huge
relief.
Thanks again for your
support – I’m relieved I
stumbled across you before
signing up with one of the
mainstream training
providers.
Kind Regards,
Marc”
Marc Thomas
Passed September 2011
“I could not recommend this
service strong enough and
honestly feel this was the
reason for my successful
pass”
Paula Roberts
Passed November 2009
Governance
•
Few risk management procedures (identified by the new CEO)
•
Little evidence in the case of key governance issues being
addressed.
•
They are not listed so do not have to conform to governance
requirements, but in a large business like this you would expect
many key governance procedures to be put in place.
•
Typical elements that appear to be missing include:
Non-executive directors to bring independence and expertise
Committees of Non-execs – Audit, remuneration, nomination
Disclosures of directors and pay
Financial reporting and control
Information for directors
Regular meetings with key shareholders
Ethics and CSR
•
Ethics is 10 marks in the exam – and hence is a very
important area
Specifically mentioned in case:
•
Security of customer information and purchase details
Other possible ethics issues:
•
•
•
•
Supplier treatment of their staff/working conditions
Sustainability/environmental concerns
Product health and safety
Theft/fraud
Stakeholder mapping
•
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
Low Interest
Minimal interest
Low Employees of suppliers
Power Occasional customers
Keep satisfied
Government
High
Power Major Branded suppliers (e.g. Apple)
Bank
High Interest
Keep informed
Loyal customers
Smaller Suppliers
Most employees and minor directors
Small shareholders
Key Players (Keep close)
New CEO and Chairman
Major shareholders e.g. 4J
Strategic analysis – the rational model
Business Environment
PEST
5 Forces
S W
NOW
O T
Internal
analysis
Product analysis
-Product life cycle
-BCG matrix
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
• 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 5-6
words for each point in your SWOT AND aim for 4-5 points
per heading.
SWOT
Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
New, dynamic, experienced CEO
Well recognised brand
Employment conditions, staff training
Quality and Customer service
Stores in some good city centre locations
Good product and department information
provided
Assets on balance sheet to sell or secure
finance against
Strong cash-flows
Own brand products – high margin, increased
sales, not comparable online
Overseas markets of Middle East and Asia
Weaknesses
1.
2.
3.
4.
5.
6.
7.
8.
9.
Opportunities
1.
2.
3.
4.
Mobile retailing and expanding online
In-store wi-fi
Overseas expansion (purchase, franchise,
new store openings)
New product ranges (e.g. health) or change
product mix
Too slow to change – lack of innovation e.g. online,
new fashions – “behind its major competitors”
Lack of store space in out of town locations
IT systems – information systems not integrated,
logistics systems led to stock-outs
Lack of consistency of suppliers, slow lead times
Products out of fashion, and overstocked
Online offering not integrated (online, mobile, bricks
and mortar) – e.g. returns, in-store delivery
Governance: Lack of risk management and
contingency planning, No NEDs or committees
Sales growth and sales/m2 worse than competitors
Cost increases – marketing, distribution, admin
Threats
1.
2.
3.
4.
5.
Online retail, and changing customer preferences
Competition – other dept. stores, specialist retailers,
supermarkets, overseas
Social trend towards out-of-town locations
Continuing poor economic position – reduced
customer spending and focus on lower cost items
Traditional customers’ changing spending patterns
towards health, diy and entertainment.
Astranti TOPCIMA Mock Exams and mini-mocks
“Hi Nick,
The biggest criteria for success in my
opinion is practising mock exams. These
are key since:
• They help you with Time Management, the
critical problem for most students
• They enable you to practise a range of
issues that you may see in the real exam
The Astranti Mock exams on this Case can
be purchased at www.astranti.com
I passed my CIMA T4 Part B
with 26 credits. To say that I
am extremely happy is a
gross understatement!
I would like to thank you for
helping me cross that bridge
(not an easy one) and
achieve another milestone in
my life. Your mocks made a
big difference and really
helped me - this was my 3rd
attempt. There is something
very right in what you are
doing.
Keep up the good work!
Kind Regards,
Edmore Chinhakwe”
Passed November 2011
PEST analysis
•
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
Political/
Legal
• New laws could be relevant in areas such as Health and Safety,
• Restrictive competition legislation prevents growth through purchasing
competitors in Z
• Difficult economic times increases importance of price e.g. value range –
Economic
which is not consistent with N’s traditional market
• Worldwide economic downturn will affect all of N’s markets
• Exchange rate impact as overseas operations
• Euro crisis – uncertainty in future markets in Europe
• Increasing trend for online sales – key threat to Bricks and Mortar
Social (inc focused retailers such as N
sustainabil
• Out of town shopping – need to adapt locations as trends change
ity)
• Increasing customer awareness and focus on sustainability
• New technologies in retailing (e.g. sales systems, distribution and
inventory management, marketing, finance) will be key to continued
Technologi efficiencies
cal
• Internet retailing is rapidly changing the market
• Mobile devices
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 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.
