CIPS
Professional Stage
CASE STUDY ANALYSIS
The Retiring Company Ltd
May 2006
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Published by
Profex Publishing Limited
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Maidenhead
Berkshire SL6 1PE
www.profex.co.uk
This analysis has been prepared for Profex Publishing Limited
by Ian Black BSC MA CENG MIEE.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system
or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or
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©Profex Publishing Limited 2006
ii
Contents
Preface
iv
1
Introduction to the case
1
2
Tackling the case study exam
7
3
An overview of the company’s business
9
4
Tools of strategic analysis: an overview
12
5
SWOT analysis
14
6
PEST analysis
19
7
Porter’s five forces model
22
8
Ansoff’s matrix
25
9
Force field analysis
27
10
Further tools of strategic analysis
29
11
Strategic options for The Retiring Company
32
12
Tactical aspects: a review of each division
35
13
A matrix approach to enhancing performance
42
14
Procurement systems and processes
46
15
Management and human resource issues
50
16
Issues relating to quality
53
17
Legal issues: an overview
54
18
Legal issues: more detail
55
19
The financial situation of The Retiring Company
59
iii
Preface
CIPS has now published the pre-seen material for this month’s Case Study examination,
featuring The Retiring Company Ltd a national private company of six divisions providing
elderly care, hospital care, a property business, a chain of florists, funeral businesses and related
activities. If you have registered for the exam and have not managed to access the pre-seen
material you should contact CIPS as a matter of urgency.
The exam is on Friday 26 May 2006, so you need to work fast to maximise your chances of
success. This Case Study Analysis text is designed to help.

You should use the text to assist your study of the pre-seen material, and to focus your
revision and preparation in the run-up to the exam.

You should take the text with you into the exam room. Its sections may provide a useful
structure for the solutions you will be required to produce in the exam, as well as offering a
memory-jogger for the key issues.

You must not reproduce sections of this text in your examination script: the examiner
explicitly states ‘copying or plagiarism will not be tolerated and could result in no marks
being awarded…’
Throughout the text, we support statements made by referring to the relevant page and line of
the case. References take the following form.

1, line 7ff. This means ‘Page 1, lines 7 and following’.
You should take the time to number every fifth line on every page of the case study now, so you
can follow these references.
The column headed ‘Notes and references’ also includes cross-references to pages and sections
within this text. For example:

Page 9. This means ‘refer to page 9 of this text’.

Section 15. This means ‘refer to Section 15 of this text’.
This column also contains occasional references to appropriate websites.
For further assistance, our Case Study Study Text offers detailed discussion on how to tackle
case study questions, fully-worked examples based on past CIPS exams, and detailed summary
notes on the main syllabus areas typically required in the exam. Note that CIPS advises you not
to over-burden yourself by taking too many reference texts into the exam room. We have tried
to include the most essential information in the space of a single A4 text.
Good luck in your examination!
Profex Publishing
May 2006
iv
SECTION 1
Introduction to the Case
Notes and references
The Retiring Company Ltd
The case is concerned with a private UK limited company with a 1, line 7ff
200-staff Head Office in the north of England running six separate
divisions, mainly in the south. This structure is dictated by the
family tree with Geoffrey Ripon as Chairman, and his four sons and
two daughters each running a Division.

Residential (Elderly) Care in 50 locations around the UK each 2, line 3
supporting 20-80 elderly residents

Private Hospital Division running 15 urban private hospitals 3, line 3
with surgical facilities

Residences Division managing 40 UK sites offering warden- 4, line 2
supported housing for between 36 and 80 tenants or couples
in each. The division may be very profitable but no figures are
available

Funeral Division operating in 120 individual business units, 4, line 42
each operating as if it were a local self-contained business

Floral Division with 80 retail shops largely servicing the 5, line 38
hospital and funeral business controlled by the family, with
supplies mainly from overseas

Car Hire Division with 400 chauffeur-driven vehicles driven 6, line 36
by 600 drivers on the books. The division is ‘continuing to lose
significant amounts of money’
No staffing or financial turnover information is provided for the
group, but the scale of these operations has clearly become very
large: add up the evidence in the case and you will find the staff
could exceed 5,000. Each division is operating at high demand
levels against their capacity, and as a result (with the exception of
the Car Hire division) they are trading potentially profitably, but 7, line 27
direction, planning, monitoring, and controls are sadly lacking.
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Notes and references
The current situation
After developing in its family-run style over forty years into a 1, line 24
national set of operations, cashflow is a serious problem and the
bank has raised key concerns on strategic and operational
management. The Chairman agreed with the bank that an 1, line 33
independent consultant should report on the current difficulties.
This outline report by Debbie O’Rourke is the basis of our study as
she reveals serious management issues.

No clear strategic direction for a conglomerate clinging to a 1, line 17
family structure when the Chairman of the enterprise is 80
years old and some of his family heading divisions are
approaching retirement. We would be careful about age
discrimination in employment, but the business needs to be
practical about succession and continuity.

Poor relationships (demonstrated by the serious lack of
commitment, skill, communications or interest by some of the
sibling divisional heads), combined with considerable friction
between them, undermines any sense of corporate strategy or
direction.

A diversity of issues peculiar to the individual operating
environment of each division. These are itemised separately in Section 12
the report and reviewed below. This complexity and diversity
suggest that single, all-embracing responses will not be
adequate for the range of problems faced in the respective
companies

We note the passing reference to media criticism, but this is
not taken up elsewhere in the case. There are references to
customer complaints in four divisions (residential homes,
funerals, flower clients, and hire car customers) but no
obvious links to the media. Perhaps the examiner felt we had 1, line 30
enough issues on our plate for this case study.
The Chairman and his family must quickly come to terms with the
severe business criticism in Debbie O’Rourke’s report. We can see
that they are so keen to follow their own personal pursuits outside
the business that they are neglecting their duty to their customers
and staff. Their minimum responsibility must be to see that they do
not trade into insolvency, and the fact that some divisions are
looking to extend their overdraft suggests they are running into
liquid cash problems. Beyond that stage, it is imperative that the
group gets a grip of its strategic direction and translates it into
proactive management.
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Notes and references
An overview of the case
This case represents seven different organisations potentially in
distress. Two hundred head-office staff and a large but unspecified 7, line 46
number of operational mangers and staff (we can see this could
exceed 5,000 staff from the descriptions of each unit) are running
the separate businesses with no clear direction, having absentee
divisional heads with little interest in the business except to fund
their own hobbies and diversions.
The case has problems in abundance in all the CIPS syllabus
elements: strategic, tactical, operational, organisational, legal,
procurement and human resource issues abound.
As CIPS point out they expect to examine at least two of the core
syllabus subjects, but we need to look at as many angles as possible
in this text. In particular you should consider how questions may be
directed at individual operations or across the group as a whole.
A key element will be restoring credibility with the bank while
establishing leadership and structure to develop positively all the
operational,
commercial,
procurement,
contracting
and
management problems. The bank is demanding a coherent business
plan in four weeks: time is of the essence.
Issues raised by the case
The bank and the consultant Debbie O’Rourke have done the 8, line 10
groundwork for us and it is evident the company must act
immediately in the following areas.

Creation of plans (and, we must assume, budgets) for future
profitability. To satisfy the bank and good commercial
practice they should be coherent and indicate the strategic
direction of the group and the individual businesses.

Correction of adverse financial ratios. These usually start with
liquidity ratios in the balance sheet but could extend to any
number of productivity and efficiency figures for the
operations. Most take a significant time to correct. We do not
have the data to judge which are the priorities.

Adjustment to the cash position as cashflow problems are
creeping up, demanding greater borrowing

Planning and implementing succession and management
issues arising from the increasing age and decreasing interest
of the family currently in control. Age is no bar – but attitude
could be a serious issue.
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Notes and references

A rapid review of the capital structure and borrowing plans to
avoid or minimise overdraft costs

Action on some adverse media comments (but we do not have 1, line 30
information for this problem area, except for comment on
customer complaints).
In addition to these top-level corporate issues, Debbie O’Rourke has
identified a detailed list of operating issues with each business unit.
Rather than launch into the details here, these are covered in their Sections 12, 13
respective divisional sections but key items are as follows.
Procurement issues

No evidence of dedicated purchasing professionals

Numerous shortcomings in procurement disciplines and
controls

Unethical placing of contracts

Missed opportunities for outsourcing

Lack of rigorous supplier vetting and monitoring

Contract decisions taken at the wrong levels with inadequate
data
Operational issues

Missed opportunities for synergy between divisions

Poor communications between senior management

Top-heavy staff and Head Office organisation

A long list of individual problems identified by Debbie
O’Rourke
Profitability concerns

Of the six divisions, car hire is losing money and residential
care is demanding heavy capital investment in buildings
Issues relating to the management of staff
Clearly, there are serious personnel management problems because
staff are so stressed and under-paid under a difficult regime that
they are leaving . The management of stress appears in the syllabus
of the Foundation Stage paper on managing human resources.
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Notes and references
The structure of this text
It is important not to ramble around all these issues, but instead to
present your arguments in a logical and coherent way. We try to
help with this by the structure of the current text. Case study
examination questions are usually built around the three core
syllabus areas: strategic planning, tactics and operations, and legal
aspects, so we follow this theme.

Sections 1 – 3 are introductory in nature.

Sections 4 – 11 deal with strategic issues.

Sections 12 – 16 deal with tactical issues, including human
resources, procurement and organisation.

Sections 17 – 19 deal with legal and financial issues.
Further reading
You must broaden your understanding of the issues in the case by
reading relevant articles in the press. This can also enable you to
introduce authentic detail into your answers and impress the
examiner accordingly. Look in particular in:
The Times
The Economist
Supply Management
The Financial Times
The Daily Telegraph
Note in particular the article on change management in the Supply
Management issue of 31 March 2005, written by Andrea Reynolds,
an examiner for the case study paper. There, she mentions the ‘soft
skills’ in managing behaviour which will be significant in this case.
Searches on BBC news web pages will give recent information, and www.helptheaged.org.uk
you should look at web sites such as Help the Aged and Age www.ageconcern.org.uk
Concern for retirement and social issues.
You should also access the CIPS website to have a look at the Chief
Examiner’s reports on recent case study exams. In particular the
chief examiner pointed out that students often failed to apply their
learning of theory to the particular case in question. This is why
you must immerse yourself in the particular business conditions in
the case and arrive at workable solutions to current problems.
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Notes and references
Acknowledging the examiner’s note that ‘all…companies contained
in this study are fictional…’ there are plenty of familiar examples of
the operations included in these divisions, even if they do not
always operate in a family conglomerate like the Retiring
Company. We can therefore adopt a building blocks approach, and
consider each business separately and then examine the position of
the head office and holding company.
In your examination preparation, consider live examples of care
homes, private hospitals, funeral service, florist, and limo services
and think about their respective business positions. Many of these
impact on our lives through family and friends and your research
for the examination should include enquiring how the selected
businesses are operated and managed. We acknowledge that the
case is very English in its outlook: notice that funding for
residential care, for example, is different in Scotland.
We also realise that some of these issues could impact very
personally on students and hope we have avoided any insensitive
comments which may arise from the issues of elderly care and
funeral activities in particular. We are concerned here only with the
business issues needed to solve the case study questions for the
examination.
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SECTION 2
Tackling the Case Study Exam
Notes and references
Before digging more deeply into the facts of the case it is worth
making some important points about how you should tackle the
exam. The case study is a very different type of assessment from the
normal three-hour exam, and specialist points of exam technique can
prove to be very important.
Before the exam

Prepare a ring binder to hold your notes (including this analysis
text). Include dividers to mark off the main sections. Your
objective should be to make your own notes sufficiently detailed
to carry you through with only minimal use of textbooks (see
next point).

Take in any textbooks you think appropriate, but expect to use
them only as a last resort. If you own a copy of the Profex Study
Text for this subject this should certainly go with you into the
exam room, because it contains handy revision notes on the
main syllabus areas that are examinable.

You are not provided with a new copy of the case in the exam
room, so you must remember to take in the copy you already
have.
During the exam

Read all four questions carefully to ensure you understand what
is required. There is no choice of questions in the Case Study
examination.

Begin on the question where you feel most confident of the
material.

When you start writing, miss a line or two at the top of the page
for clarity.

Use frequent headings, underlined neatly with a ruler.

Under each heading write your ideas clearly, leaving a line or
two after each substantial point. This white space forces the
marker to recognise that you have finished a point and deserve
a mark for it.

Underline any authority you cite, such as a statute, or a legal
case.

If you quote from a published text, acknowledge your source.
Don’t overdo such ‘borrowing’: the exam rubric states that: ‘All
answers must be the candidate’s own work. Prepared notes may
not be included as part of the answer’.
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Notes and references

Do not use any of the text in this or any other book word for
word.

Include carefully drawn diagrams where appropriate.

Be very careful about time management. Under no
circumstances should you spend more than the allotted time on
any question.

Avoid waffle: keep your answers short and punchy. The
examiner is more concerned with quality than quantity.

Attempt all four questions. You will greatly enhance your
chances of passing by doing so.

Be very careful when using fashionable jargon. For example,
there is much talk nowadays of partnership sourcing but this is
very rare in practice and you should think very carefully before
recommending it. The same applies to specialist techniques
such as JIT, or MRP because they hardly apply in the retirement,
healthcare and related supply chains. Application of ‘lean’
management principles may be sound, provided you explain
how they would work in practice in the context of The
Retirement Company Limited in the case.

Don’t be judgmental. You and I may think that the Ripon family
is variously greedy, arrogant, ignorant, or neglecting its duties.
Only some of these are evidenced in the case, and some
divisions have been turning in reasonable profits to the
Retirement Company Ltd We do not have access to the
accounts, however, so try to be objective in setting out facts
without being carried away by your own ethical and moral
values.

Question everything stated in the case, other than simple,
objective facts, and look out for the purchasing and supply signposts to potential questions and their required answers.

You are a purchasing and supply chain specialist, but don’t
assume that purchasing is the only important discipline. There
are many general management, organisational, and human
resource management issues raised by the Ripon family case.

Everything you state in the exam must be supported by the
evidence given in the case. You must distinguish between what
is stated in the case and what you are tempted to assume from
the case. For example, Billy Ripon is enjoying an extravagant
lifestyle, but this may not be to the detriment of his branch of
the business which is ‘believed to be highly profitable’.
4, line 35
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SECTION 3
An Overview of the Company’s Business
Notes and references
Summarising the case
It is helpful to begin by deciding what you think the case is
fundamentally concerned with. Summarising this in a single sentence
can help you to focus both on the problems faced by the business and
the possible solutions that can be recommended. So what is the case
about?

One view is that it concerns a family operation which has
outgrown its original family roots (compare Greiner’s model of
organisational growth) and has reached a crisis of management
control as the scale overwhelms the original entrepreneurial
spirit and flair.

Another way to express it is that the case concerns a lack of
corporate strategy and leadership, leading to poor operational
performance. An implication of this view would be that we
need to overcome the short-term cashflow and management
problems and shape the future by drawing up a coherent
overall strategy that develops current activity with the
possibility of growth, new developments and acquisitions.

Strategically, the six divisions represent standalone businesses
each of which has a link to looking after the needs of old people,
but they can be treated independently or jointly for strategic
development

You should also take into account that despite the lack of
interest and/or incompetence at the top, these separate
divisions have grown and may be operating reasonably well,
except in the areas highlighted by the consultant. Some
management principles must therefore have been applied to
reach this size and stage of development.
Each of these possibilities is considered in the Strategy section. You Section 11
may be able to think of others which are equally valid.
What business are we in?
This debate leads on to traditional strategic questions.

What business are we in?
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Notes and references

What are the commercial environmental pressures to which we
must respond?

What are the expectations of stakeholders?
These questions should yield positive answers to help develop the
management of The Retiring Company.

Our business is to provide excellent health care and residential
services for retired people from all walks of life and eventually
to meet their funeral requirements with the same level of
professional care and attention to detail.

Our business is to maximise the stakeholder value by operating
efficiently and effectively to achieve a return on investment in
six different commercial environments linked to retirement.
What is the current strategy?
You could conclude that this is the missing link. Geoffrey Ripon
started initially with one residential care home and the business has
grown by an indeterminate process which included organic growth
and acquisitions. We can only assume that this growth was nurtured
by Geoffrey Ripon’s early entrepreneurial efforts in the 1960s and 70s
when his children were still being educated.
Ripon’s strategy has been to let the divisions stand or fall on their
1, line 19
own performance, with separate corporate structures and accounts
for each division.
For the purpose of the exam, an important issue may be to suggest
strategic directions that may be adopted by Geoffrey Ripon and we
discuss this in Section 11.
However, an even wider range of questions applies to the operational
management of the group.
Some possibilities are outlined
throughout this text, and explored in Sections 12–19.
The organisation of the business
We have a picture of a business in six divisions, each led by a son or
daughter of the founder, operating from an archaic headquarters and
in some cases running steadily towards a cash crisis. Some of the
sibling divisional heads are largely absent and apparently do not care
2, line 35
about their operations. Their staff, however, are battling with the
operational difficulties. Some are leaving through stress, and some
are clearly succeeding where the family have failed. We know
virtually nothing about the management teams and their staff from
the case.
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Notes and references
What is the immediate reaction to the bank’s demands? Who will
manage the essential staff work to pull together a business plan in
four weeks flat? With the best will in the world our 80-year old
Chairman is unlikely to draw up a detailed business plan now; his
family barely speak to each other and display animosity in some
cases.
We must therefore explore the management, operational, human
resources, supply chain, procurement, legal, project, and other issues
in some detail. This will allow us to open up areas for action by the
Retiring Company Ltd to meet the specific directive from the bank to
produce a viable business plan, and then manage its way out of this
inefficient mess.
For practical purposes we could assume that Debbie O’Rourke’s
future would include drawing up the plan, in conjunction with the
Chairman as she has already started on the groundwork. She has the
right background in finance and supply chain management, our key
concerns.
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SECTION 4
Tools of Strategic Analysis: an Overview
Notes and references
The case study exam often requires candidates to use tools of strategic
analysis. Indeed in the Retiring Company we see strategic drift to
such an extent that the business is crying out for strategic direction:
they should apply the rational model of strategy formulation, which
would require them to:

analyse the near and far commercial environment

check stakeholder concerns

consider possible responses and options

evaluate the possible directions

choose and implement a route and in particular communicate
(cascade) the direction to the divisions at all levels.
In the following sections we attempt to do this using all of the main
tools that appear to be useful in the circumstances of this case. We
also refer (in Section 10) to a few other tools that appear less useful,
with explanations as to why they are less useful. To begin with,
though, we give a few general remarks on the use of these tools.

If the question specifies use of a particular tool, obviously you
must use the one specified. Use of another tool, however valid it
may be, will not earn marks.

If the question asks you more generally to ‘use appropriate
tools’, then use as many as you can without overrunning the
time limit.