5 forces analysis
Factors increasing Force
Buyer Power
High
Supplier
Power
Medium/
Low
Competitors
Very High
New
Entrants
Low/Medium
Substitutes
Low
Factors lowering force
• Increasing choice for customers – range of
• N’s own brand products can only be bought
competitors, online
• Online competitors are often low price
• Easy for customer to switch
from N and not competitors or online
• Some traditional, loyal customers
• Major brands can dictate prices and terms
• Many suppliers of these products, particularly
(e.g. Apple)
manufacturers of own brand products, which
accounts for a significant proportion of N’s sales
• Online competitors (e.g. Amazon, Very)
•Other departments stores - significant in
• Some specialist retailers have gone into
liquidation
many countries
• Supermarkets on low price range
• Specialist retailers
• Overseas competitors have entered the Z
• Lots of competition, a poor economic situation
market in the past – it is possible more may
enter in the future
• Online is very easy for new competitors to
start up
suggests now is not the time for new bricks and
mortar department store chains
• Income from traditional customers being
• Wide range of products which continue to have
spent on new products such as health, home
improvement.
ongoing needs – electrical, clothing…..
Strategic analysis – the rational model
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
Products
Generic Strategies
• Wide product range of products
BCG/
Product Life
Cycle
with good profit margins
• Some threat as some
customers switch to other
products not traditionally
supplied by department stores
such as health and
entertainment.
• Not N’s traditional market
Cost leadership
•Best margins >60% on
Strengths
Menswear, Womenswear,
Children’s wear and accessories
• 60% own brand which have
been successful and are high
margin
• High Quality
• Excellent service
Differentiate
• Worst margins on Homeware
Weaknesses
(25% margin) and Health and
Beauty (39%)
• Clothing ranges are not
fashionable and overstocked
with long order to delivery times
reducing flexibility
A critical component of their
past success
• Middle incomes
• Merchanising director says
focus is 25-45 age group
Focus
Industry analysis
•
For your 5 Diversity marks in the exam it is vital
you learn 40-50 industry examples you can quote.
•
For a free sample of industry examples visit
www.astranti.com
•
There you can also buy our pack of 60 industry
examples to take some of the pressure off you
doing your own research.
Ansoff’s Matrix and methods of growth
•
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
• Integrated online, mobile, bricks and
Existing
Product
New
Product
mortar
• Integrated IT information systems
(ERPS)
• Long term supplier relationships, and
updated inventory and distribution systems
• More out of town stores
• Improved governance/risk management
New Market
• Overseas expansion
• Younger generation
•Traditional customer incomes have
• Vertical integration – e.g. purchase a
moved towards, health, home
improvement, and entertainment. Could
potentially move into these product areas,
capitalising on brand
supplier to control quality and delivery
• Leasing/property management
(possible if old stores can not easily be
sold)
• Convenience stores
•Wider product range online
Methods of Growth
Internal Development
• IT development
• Supplier management/distribution
• Efficiencies
• Changing product mix
• Out of town store expansion
• Overseas expansion
• Purchase a company with a ‘younger generation’ brand position
Acquisition
Joint Venture
• Overseas expansion (Franchising)
• Links with new products (e.g. health) where capitalise on
expertise of JV partner
Divest
• Unprofitable stores
• Unprofitable product ranges
What should you do on weekday evenings for T4?
•
•
•
•
•
•
Knowing how to prepare for the T4 exam is a key difficulty.
The most important thing you can do is doing as many mock
exams as possible to master time management, report
structuring and dealing with key issues.
BUT that takes over 3 hours, and is impractical on evenings.
Our solution – our ethics, calculations and issues ebooks
These enable you to practise one off exercises in time
slots from 20 minutes to up to an hour to practise your time
management and report structuring.
They also include detailed guidelines for each of those
sections.
Why not try them before you buy by downloading the samples
at www.astranti.com
Defining a business strategy
•
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
•
Clear generic strategy – Quality, service, focused on middle and older age ranges
•
Capitalise on strengths
Expand own brand ranges
Increase floor area devoted to better margin products e.g. Clothing
Continue with excellent service and high quality approach (e.g. staff training)
•
Plans to overcome key weaknesses
Customer focused purchasing e.g latest fashions
Integrated online offering (Mobile, Online, Bricks and Mortar)
Reviews
Click and collect
Mobile friendly
Wider product range than in-store
New governance arrangements – NEDs, committees, risk management, control
Costings review – distribution and administration – efficiency programme if appropriate
Long term supplier relationships with shorter delivery times and flexible production
Update IT systems (e.g. ERPS) – management information, inventory and distribution in
particular
•
Continued store expansion into good out-of-town locations
•
Wider expansion into Middle East and Asian markets
•
CSR strategy devised and implemented, with clear targets and CSR reporting
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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!
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