If you are asked to justify the use of certain tools, the
information in the following sections should enable you to
justify: SWOT analysis, PEST analysis, Porter’s five forces
model, Ansoff’s matrix, Lewin’s force field analysis and
Greiner’s model of organisational growth.
Our analyses in the following sections are not the only possible ones
that could be made. For example, though we have tried to analyse all
the business’s strengths in the SWOT analysis, you may well be able
to think of some that we have omitted. Equally you may not agree
that everything we classify as a strength necessarily is a strength. The
analyses we provide are meant to help you think clearly about the
issues; they cannot be the definitive answer.
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Notes and references
Bear in mind that this kind of analysis is not done for its own sake. It
is intended to help in shaping the Retirement Company’s future
strategy. If you use this kind of tool in the exam be sure to refer to
your analysis when recommending strategic possibilities and make
them specific to the Retiring Company. Too many exam marks are lost
because students write out their view of the theory at length without
translating it into specific actions in the case in question.
Ensure you use SWOT only as a starting point: the need is to build on
the company’s strengths, eliminate or minimise the effect of
weaknesses, grasp and develop opportunities, and counter any
potential threats.
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SECTION 5
SWOT Analysis
Notes and references
A SWOT analysis is a listing of the business’s strengths,
weaknesses, opportunities and threats as a basis for
development and/or remedial action. Strengths and
weaknesses are factors that are likely to be internal to the
business. Opportunities and threats relate to the external
environment of the business. SWOT analysis is appropriate
here because the case contains plenty of information on which
we can operate. Note that a SWOT analysis must be carried out
from the perspective of the business owners; to some extent,
we are compelled to make assumptions about the objectives of
the Ripon family.
The SWOT factors relevant to The Retiring Company Ltd
include the following, bearing in mind that some are specific to
particular divisions. You may wish to create your own SWOT
seven times over: once for each division, and one set for the
head office. We have assembled these in the sequence
published in the case and you may find more.
Strengths
1.
A private family firm has flexibility to make decisions
without impact on numerous shareholders.
2.
The Retiring Company has a portfolio spread of
businesses which, though related, will respond
separately to the commercial environment, potentially
spreading risk.
3.
The target markets, including retired and elderly people, www.statistics.gov.uk/census
and those looking for private health care, are growing
steadily in number.
4.
Residential care has assets of 50 large standalone 2, line 3
residential homes.
5.
Residential care has 100% bed occupancy and substantial 2, line 7
waiting lists demonstrating demand for their services.
6.
The private hospital division owns assets comprising 15 3, line 3
private hospitals all of which are reasonably up-to-date
and meet legislative requirements.
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Notes and references
7.
Jennifer Ripon (running the hospital division) is a 3, line 2, 46
dedicated health care professional.
8.
The private hospital division is operating close to 3, line 5
capacity and demand is high.
9.
Residences division has assets in the form of 40 4, line 11ff
properties with from 36 to 80 separate flats or apartments
in each, furnished to very high standards.
10.
Billy Ripon (running the residences division) thoroughly 4, line 25
understands the property business and planning
requirements.
11.
The residences division is generating sound profits, it is 4, line 35
believed.
12.
The funeral division has grown to 120 separate business 4, line 40ff
acquisitions operating under one umbrella organisation
with turnover exceeding £200m (not including
disbursements).
13.
The floral division runs 80 retail shops with a good 5, line 39ff
geographical spread (though they operate from rented
premises).
14.
The car hire division has 400 limousines to high 6, line 37ff
specifications.
15.
The head office is in a large country house owned by the 7, line 29ff
family.
Weaknesses
1.
Doubts exist at the bank over future profitability because 1, line 24 ff
of rising costs and the absence of a strategic plan for
operations or marketing.
2.
Adverse financial ratios have been observed by the bank: 1, line 26
this can cover a multitude of measures but suggests that
the business is out of control.
3.
There are potential cashflow difficulties and some 1, line 29
divisions are seeking higher borrowing.
4.
The bank observed that some directors are less able to 1, line 28
manage as a result of their increasing age. Age does not
necessarily disqualify, but the bank has identified the
absence of management skill.
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Notes and references
5.
Debbie O’Rourke found that some of the directors were
not only repeatedly absent from their operation but also
uninterested in its performance, except to fund their
lifestyle. This absence is demotivating to the management
teams.
6.
Public sector funding for residential care is capped at cost 2, line 11
levels and the number of private residents is falling so
revenues are restricted.
7.
Many of the residential buildings are old and poorly 2, line 15
maintained, building up the weight of costs which must
be met from revenues.
8.
Residential care staff levels are too low and there is 2, line 19
insufficient funding to attract more and better staff: this
will seriously affect service levels to clients.
9.
Operating costs are rising ahead of inflation when active 2, line 21
purchasing should be limiting the increases.
10.
Purchasing procedures for the maintenance of the 2, line 21ff
residential care homes are out of control and costs
escalate.
11.
Residential care managers are stressed and leaving the 2, line 35
company, which will result in overloads on the rest of the
teams.
12.
Residents are complaining about conditions, staff, and 2, line 37
facilities.
13.
Funeral clients (ie next of kin) have complained about 5, line 33
costing errors and omissions.
14.
Floral customers are complaining about damaged or 6, line 24
wilting flowers, poor packaging, wrong addresses and
late deliveries.
15.
Car hire customers are upset too; they have complained 7, line 20
about rudeness, lateness, grubby vehicles, and overcharging.
16.
Tony Ripon, head of residential care homes, is usually 2, line 41
absent at race meetings and has run up ‘considerable
gambling debts’.
17.
There is friction between the divisional heads: some 3, line 47
competition can be positive, but the implication is of
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Notes and references
negative forces which usually distract from commercial
objectives.
18.
The divisional heads lack knowledge and commitment to
run their operations, and some favour their extracurricular activities (horse-racing, gambling, lavish
lifestyles).
19.
Purchasing at every level and in all divisions is
fragmented, disorganised, and quite inefficient. Suppliers
have been allowed to dictate terms, specifications, and
prices, and subcontractors are running without service
level agreements.
20.
Several operations across divisions are operating to oldfashioned standards and have failed to anticipate or keep
up with current business practices.
21.
The head office in the North is remote from all of the 7, line 29
operations, requiring a substantial journey for any of the
senior team to visit their staff and engage with clients.
Opportunities
1.
The constituent divisions could generate productive
synergy if managed properly. Debbie O’Rourke’s
analysis shows many areas of potential overlap which
have not been exploited because of poor communications
between the Ripon family members: consider fuel
supplies, vehicle procurement, vehicle operations,
property and vehicle maintenance for example.
2.
Demand is high for many of The Retiring Company’s
operating services. We are not told about national or local
competitive forces so must make some informed
assumptions but we can observe the demographic
changes that are moving towards an older population,
greater demand for health services now that some
surgical procedures are so commonplace, and greater
demand for small residential accommodation units
supported by professional services.
3.
A small family concern has built up into a huge
organisation under the control of seven people. With the
assets at their disposal, and the resources of their
numerous staff, then if they can get together and agree a
strategy they have a tremendous opportunity to drive
forward the organisation.
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Notes and references
Threats
1.
The bank is withholding further overdraft facilities to the 8, line 8
group until the business plan is produced.
2.
Billy Ripon’s hospitality offers to business associates in 4, line 30
the residences division leave him open to accusations of
unfair and unethical practice.
3.
The laundry business Launder Ltd supporting the private 3, line 37ff
hospital division is providing inadequate service.
Although Jennifer Ripon has withheld £20,000 from
invoice payments, the contractor is unrepentant and
clearly not attending to the quality of service.
4.
Clients in several divisions are raising serious complaints
about the level of service: items 12–15 in the weaknesses
above represent real threats to the business as customers
will leave and the company’s reputation will suffer in the
market place, reducing revenues.
Strengths are there to be exploited and developed, weaknesses
should be eliminated, while opportunities may form the basis
of development and threats should be countered or mitigated.
18
 Profex Publishing Limited 2006
SECTION 6
PEST Analysis
Notes and references
A PEST analysis is a listing of the political/legal, economic,
sociocultural and technological factors in the organisation’s external
environment. The objective is to list all the factors that may have an
impact on the organisation and then build up a coherent strategic
position in response. You will find that there is overlap and it may
not be clear under which category a particular influence should be
listed. Some authorities use PESTLE or more categories, to include
say legal and ecological factors. This is not important: the categories
are there to help you focus on all the different possibilities, not to act
as an analytical straitjacket.
PEST analysis is appropriate here but be aware that much is based on
a wide range of inferences from assumptions surrounding the case.
The PEST factors relevant to The Retiring Company Ltd include the
following.
Political/legal factors

EU impact on employment legislation, working hours, human
rights, health and safety regulations. This could impact on many
areas of employment in The Retiring Company.

EU impact on resources: new sources of low-cost labour,
increased sourcing opportunities. Taxi services, buses and many
areas of care in the UK increasingly employ overseas staff who
are freely mobile within the EU.

Increasing regulation, eg in relation to ethical sourcing and
corporate governance.

Legislation on smoking in public places will impact on the
workplace: although the residential care unit (for example) is
the home of the client, it is the workplace of the Retiring
Company staff.

Regulations on minimum wage will affect the group. If the 2, line 19
amount is increased, the company’s wage bill will also increase,
because at present some cleaning and caring employees are paid
only barely above the minimum. This will impact on
employment strategy and outsourcing decisions.
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Notes and references
Economic factors
Exchange rates: an increase in the strength of sterling makes imported
goods cheaper, whereas a weakening in sterling makes imports more
expensive. Dutch flowers are imported from the Netherlands under
EU regulations so the strength of the pound sterling against the Euro
is relevant; the Kenya flower trade would be priced locally in Kenya
shillings but probably traded in US dollars.
Inflation may start to grow again after a reasonably stable period,
affecting the purchasing power of potential residents and clients of
The Retiring Company.
Interest rate changes affect the cost of capital, impacting on purchase,
lease and rental costs for The Retiring Company. We have no data on
the company’s cost of capital or their borrowing (gearing) position,
but they are already asking for increased borrowing which will
become more expensive as rates rise.
Increases in the general level of disposable income in the UK
economy affect the level of interest in private health care and
residential support. Flower purchases are also subject to levels of
wealth.
Socio-cultural factors (including ecological issues)
Demographic studies have for some time indicated that the
proportion of old people in the UK is increasing, but the absolute
number is also rising as confirmed in the UK 2002 census. The Royal
Institution of Chartered Surveyors predicts an increase of 2.9 million
people aged 65 and over in the UK from 2001 to 2021. The OECD
proposes a ‘housing in place’ policy, to allow older people to stay in
their own homes for as long as possible, but even so the UK
Government predicts a 10% rise in the number of people 75 and over
in institutional care by 2021. This will increase demand on businesses
such as The Retiring Company, and also attract competition.
www.rics.org: RICS
European Housing
Review 2005 Michael
Ball
Both public and private sector hospitals see increases in demand for
many procedures, arising from better quality provision and higher
expectations: this adds to the business demand for the private
hospital division.
Increased public knowledge, expectations and sophistication in levels
of service, quality, and availability of resources in care and health
businesses will place additional demands on the Retiring Company.
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Notes and references
Changes in family structure and interests have a direct effect on
residential care demands: single parent families, smaller family units,
and more sophisticated tastes all contribute to changes in demand.
Social changes could impact the hospitals group if they were to cater
for increased demand for, say, cosmetic plastic surgery or designer
birthing resources.
Technological factors

Growth in internet activity including use by the elderly and
those seeking health care services outside of the NHS
environment.

Enhanced logistics management systems worldwide using
mobile phone technology, global positioning systems, and RFID
stock identification, coupled with online stock recording, will
affect the volume and frequency of deliveries of flowers.

Online ordering for flowers and car hire is developing rapidly,
in parallel with other ‘luxury’ items such as wine and
chocolates.

Web information on care, pensions, and insurances make a
better-informed market sector who are very knowledgeable and
discerning in their social and health needs.

Care facilities increasingly incorporate mechanical handling,
hoists, lifts, stair-lifts, and enhanced local and national
communications.

Hospital facilities need to be maintained up-to-date to include
digital imaging, X-rays, digital data transmission, and
sophisticated MRI scanners.

Keyhole surgery reduces the cycle time of many surgical
procedures so that beds can be re-used, enhancing the
productive capacity and throughput of the hospital wards.
You will be able to extend this analysis imaginatively yourself, but in
each case consider the impact of technology on the business: it
requires professional procurement in the first place, puts heavy
demand on funding, and requires subtle planning and operations
management. All of these are necessary before potential savings
materialise and a return on investment is achieved.
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 Profex Publishing Limited 2006
SECTION 7
Porter’s Five Forces Model
Notes and references
The five forces model developed by Professor Michael Porter is a tool
for analysing the competitive forces within an industry. The five
forces are: threats from potential new entrants to the market, threats
from substitutes, suppliers’ bargaining power, buyers’ bargaining
power (ie customers), and the general degree of competitive rivalry in
the industry.
The tool allows the strategic planner to examine external forces or
threats and then respond: very useful if that is what the examiner
asks.
In the case of the Retiring Company, the analysis only makes sense at
divisional level because of the diversity of the operations. The forces
could include the following factors.
Threats from potential new entrants: assessment – serious
Porter’s ideas refer to the entire market, where we could envisage the
rise of new entrepreneurs with venture capital funding, or investing
companies looking for growth on the back of rises in commercial
property prices.
Each division is susceptible to new entrants, as the respective
businesses are already very fragmented. With the exception of
Hospitals, the skill levels are relatively low, and new entrants will be
a real threat.
There are factors that might act as barriers to entry into the separate
local markets for our Retiring Company operations, but we do not
have enough information to make a full assessment. They could
include:

investment level required to buy convert or build premises

licensing requirements from local authorities.
Threats from substitutes: assessment – low risk
Residential care, health care, and funeral activities are notably
conservative activities with little basic change visible over many
years. Ownership and style of delivery may change, but there is little
to substitute for one-to-one caring practices.
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Notes and references
UK Government policy is to promote the development of care in old
peoples’ own homes as far as possible, with visiting resources such as
meals provision, nursing, physiotherapy and particularly
occupational therapy, co-ordinated through the social services
department of local authorities. This is designed to curb demand for
residential homes and reduce the cost to service users.
Because there are strong moves to provide care in peoples’ own Michael Cross, The
homes, a predictable change in elderly care is the growth of ‘telecare’ Guardian, 25 Jan 2006
or remote monitoring of people and premises, to check on ambient
temperature, leaks, security and other conditions. This extends the
effectiveness of wardens by applying information technology. This is
one of those threats which is also an opportunity for The Retiring
Company: they too can invest in ‘telecare’.
Flower provision is another traditional area not easily substituted:
development of artificial flowers has not diminished demand for the
real thing.
Threats from suppliers’ bargaining power: assessment – serious
In several cases where the case company has lost control of their 2, line 30
procurement function (notably, laundry, maintenance contractors,
agency staff, coffin transport costs, crematorium services, and flower
supplies) no service level agreements exist and the suppliers are
holding the upper hand. Lack of purchasing management and
expertise has added to high cost and poor service.
Threats from customers’ bargaining power: assessment – medium
to high risk
Residents of the Care Homes are complaining about theft, lack of 2, line 37
care, poor meals, uncleanliness, rude staff, and poor facilities. If not
resolved, this will have a direct impact on the public sector’s
placement of clients and reduce income in the division.
Cost challenges and late payments by large insurance companies are 3, line 25
adversely affecting cashflow in the private hospital division.
Customers (whether individual residents, clients or corporate bodies)
have reasonable choice and will walk away from a shoddy service.
Competitive rivalry within the industry sector: assessment –
medium risk
In each division there is plenty of competition and The Retiring
Company does not appear to demonstrate competitive advantage in
cost leadership or differentiation.
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Notes and references
Overall, there is clear risk to the Retiring Company immediately from
all five of the forces in Porter’s model so steps must be taken to create
competitive advantage to mitigate these threats.
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 Profex Publishing Limited 2006
SECTION 8
Ansoff’s Matrix
Notes and references
Ansoff’s matrix is a two-by-two grid which attempts to classify the
options available to an organisation. The two axes of the grid refer to
Products (Existing and New), and Markets (Existing and New). You
can remember this by the acronym PENMEN. The possible strategies
resulting from this, in ascending order of riskiness to the firm, are
market penetration, market development, product development, and
diversification.
Markets
Existing
Existing
MEN
New
Market
penetration
Market
development
Product
development
Diversification
Products
New
PEN
If we apply these possibilities to the Retiring Company we need to
think carefully not only about the group strategy but also the strategy
of each of the divisions in turn. Here we consider the group and some
examples of the individual divisions: you could extend the analysis
even further.
Group/division market penetration: existing products in existing
markets
In The Retiring Company the separate divisions are largely operating
at full capacity, so that further market share can only be achieved by
stepping up the effective use of capacity or by acquiring more. Each
division will have its own approach to this strategy. We can consider
for example the residential care homes: the acquisition of further
buildings either from other companies or by commissioning new
builds will increase bed capacity in line with demand More capacity
could be released in the hospitals by running shorter procedures, but
this would have to be in line with quality standards.
Note the converse of growth: if capacity or quality cannot be
enhanced to meet demand then preserving the status quo is not
usually an option as the competitive forces bite and business is lost.
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Notes and references
It may therefore be necessary to look at retrenchment, or shrinkage.
This leads to divestment policies where it is better to cut the losses,
and amputate the limb for the good of the body.
An example here might be the hire car division; if it were found that
turning it around would not be feasible in the required time, then it
should be sold off/shut down. The assets thus liquidated should
then provide capital to support the remaining businesses.
Group/division market development: existing products in new
markets
The Retiring Company could extend its activities geographically by
looking at new sections of the market including the rest of the UK and
Europe. Much work needs to be done at home first, but in future
growth plans external markets must not be ignored.
Group/division product development: new products in existing
markets
This involves selling additional items to the company’s existing
customer base. The group should undertake a product development
audit, examining from a clean sheet just where separate companies
could operate to add revenue at low cost, enhancing profits. Funerals,
for example could look at financing packages for prepayment of
funeral expenses, and there are areas of contact for developing
pensions and insurance activities. Car hire could link to events and
their hospitality management, chauffeuring clients to and from
hospitality suites in a wide range of sporting and social activity, or
even developing into holiday hire and travel.
Group/division diversification: totally new activities in new
markets.
It could be argued that the group has already diversified enough, but
the emphasis on care/health/death support could also be restrictive.
Logical links from transport and property to car parking, baggage
handling, public transport, hotels, and travel are just a few examples
that could be explored, exploiting the skills already established.
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 Profex Publishing Limited 2006
SECTION 9
Force Field Analysis
Notes and references
Introduction
If your analysis of the case suggests that change is needed within the
company, you should investigate how feasible this is likely to be. One
tool for doing this is force field analysis.
Force field analysis lets us gain a little more insight into the forces for
and against change. It splits them into driving forces for change and
resisting forces against change. If the forces for change are stronger
then change is likely to ensue; if the forces against change are
stronger then change is unlikely.
The analysis can then be used as a tool to manage the identified
changes by actively working on the system to reinforce the favourable
forces and diminish the counter forces. This will be important with
The Retiring Company where many entrenched ideas will have to be
overcome to achieve effective management and continued
profitability. A key feature here is that the changes are most necessary
at the level of the divisional heads. We should therefore consider
carefully where the driving force for change is to come from. Here the
external consultant could be instrumental.
A conventional method of performing Lewin’s force field analysis is
to draw a diagram in which the forces for change are represented by
arrows pointing right (the heavier the arrow the stronger the force for
change), while forces against change are arrows pointing left. A
suggested analysis is given below.
We begin by listing the forces, with numbers to facilitate the diagram.
Examples of driving forces for change
1
The bank demands action.
2
The group has no coherent strategy.
3
Complaints from customers demanding better services will
prompt management action.
4
The divisional heads are not committed to their enterprise.
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Notes and references
Examples of forces resisting change
5
Staff do not like change (an over simplification: some change is
very beneficial, and staff will support actions to increase job
security, for example).
6
Existing managers will feel threatened by changes.
7
Absence of dynamic managers may make change difficult to
achieve.
8
Some staff will feel comfortable in their current roles and will
resist attempts to change their job content or apparent status.
Force field diagram
Driving
change)
forces
(for
Current state
Resisting
(against change)
forces
1
5
2
6
3
7
4
8
Conclusion (illustration purposes only: you will need to explore
more changes)
The diagram confirms that there are stronger forces for change than
against change. It will make sense for Debbie O’Rourke or the
management team to quickly undo the negative forces (5–8) and to
exercise strong management in supporting the positive forces (1–4).
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 Profex Publishing Limited 2006
SECTION 10
Further Tools of Strategic Analysis
Notes and references
In a real world situation, a management consultant with unlimited
access to information about the business might use tools of analysis
additional to those already employed in this text. In a case study we
are hampered by the limits on available information. In addition, even
if we could obtain further information, we might find that a particular
tool of analysis was of little use to the business in question.
In this section we briefly discuss some familiar tools and models for
which there is limited information provided in the case. As we have no
data on financial performance, for example, we cannot start plotting
any of the following lifecycle profiles, but we can exercise some
judgement on relative positions.
The product lifecycle
The product lifecycle (or PLC) distinguishes between a number of
stages in the life of a product or service. It can also be applied to the
industry lifecycle. At each stage we are interested in the cashflow and
profitability generated by the product (or service or industry) against a
time base. A balanced portfolio will include products at each stage of
the cycle or a business will have in place a sequence of developments
to optimise the growth potential and maximise profitability.
The Retiring Company has six distinct divisions representing a range
of products and you should consider the stage each has reached.
Different authorities analyse the stages in different ways, but a
common analysis includes an introduction stage, a growth stage, a
maturity stage, and a decline stage. The following diagram illustrates
this.
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Notes and references
The residential care homes are at a mature stage: well-managed, this
should be a lengthy stage. The private hospitals have not yet reached
that stage of maturity and could still be growing, particularly as
demand is high. The car hire division could well be past its sell-by
date: maturity has been reached, it is in decline, and losing money.
The Boston Consulting Group (BCG) matrix
This grid identifies products as being stars, question marks, cash cows
or dogs depending on their position in a grid that matches high or low
relative market share against high or low relative market growth.
We do not have a great deal of quantitative information about the
Retiring Company or its local market shares, but since we know that
overall UK elderly care/accommodation and private health care
activity are still growing, then the company should be operating at the
cash cow-to-star level in these areas. Flowers and car hire could be
described as question marks, and the BCG analysis invites us to decide
which way question marks are going next: stars or dogs? Make sure
you apply your own analysis, and beware sweeping assumptions
about market share and growth rates.
Greiner’s growth model
Greiner drew up a picture of an organisation developing from early
small scale entrepreneurial roots to a large conglomerate, much as the
Ripon Family have done over 40 years. We do not have all the
evidence to check the growth pattern, but as a group it is clear the
Retiring Company is at a crisis point similar to Stage 3 on the diagram,
and some of the divisions may be at different stages themselves. The
point is that management must recognise these crises and work
through plans and actions to develop the business, or failure will be
spectacular.
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Notes and references
Consider the principles at stake here: managers must recognise the
difficulties of achieving controlled growth and must adjust their
response accordingly at each stage of development. The Retiring
Company is losing control in finance, procurement, contracting,
marketing, and operations and must therefore act to save the business.
31
 Profex Publishing Limited 2006
SECTION 11
Strategic Options for The Retiring Company
Notes and references
Introduction
Having used appropriate tools of strategic analysis to identify key
issues facing the company, what conclusions can we come to about
possible strategic directions for the future? Bear in mind that the
examiner is not expecting you to come up with a single ‘correct’
answer: in the case, as in the real world, there is no such thing. What
the examiner does expect though is a reasonable evaluation of the
issues, coupled with reasoned argument in favour of one or more
plausible possibilities, always allowing for realism in the resources
that will be needed to implement your recommendations.
Remember the timing constraints for the business: a coherent
business plan has been demanded by the bank within a period of four
weeks. There is no time for a (say) six months period of reflection,
market research, and analytical study. Geoffrey Ripon and his family
have some serious thinking to do, and they have failed so far to
present a unified front. We have suggested that Debbie O’Rourke will
be instrumental in the plan, provided the Chairman supports her
work through the family strife.
8, line 9
Both the SWOT and PEST analyses demonstrate the diversity of the
group in level of maturity, profitability and commercial strength.
Perhaps the stronger divisions are the residences and the hospitals
groups, so they could form the nucleus of a new organisation with a
pared-down head office. The residential care and the car hire
operations are the weaker divisions. The driving force from the
analysis tools seem to be the need to build on strengths, exploit the
synergies and eliminate identified weaknesses
In all cases timing is a key issue: it is easy to overlook the amount of
time needed to achieve a turnround in a business, or a change of
culture, or simply the physical changes implied in building, fitting
out and manning physical operations such as a new hospital or a
replacement head office.
On the other hand, the longer a project drags on the later are the cash
(income) flows and the more risky is the outcome. Management must
overcome these difficulties!
Recall Porter’s generic approach to strategic development: are we
planning to develop on a cost basis, or focus, or differentiation? The
answers are likely to be different for the six divisions. Some
possibilities are examined below.
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Notes and references
1
No change
The base option is to continue with the existing operations in
much their present form, but to seek a few tactical workarounds to rectify the current liquidity problems. Such an
approach as a ‘caretaker-manager’ is what has created the
current mess, and cannot be seriously pursued as a professional
response.
2
Re-structure the group, building on strengths and eliminating
weaknesses
This could include a radical cutting back of operations, by
eliminating one or more divisions and putting energy, cash and
management expertise into the remainder. This should be
combined with linking operations to achieve both efficiency and
service improvement, employing sound purchasing principles,
outsourcing facilities management to overcome building
maintenance and fuel cost issues. For example, the car hire
group could be sold off or in the worst case abandoned, the cars
sold for cash and the staff laid off to generate a little residual
cash for The Retiring Company. Another case could be made for
selling off the residential care homes to avoid the infrastructure
costs and before they become totally unmanageable as staff
leave and costs escalate
3
Work out a procurement effectiveness programme for each
division and cascade its effect from board level to grass roots.
In some case this will be a rescue plan, but in each case it would
involve developing and implementing sound purchasing
principles. A strategic procurement head would be established
with group responsibilities, and the divisions tailored to suit the
new emphasis on procurement. This strategy is necessary
whatever you decide to do with the divisions, so it is
complementary to structure change. The company should
install modern purchasing and supply chain management
(PSCM) techniques. Detailed shortcomings in the current PSCM
arrangements are highlighted in the SWOT analysis.
4
Adopt customer-led marketing strategy
This is equally critical on a short timescale and would require
the following actions.

Establish customer (resident, patient, client etc) needs in a
marketing plan for managing retirement activity and
confirm their service expectations for service delivery such
as costs, maintenance, and cleaning.
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Notes and references
5

Implement external benchmarking. This is because many
parts of The Retiring Company have lost sight of the need
for excellent customer service and they need to check on
their competition and identify best practice.

Educate the team in ‘who is my customer?’ so that they
can work together to achieve the overall strategy.

Eliminate inefficient practices.
Partial re-structure within divisions
The group could consider selectively restructuring the weak
parts of divisions under new divisional heads to build on the
positive parts of the SWOT and cross-fertilise the best practice
from one division to others. This could be combined with
elements of the procurement strategy and the marketing
strategy above, using benchmarking and balanced performance
measures to ensure the focus stays on the areas to be improved.
6
Flotation of the business
Going public with some or all of the group by selling shares
would change the structure from private ownership. To be an
attractive proposition for sale, however, some of the strategic
and tactical improvements would have to be made in the first
place. A flotation would allow the injection of additional funds
for investment, opening up further options in the development
strategy.
In each case the examiner will be looking for demonstrably
feasible solutions so make sure you work through the options to
meet priorities (cash first, then costs, then volume, etc in a
logical sequence); include timing, and resource needs in the
most practical way. The recruitment of a procurement
professional for example could take several months, unless we
decide to make Debbie O’Rourke an offer she cannot refuse.
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 Profex Publishing Limited 2006
SECTION 12
Tactical Aspects: A Review of Each Division
Notes and references
Having examined a number of strategic issues, we now move on to
tactical and operational issues as they form a management action
hierarchy cascading from the top down. In the examination you may
be asked to demonstrate this linking of strategic decisions and tactical
implementation.
There are many tactical problems facing the company, some of which
we identified as weaknesses in the SWOT analysis. These will have
occurred to you as you read through the case, and Debbie O’Rourke’s
analysis is the starting point. We have classified them under her
divisional headings and generated potential actions which the
management team needs to consider.
You own ideas may be more appropriate, but in each case consider
the logic that you employ to arrive at solutions, and when you
describe what to do, make sure you consider the how and why and
when. The examiner will look for justified and feasible solutions.
Priorities must be set. The November 2004 examiner reminded us that
‘few candidates recognised that not all the remedial action could be
carried out at once….’ and emphasised the need for time to plan, and
time to execute on a short and long-term basis.
The residential care homes division

Public sector (and charity) clients are inadequately funded, 2, line 10
restricting the revenues available. Steps should be taken to
maximise revenues: some authorities pay better than others: the
market should be researched and all potential clients compared.
The Retiring Company could re-consider its marketing position
and services to be offered.

The number of private clients is diminishing, so The Retiring 2, line 13
Company should check the growing market and its competitive
forces: where are the clients going and why?

Care home buildings are old and expensive to maintain. Instead 2, line 15
of conversion costs to meet statutory needs, they should
consider selling off some premises and building purpose-built
homes. With cost opportunities on fuel efficiency and lower
maintenance, a case could be made for a radical physical restructuring.
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Notes and references

Staff cannot be recruited at present salary levels. The Retiring 2, line 18
Company should consider each of the above points and look at
re-positioning in the market, to cream off some premium rates
for better facilities and recruit staff at higher salary levels. They
could look at consolidating some homes to achieve adequate
staffing.

The residential care homes are not buying their consumables 2, line 22
professionally. Negotiated supply contracts with volume
catering sources will allow budget levels of expenditure to be
achieved. Laundry should be negotiated on a corporate rather
than local scale if this will yield savings and better results. In
particular the volume impact of linking up with the laundry
servicing for the private hospital division could be explored.
The supply of fuel should also be negotiated on a national basis
alongside the hospitals and residences divisions for economies
of scale.

Each care home is employing its own maintenance staff, some 2, line 26
retired, and some subcontracted. Their purchasing and
contracting techniques are feeble, resulting in inaccurate
estimates, undefined work, and escalating invoices. Imposition
of purchasing disciplines should be the first priority, and
consideration should be given to outsourcing under rigorous
contracts with clear service level agreements. An alternative
would be to employ flying squads of in-house maintenance
staff. Whichever route is selected, the procurement solution
should take into account the other premises and maintenance
needs in the rest of the group, to achieve economies of scale and
effective working.
It may be appropriate to look at a
comprehensive facilities management contract across several
divisions, taking into account the HR issues and TUPE
legislation.

Stressed mangers are carrying a heavy load against a 2, line 35
background of poor pay, long hours, and lack of management
support. A clear motivational HR strategy across the group
should be set up to cope with these difficulties.

Quality standards have been allowed to slip. We do not know 2, line 37
the time-scale but the range of complaints from residents
suggest a widespread problem which will have built up over
time. Rigorous quality standards need to be imposed in the area
of service to avoid losing clients and revenue.

Tony Ripon is frequently away at horse racing meetings, 2, line 40
missing the opportunity to discuss his operation with Debbie
O’Rourke. He has ‘considerable gambling debts’ which will
need to be funded.
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Notes and references
Private hospital division

15 hospitals in urban sites is an impressive business on its own, 3, line 47
but they appear to be ill-managed because of Jennifer Ripon’s
lack of commercial skills (despite her commitment to caring).

Demand is high for private services as individuals (and even
NHS trusts) wish to avoid waiting for treatment in the public
sector. However revenues will be subject to the setting of fee
levels and the NHS with its professional purchase and supply
agency have made progress in setting flat-fee rates for
procedures such as cataract operations, hip and knee
replacements, hernia operations and other services.

Procurement practice is poor, and high levels of bought-in 3, line 16
services are employed (agency doctors, nursing, equipment,
cleaning services) with inadequate selection, monitoring or
controls on the spend. Food, drugs and consumables are
bought by individual hospitals with no regard for scale
economies, bulk purchase, call-offs, logistics, storage, or
consignment stocks. Local maintenance is also out of control, 3, line 32
and although a central laundry policy and contract has been set
up by Jennifer Ripon, it ignores the related laundry activity
undertaken for the care homes division. This laundry contract is 3, line 37
also in a mess: quality is low, deliveries are late, quantity
disputes exist and Jennifer Ripon is withholding £20,000 against
the resolution of some issues.

Launder Ltd’s response is unacceptable because staff and traffic
problems could apply to any operator: they must manage
adequately to meet client needs. The private hospitals division
must get a firm control of its purchasing by setting service
standards, agreeing delivery schedules, sourcing appropriately,
and establishing contracts on its own terms. If Jennifer Ripon is
negotiating her own deal, then perhaps she does not have in
place the appropriate professional staff and these are critical to
her division’s cash position and profitability.

Credit control is poor and insurance companies are allowed to 3, line 23
prevaricate and attempt to re-negotiate over payments. The
cashflow problems then delay payments to suppliers which will
undermine relationships and quality of supply. A tight grip of
credit must be taken, with top level negotiation with the
principal debtors at the respective insurance companies.
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Notes and references
The residences division

Relatively speaking the residences division may be less troubled 4, line 29
than the rest of the family operations but there are procurement
problems in Billy Ripon’s ebullient nature and his treatment of
suppliers, contractors, local government councillors, and
officials. Professional and ethical standards in carefully selecting
suppliers and contractors, reviewing and monitoring both
performance and relationships, and the transparent application
of high commercial standards to tendering, planning,
purchasing, and contracting will all enhance the commercial
position of this already profitable business.
The funeral division

The marketing position of this type of operation has been
summed up as ‘the nearest undertaker gets the business’ which
underlines the fragmented nature of funeral company
organisation and the localisation we see.

The vehicle fleet is life expired which will create a huge capital 5, line 24
purchasing or leasing challenge in the near future. This should
be taken into account alongside the car hire division, to see
which of these businesses could possibly support the other. The 5, line 36
case states that ‘there is no synergy with her brother
Christopher…’ but this is a personal issue: there must be great
potential for commercial synergy between the two businesses.

Maintenance of the infrastructure is onerous and may demand
further capital expenditure. Owing to the specialist nature of 5, line 2
equipment (refrigerators, hearses) there may not be the
opportunity to combine resources or contracts with the other
divisions but this option must be evaluated.

The question of complaints over disbursements is a curious 5, line 33
inclusion here: as they are unavoidable they represent a cost
which must be included in the pricing structure. Funeral pricing
occurs in an imperfect market where much is hidden and little
choice is really available as customers refrain from ‘shopping
around’. The resolution of the problem is in the pricing element
of the marketing position. Well-trained staff would then have
to decide on creating an all-in pricing package or listing
disbursements separately, in either case carefully explaining the
cost structure and final prices to the clients. If this no-surprises
approach is taken then complaints should be substantially
reduced.
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Notes and references
The floral division

This is a serious supply chain problem on its own. The 5, line 43
operating costs are high, with rented properties each locally
subject to profiteering landlords. Professional negotiation of
longer leases should reduce the long-term costs. The added
impact of business rates should cause a re-think on the
operation: are the rented premises in the right locations? Could,
say, franchised outlets in other businesses including the funeral
businesses be more appropriate? Is it time to divest of a
business which does not meet return on sales or investment
targets?

The supply chain is lengthy and erratic, employing overseas 6, line 2ff
growers, and a UK logistics company. This requires active
management of the supply chain, whether internally by the
floral division or by a committed third party logistics company
which is carefully controlled.

Flowers are specified by the growers and selected from a 6, line 7
catalogue. This takes control from the buyer and the process
should be more aligned to customer needs.

Some suppliers work through UK agencies: the cost will be 6, line 9
borne by the buyer, so it would make sense to negotiate further
up the supply chain and cut out the middle man.

Quality levels are low: damage, incorrect quantities, and 6, line 24ff
packaging errors all add to the product cost and if they are
allowed to reach the customer will reduce confidence and
adversely affect sales. Excuses offered to local managers are
commercially unacceptable and a professional buyer should be
able to replace or improve on these steps in the supply chain.

Extra cost appearing in invoices must be eliminated by careful 6, line 14
attention to purchase orders, supply contracts and pricing.
Appropriate use and subsequent monitoring of incoterms
should regularise these problems.

Marketing costs are high suggesting a buyer could assist in 6, line 18
placing advertising on a better cost basis: some basic research
will help the group manage its supply chain and hence costs
better. Comparison with supermarkets will allow developments
in premium services, deliveries, and added value (design and
display advice, installations and flower arranging services, for
example) with which the supermarkets will not be able to
compete.
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Notes and references

Business rates are adding to the rental costs: see discussion 6, line 22
above on location.

Local delivery services are damaging the flowers and making 6, line 24ff
errors. A professional purchasing review of the delivery
services should consider alternatives including the in-house
option, larger delivery organisations, and even a link to the car
hire business. Dismissing customer complaints by reference to
the third party deliverers is missing the point of customer
service. There is potential here for a really first-class service
through management of the supply chain which the floral
division must grasp.

Mike Ripon has erred in setting up long-term supply contracts 6, line 33
with the logistics operators. These must be re-negotiated and
commercial work-arounds found to reduce the stranglehold on
the business.
The car hire division

Christopher Ripon has assembled an ageing fleet of vehicles 6, line 39ff
with increasing maintenance costs, and is feeling the added
burden of poor maintenance through inadequate procurement
and control of garage services. The entire operation is crying out
for professional purchasing controls such as the following.

Service provision by garages should be controlled by defining
standards, establishing contracts, and monitoring the outcomes.

Acquisition of vehicles is a specialised activity and in these
times of over-capacity in many areas of car production the fleet
buyer is in a strong position to achieve low cost investments in
cars for both purchase and lease. The secondhand car market is
depressed and further deals should be available to the
thoughtful professional purchaser.

Fuel should be brought under similar professional controls and
fleet contracts sought to include the other divisions.

Staff turnover increases suggest disenchantment with the 7, line 10
management of the organisation and require intensive
management effort to motivate, train, develop, and retain staff.

Employee prosecutions for driving offences are a quality issue 7, line 11
demanding training and staff development. Initial checks
should be made, however, to ensure the company is not
contributing to the problem by poor scheduling of work or
allocation of resources against impossible deadlines.
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 Profex Publishing Limited 2006
Notes and references
The headquarters administration

The headquarters staff and organisation appears bloated,
expensive, and inefficient. Many much larger organisations
operate group structures with much smaller head office staff
numbers. Remarkably, each divisional director is supported by 7, line 35
separate teams for HR, marketing, supplies, operations, finance
and administration. No doubt they have evolved over time,
claiming special circumstances in each separate division, but
this is clearly wasteful duplication when the numbers are so
large, at about 20–30 per division.

There will be potential for rationalising and combining
resources across the separate divisions, but a basic decision
about centralisation or decentralisation needs to be made.

‘Each division buys all its goods and services on the terms and 7, line 44
conditions of the suppliers.’ What greater justification do we
need for the imposition of professional purchasing? This multimillion pound turnover business needs to control its spend and
buy on its own terms, employing a purchasing portfolio model
to cover the range of activity: some commodity purchasing,
some purchasing through preferred suppliers, and some
partnerships for high spend/high strategic importance items
(heating fuel could be one). Only a purchasing professional
operating at the highest level will be in a position to set up the
portfolio model, and direct the divisions to implement
significant changes to the way they operate.

Many generic HR issues have been neglected by the head office
teams who are letting the operations struggle on with poor
motivation, stress, low quality, and absent management. As a
result, a lack of communication, team spirit and a common
purpose are all missing from the divisions. Attention to each of
these may be better handled if responsibility is devolved to the
divisions and the head office team split up.

Marketing and public relations issues (such as the lack of a
customer-led market philosophy, allowing customer complaints
to escalate) will eventually lead to rapidly deteriorating public
relations.
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 Profex Publishing Limited 2006
SECTION 13
A Matrix Approach to Enhancing Performance
Notes and references
Examination needs
As an alternative to the individual shopping-list approach to the
tactical problems described above, we should consider how the
examiner is likely to pose the questions. A strategic question could
embrace the whole operation or could focus on only one or more of
the separate divisions, where perhaps synergy could be
demonstrated. For example, a question might focus on the car hire
and funeral divisions where high quality, reliable, well-maintained
personal transport is the linking factor.
A tactical question on, say, purchasing techniques could equally be
directed at the whole group, implying central control and standards,
or could focus on just one division or operation within a division.
The special problems of acquiring flowers for sale, for example, are
unique to one division, and your answer to a question in this area
will necessarily leave out all the other divisions.
A tactical question leading to developing joint operations or
outsourcing a shared activity may well spread across two or more
divisions.
Consequently you should be prepared to match the scale of your
answer exactly to the examiner’s requirements. There are plenty of
examiners’ reports indicating that this is a source of trouble to some
candidates, so we emphasise the need for a structured approach
linked precisely to the question. We have produced the guidelines
below to indicate likely areas of concern in a matrix, and the areas of
concern are explored in the following sections of this text.
Adopting one or more of your selected strategies will lead to some of
the required service improvements, but each needs tactical planning,
priorities and timing, allocation of planning and execution resources,
and the setting up of performance measures and benchmarks to
measure progress.
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Area of
concern
Care homes
division
Private hospitals
division
Residences
division
Funeral
division
Floral division
Car hire
division
Group/or HQ Staff
Strategy
Growth and/or
divestment
Growth to meet
NHS and
individual
demands;
capacity needs
Already
negotiating 20
new sites,
growth
Growth,
potential
synergy,
develop
financing and
related business
Supply chain
controls
Either: divest,
cut losses, or
Enhanced
quality
Enhanced
quality
Decisions on
growth/
acquisition/
divestment
Identify target
market to
maximise revenue
Close/sell, or
merge and exploit
synergies
Investment
planning
Retention and
growth
Close/sell, or
merge and
exploit
synergies
Central vs
devolved;
organisational
structure
Potential flotation
and funding;
mergers and
acquisitions
2
Quality standards,
setting and
monitoring
Operations
Clients
complaining
Poor quality
service
 Profex Publishing Limited 2006
Premises need
upgrading, fire
regs, access
Modern premises,
meeting statutory
requirements
High standard
accommodation,
caretaker
Function as 120
separate
businesses
Maintenance poor
Developing,
under close
scrutiny of Billy
Maintenance
issues, plant and
equipment
100% occupation
80 rented shops
in UK, often
close to
hospitals and
funeral
business.
Use of UK
logistics
operator
400 vehicles,
600 drivers;
chauffeur
service
Old, high
mileage cars
Questions of
replication,
inefficiency, need
for Chairman’s
social calendar/
staff; separate
systems,
procedures
In-house catering,
in-house
maintenance,
transport
Area of
concern
Care homes
division
Private hospitals
division
Residences
division
Funeral
division
Floral division
Car hire
division
Group/or HQ Staff
Purchasing
and
procurement
Local purchases
Local purchases
Laundry issue
Laundry issue
Selection of
contractors
personal, not
analytical. Work
given to longstanding
contractors. Not
transparent.
Cost of coffin
transport needs
review;
crematoria
exercising
power
Supply
difficulties
sourcing from
Kenya, Holland
Irrational
purchases,
several
different
sources.
Central vs
devolved; some
supplies at HQ
Structure and
organisation
50 premises,
South, NE, NW
England
15 hospitals,
UK towns
40 locations,
retirement
towns
120 funeral
parlours, in UK
mainly South of
England
80 rented
shops, UK
30 depots in UK
Six separate
divisional staffs in
one old house
Contracting
Maintenance ad
hoc; verbal
estimates, no
specs; possible
synergy across
group
Launder Ltd
failing to perform,
in dispute
Trusted
contractors but
on informal
basis and open
to criticism for
entertainment
Contract for
coffins, high
transport
charges. Dispute
with Crema Ltd
over market
position
Locked into
adverse
contracts with
logistics
Ad hoc
servicing, poor
maintenance
Devolved to
divisions
Tony, gambler, at
races. Difficult to
attract staff;
staffing too low.
Jennifer, hard
working
Billy,
entertaining
contractors
Sally operating
120 separate
businesses, we
assume local
and professional
controls apply.
Mike, nice, but
not commercial
High staff
turnover,
prosecutions,
complaints
Supply chain
management
2
HR
 Profex Publishing Limited 2006
Most work subcontracted
No data on
flexibility
between
branches, but
staff turnover
high
44
Locked out of
solus deals at
airports
80-yr old Chairman
Breakdown in
communications,
little interaction
Area of
concern
Care homes
division
Private hospitals
division
Residences
division
Funeral
division
Floral division
Car hire
division
Management
Leaving in droves
High medical
skill, low
commercial
Billy very active,
negotiating,
planning,
persuading
Sally running
separate
businesses, in
effect.
Mike, nice,
weak, and not
commercial
Christopher
Ripon vague,
but likes
vehicles.
Finance
Heavy investment
needed:
infrastructure; low
wages deterring
recruitment; high
costs at all levels.
High staff (agency
and medical) costs
High profits
Withholding
invoices
High rental
costs for
premises; profit
threatened by
high purchase
costs,
marketing, and
fierce
competition.
Historical and
current lossmaker.
Client funding
capped
High turnover,
costs, and
disbursements,
but cash
management
suffering
delayed
payments
Only complaints
over costing,
apparently. We
assume
professional
standards
maintained in
120 different
ways.
Customer
complaints on
most aspects of
supply.
Poor: customer
complaints,
some arising
from poor
systems,
maintenance.
Deferred
payments
Cash crisis
New sites to pay
back in 7 years
High promotion
costs
Fuel costs
2
Quality
Poor at client
interface:
complaints
Disputes over
laundry
High perceived
quality of
accommodation
 Profex Publishing Limited 2006
45
Ad hoc capital
purchases; high
fuel cost ahead
of inflation
Group/or HQ Staff
Massive overhead
against operating
divisions. Need
business plan:
NOW!
All divisions except
residences
struggling with no
clear drive from the
top
Absence of TQM
SECTION 14
Procurement Systems and Processes
Notes and references
The group has evolved under its six divisional heads in their own
personal styles and the divisions seem to ignore each other’s
activities, reflecting the relationships between the members of the
Ripon family. Procurement systems are haphazard and the separate
divisions have barely asserted their purchasing rights, allowing
suppliers and contractors tremendous freedom to rip them off.
The key transgressions of sound purchasing principles appear to be
as follows.

No obvious procurement function at senior level in the
company; otherwise the Ripons and staff would not be at liberty
to make purchases and enter agreements without professional
support.

No consideration of economies of scale or of mutual working or
support between divisions when making purchases or placing
contracts

Delaying payments to suppliers. It is not their fault.

Unethical behaviour as Billy Ripon is able to treat clients to 4, line 27
hospitality, sports, and weekend trips

Tendering and competitive quotations are not immediately
obvious

Purchases are repeatedly undertaken on sellers’ terms and 7, line 44
conditions when the group should be setting its own
purchasing terms.

Contract management is ineffective from vendor appraisal and
selection, right through to performance, standards, monitoring
and conclusion.
3, line 27
There are several indications in the case of poor contracting practice
in dealings with suppliers.

There is no guarantee of good price, service, or delivery on a
long-term basis.

There seems to be no effort to insist that quality standards are
adhered to, even when such standards have apparently been
embodied in the contractual agreements.
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Notes and references

No use is made of framework agreements and service level
agreements.

There does not appear to be any application of the company’s 7, line 44
own terms and conditions of trade, so goods and services are
bought on the suppliers’ terms and conditions of contract.
In the absence of dedicated purchasing expertise it will be difficult to
address these issues. However, a number of specific improvements
can be suggested.

The need for appropriate specifications is very apparent.

Specifications, when used, should be more comprehensive than
the current agreements. They should cover aspects such as
quality, condition, delivery etc in addition to price.

The company could draw up its own standard terms and
conditions of purchase. By insisting that such terms apply to all
purchases they eliminate the risk of contracting on suppliers’
terms. Such terms and conditions should be included in all
purchase orders, and no purchase should be made until a
purchase order has been completed and authorised.

Only staff with the relevant seniority and expertise should be
allowed to bind the company in contract.
What to do?
As indicated above, the group lacks purchasing expertise. They have
small teams at head office handling supplies. Our strategic analysis
suggests that a purchasing professional is required immediately.
Their responsibilities will then include the introduction of formal
disciplines in the areas of sourcing, supplier evaluation and selection,
supplier appraisal and management, contract management, and
purchasing administration. Basic purchasing techniques such as
framework agreements and service level agreements are not
understood in the company and its divisions.
The appointment of such a professional could be on a consultancy
basis (it may be that the cashflows and profitability in the company
will easily cover the expenditure, and it will generate a substantial
return for the business). In this case, the responsibilities would not
only cover the immediate operating issues but would allow careful
analysis of the outsourcing options discussed elsewhere.
Acquiring this individual is a major procurement challenge itself,
demanding sound purchasing principles. Debbie O’Rourke’s
consultancy will be able to advise on recruitment and selection of the
purchasing executive.
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Notes and references
Here is a checklist of actions that the new head of procurement might
consider.

He or she controls all common procurement items within the
group (as well as advising on local purchases). Common items
include such things as IT equipment, vehicles, maintenance,
cleaning and laundering, catering, consumables

Raise the quality levels and capabilities of purchasing staff

Set standards and KPIs to assist with corporate objectives

Outsourcing decisions (eg catering, cleaning, security, facilities
management)

Reduce costs

Establish a procurement strategy

Establish supplier relations based on rational processes, not on
‘old friends’ network, perhaps using Kraljic’s matrix

Recruit and manage a purchasing team, all of whom will be
CIPS qualified. Director to design a structure of the team

Establish policies and procedures

Establish ethical practices and CSR framework

Establish remuneration policy

Insist on use of own terms and conditions

Establish system of supplier appraisal

Extent of centralisation? Perhaps allow local autonomy up to a
certain financial threshold

Agreement with a national garage chain to sort out vehicle
maintenance. Or just lease the fleet instead of buying it, then it’s
the lessor’s problem

The need for appropriate specifications is very apparent.

Specifications, when used, should be more comprehensive than
the current agreements. They should cover aspects such as
quality, condition, delivery etc in addition to price.

The company could draw up its own standard terms and
conditions of purchase. By insisting that such terms apply to all
purchases they eliminate the risk of contracting on suppliers’
terms. Such terms and conditions should be included in all
purchase orders, and no purchase should be made until a
purchase order has been completed and authorised.

Only staff with the relevant seniority and expertise should be
allowed to bind the company in contract.
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 Profex Publishing Limited 2006
Notes and references

Supplier sourcing: how do we find a regional/national
company to provide our maintenance requirement? How will
we measure their performance?
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 Profex Publishing Limited 2006
SECTION 15
Management and Human Resource Issues
Notes and references
As you develop the SWOT analysis it becomes very clear that the
divisional heads of the company are failing to exercise satisfactory
management and organisational control. Six operational areas and the
head office are functionally split and working in their own domains.
The difficulties in this area are linked to the personalities of the
divisional heads but unfortunately we have no further information on
the management structures or personalities which make up the
remainder – the entire organisation.
Whoever we appoint to take charge must grasp this out-of-control
management situation and achieve major improvements. Pressure is
already on from the bank and business commonsense demands
improvements. Debbie O’Rourke may have financial and supply
chain management expertise, and she has demonstrated her
analytical expertise to a certain extent, but we know nothing of her
management skills in relation to driving through a programme of
change.
Any answers linked to management, organisational, or human
resource issues must be practically based to take into account timing,
training, and development of the individuals and teams concerned, as
covered in your Foundation Stage syllabus.
Whichever route is selected, positive gains could be made by
outsourcing some or all of the operational activity provided this is
managed in a professional way, through careful appraisal and
selection of contractors, setting of service agreements, performance
levels and measures, and close monitoring of performance. Many
companies of all sizes and capabilities offer maintenance and cleaning
resources. If outsourcing is selected then the usual procurement and
employment guidelines must be followed, including reference to
TUPE regulations for any displaced staff.
In case of a question on outsourcing, by all means make brief
reference to the general principles underlying this kind of decision
(which you will find outlined in your Profex study texts). But don’t
get carried away with the theoretical general principles: the examiner
will be more interested in their direct application to the case of The
Retiring Company.
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Notes and references
Facilities management is a prime topic for outsourcing, provided the
basic procurement ground rules are followed. You should read
carefully Maureen Moody’s article in Supply Management, 8
September 2005, and consider how the facilities could be managed by
a third party on behalf of The Retiring Company. This would allow
the local management time to focus on their caring activities.
The case study gives no explanation of the management teams or
structures in each Division, except to say that the top-level functions
at Company headquarters are replicated for each director in
recruitment, marketing, supplies, operations, finance, and
administration. We know that a small team liaises with Payplus UK
Ltd for payroll purposes.
The structure of the top management team is shown on the next page.
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Structure of top management team
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52
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SECTION 16
Issues Relating to Quality
Notes and references
In all divisions except the residences customer complaints have
surfaced, and the response in the group is unhelpful to the customers.
It is very evident there is no sense of customer service. Consider the
current evidence of quality issues.

Residential care clients complaining of theft, lack of care, poor 2, line 37
catering, uncleanliness, rude staff, and broken-down equipment

Hospitals struggling with poor laundry service, including poor 3, line 37
cleaning, late delivery, missing or unbalanced quantities

Next-of-kin have disputed unexpected charges apparently 5, line 33
added to funeral arrangement costs

Floral customer complaints are increasing: damaged/wilting 6, line 24
flowers, poor packaging, delivered to the wrong address, or
bearing the wrong greeting.

Car hire is suffering from increased breakdowns, poor servicing, 7, line 2ff
driver prosecutions, and customer complaints about rudeness,
lateness, dirty vehicles, and overcharging.
There is no evidence of a quality management system (QMS) and The
Retiring Company must implement some form of system
immediately to handle the complaints, initially, then set up
management and staff with inspiration, motivation, and training with
procedures so that the errors and omissions should not recur.
Adopting a total quality management approach is attractive: it would
take time, training, and management expertise. It would, however,
ensure that all features of the service offered are appraised in detail
and all staff would contribute to meeting and exceeding the
customers’ expectations.
At present, motivation is low and stress is high. While divisional
heads and managers are away from their jobs then quality
expectations will never be met as quality does not seem to matter.
The exercise of strong leadership and coaching in the areas of
customer/client care, maintenance, and management will inspire the
teams to work far better than in the present regime.
As part of a TQM approach, it is imperative that all staff adopt the
new approach and benefit from the detailed training required. To
jump-start the improvement, however, things may have already gone
so far that the only hope is to outsource some or all of the facilities
management, and thus buy-in the expertise which is missing.
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SECTION 17
Legal Issues: An Overview
Notes and references
The CIPS case study invariably includes issues drawing on your
studies of the Legal Aspects syllabus. Since these tend to be somewhat
technical in nature you may feel worried about your ability to deal
effectively with them. Here are some thoughts that may cheer you up

There are not many legal issues in the present case study.

On past experience, there is likely to be just one question on
legal aspects, so the problem is at least confined to 25% of the
paper. It would be highly controversial, and rather unlikely, for
the examiner to set two questions on these areas.

You are training to be a purchasing specialist, not a lawyer. The
examiner is not expecting an exhaustive discussion of obscure
legal points. He is expecting an informed awareness of the
important issues. As long as you are able to set these out in
reasonable detail you do not need to arrive at the ‘right’
conclusion to score good marks, or to spot every obscure
technical point.

In fact there rarely or never is a ‘right’ answer. Even a trained
lawyer, with full access to all possible information, could not
say definitively that any particular conclusion is indisputably
right. That is why legal disputes go to court – to be debated, and
eventually resolved by a judge.

Very often our analysis will necessarily be incomplete because
we do not have full information.

Finally, remember that the strict legal position is not always the
most important consideration, even if the issue appears to be a
matter of law. It may be more important to devise a sensible and
pragmatic business approach than to insist on a strict legal
position. Continuity of business and sound commercial
relationships could be much more appropriate than launching
into expensive litigation. This may well be the situation for The
Retiring Company in the present case.
In the next section we will look at each of the legal issues in turn.
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SECTION 18
Legal Issues: More Detail
Notes and references
Residents’ access to premises
All new builds are subject to the terms of the Disability 2, line 15
Discrimination Act (DDA) 1995 to ensure that people with disabilities
can have equal access to public premises. Planners would also be
interested when conversion work is undertaken on old premises, and
it would be good practice to review all access. It applies not just to
entrances, of course, but to other public areas such as toilets and
washing facilities. Bear in mind this is not just wheelchair access, but
covers other disabilities such as partial sight (legibility of signs) or
hearing. The new terms of the DDA 2005 extend the provision to
transport vehicles and rented property which will impact on The
Retiring Company.
Residents’ complaints over service
The Retiring Company has residents who are complaining about the 2, line 37ff
level of service. Our quality approach needs to eliminate these
problems at source, and set up systems to delight the customer – but
this takes time. It may be that some residents are sufficiently unhappy
to enter into litigation.
Care, catering, and cleanliness may be covered in the contract they
have with the Ripon family through the Residential Care Homes
division. If not, then Section 13 of The Supply Of Goods And
Services Act 1982 (SOGASA 1982) may apply. This states that where
work is carried out or service provided, it must be completed with
reasonable care and skill. Those carrying out that service must show
the level of skill appropriate to a person in that profession. Therefore
there may be a breach if the reasonable level has not been met.
The remedy in law would be damages to cover the losses or 3, line 40ff
inconvenience, but if the complaints are just whinges and the level of
care is reasonable then there will be no action. We may be more
concerned with good customer care here, rather than any legal
process.
Retiring Company complaints over laundry
Where the company has been receiving sub-standard service then
SOGASA 1982 could apply. Bear in mind that if no time is stated in
the contract, then Section 14 applies. This states that if no completion
date is stated in the contract then it is implied that the supplier must
complete the work within a reasonable period of time.
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Notes and references
What is reasonable will depend on the nature of the contract.
The terms of the contract must be considered to evaluate whether
they cover the situations outlined. If so there may be a breach of
contract. The court may also consider whether the terms of the
contract that have been breached are conditions, warranties or
innominate terms. If they are conditions, then non-compliance with
these will lead to a fundamental breach of the contract and it may be
reasonable for Jennifer to withhold the £20,000. If they are only 3, line 42
warranties then it may be that breach will only lead to compensation
via damages rather than the contract being void.
We do not know if there has been any discussion between the parties
or any sort of alternative dispute resolution through mediation or
arbitration. If not then simply to withhold payment and breach the
contract may attract criticism from the court if legal action were
taken.
Crema Ltd abusing market power?
Sally Ripon has doubts over the position of Crema Ltd in the market 5, line 30
place. Potential competition law issues apply here: national law is
covered by the Competition Act 1998. Chapter 2 prohibitions cover
the abuse of monopolistic positions. This is the abuse of a dominant
position in the market, which may affect trade in the UK.
Dominance is where a business, trade or organisation can act
independently of others and have an appreciable effect on the
markets, for example by directly or indirectly imposing unfair
purchase or selling prices or other unfair trading conditions.
If Sally believes that this is the case and such agreements are not
regulated by other legislation then it can be reported to the Director
General of Fair Trading (DGFT) who has the power to investigate
suspected infringements. The DGFT has the power to request
documents and can search premises with or without warrant. If an
organisation is acting in contravention of the law then the penalty is
up to 10% of their turnover in the UK. The DGFT investigates
monopolies and can refer such investigation to the Competition
Commission, which also hears appeals against decisions from the
DGFT. If a restrictive agreement appears to be against the public
interest, the DGFT may apply for a ruling to the Restrictive Practices
Court which can prohibit the agreement. The burden of proof (on
balance of probabilities) is on the parties concerned to show that it is
not against the public interest.
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Notes and references
Damaged and wilting flowers
The Sale of Goods Act 1979 (implied terms of a contract, Section 13)
implies that where goods are sold by description, those delivered
should actually match that description. Section 14 implies that the
goods will be of satisfactory and merchantable quality and fit for
purpose. These terms cannot be excluded by express terms in the
business contract. Therefore the company may be liable for the sub- 6, line 24
standard flowers it is delivering.
Garages providing poor levels of maintenance
7, line 3
See details of SOGASA 1982 above.
Solus deals with airport operators
A ‘solus’ agreement is where one party agrees to restrict themselves 7, line 14
exclusively to buying and selling the other party’s product for a given
period. An example is petrol deals between petrol companies and
garages where the garage proprietor agrees to sell only petrol from
one particular company. The petrol companies have a legitimate
interest to protect, in that they need secure outlets for their petrol, but
the restraint obtained in protection of that interest must be
reasonable. The duration of the agreement is the usual problem here.
The car hire division may not be able to do anything about this. If the
terms are not unfair (eg through abuse of bargaining power) then
they are not in a position to object.
Incoterms and conditions for international flower deliveries
Incoterms are set agreements which facilitate more effective
understandable international trade. Ex works and DDP are two of the
13 distinct Incoterms 2000. The two quoted here are at opposite ends
of the spectrum regarding the duty of suppliers and buyers.
Ex works terms place the least burden on the supplier and therefore 6, line 3
the most on the buyer. The obligation on the supplier is only up to the
gates of his premises. All the supplier has to ensure is that the goods
are at the warehouse gates by a set time. The buyer must arrange and
pay for carriage and insurance of the goods. It is usual for the buyer
therefore, to have an agent in the country of origin to arrange such
matters.
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Notes and references
Delivered duty paid (DDP) – this has maximum burden on the seller 6, line 5
and therefore minimum burden on the buyer. The seller is obliged to
deliver the goods to a specified place in the country of importation
with the relevant documentation (eg import licence, warehouse
warrant, document of transport, commercial invoice and delivery
order). The seller bears all the costs and risks including any taxes and
importation duties.
As there is a problem with large amounts of the flowers being not up
to standard, it may be that such issues can be resolved with reference
to the bill of lading. The bill of lading is a document signed by the
ship owner or agent of the ship owner which states that certain goods
have been shipped on a particular ship or have been received for
shipment. This document sets out the terms on which goods have
been received or delivered by the ship owner and is signed.
Not only is the bill of lading a document of title, it is also a receipt for
the goods and also evidence of the terms of contract of carriage. The
bill of lading is the document that is passed as ownership passes
down the supply chain. It therefore also offers proof of the condition
of the goods to ascertain whose responsibility it is for sub-standard
goods and therefore liability to pay compensation.
As the bill of lading provides evidence of identity, quantity and
condition of the goods, if the bill of lading does not identify any
defects on receipt of the goods then this is good evidence that defects
arose in carriage and are therefore the responsibility of the carrier.
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SECTION 19
The Financial Situation of The Retiring Company
Notes and references
We would normally analyse the financial position of the case
company, but this case provides no significant numerical and factual
data on the financial status or performance of The Retiring Company.
We have already commented on the strategic and operational impact
of the many clues in the case, but should a question arise then the
main references are as follows.

Freeze on borrowing until the business plan is produced
8, line 8

Heavy investment needed in the residential care homes to
maintain old premises and meet statutory requirements for
disabled access, escape, and fire precautions
2, line 15

Adverse financial ratios – we are not told which, but they are 1, line 26
usually linked with liquidity and efficiency

Cashflow problems, demanding greater borrowing
1, line 29

Staff recruitment hampered by low wages
2, line 18

Fuel costs escalating
2, line 25

Agency staff cost more than employees in the hospital division
3, line 18

Billy Ripon is about to commit to huge capital investment to
purchase 20 sites with a payback period of seven years. The
bank may take a different view
4, line 20

Payments for funerals division can take up to two years when
probate is cleared
5, line 28

Floral imports subject to inaccurate invoices
6, line 14

Short-term leases for floral premises subject to escalation on
renewal
5, line 43

The car fleet is losing money steadily due to high costs
including depreciation
7, line 26

Head office is running up high overheads and not achieving
sound management in the group.
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Notes and references
All in all, the Retiring Company has its hands full: solving the finance
on its own would be a serious issue, but there is a whole range of
strategic, operational, and procurement issues to be resolved too.
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