Strategic Case study
Strategic Analysis
P Plc
Plumbing and Building
Suppliers
Nick Best
with
www.astranti.com
Welcome
Welcome to Nick Best’s CIMA Strategic Case
Study preseen analysis
For those of you who don’t know me, I am
the Managing Director of Astranti
Financial Training. I’ve tutored CIMA for
over 15 years for BPP, Kaplan, First
Intuition and Reed Business School and
have authored a number of official CIMA
study text’s and revision guides.
For Mock Exams on the latest case, free
preseen analysis videos and course notes
visit www.astranti.com
Introduction to the case
The plumbing and building retail industry is the focus for
the latest Strategic Case Study. Hardly ‘exciting’ but it’s
easy to associate with – real products which are around
us all the time and which anyone with a house has
probably had to buy. That’s a help!
The case company P Plc is based in the UK, but operates
worldwide. It’s grown through acquisition, and is
profitable, but needs to rationalise its structure and
divest unprofitable business units.
Strategic analysis – the rational model
This analysis uses the rational planning model of strategic
analysis, summarised in the following diagram
Governance
& Ethics
Business Environment
PEST
5 Forces
S W
NOW
O T
Internal
analysis
Business Strategy
Generic strategies
Ansoff’s matrix
Method of growth
Product analysis
-Product life cycle
-BCG matrix
FUTURE
Mission &
Objectives
Stakeholder
Mapping
Strategic analysis – the rational
model
The first stage of
analysis is to ensure we
fully understand where
the organisation is
heading, along with its
approach to meeting
stakeholder needs.
Governance
& Ethics
FUTURE
Mission &
Objectives
Stakeholder
Mapping
Mission
The mission statement sets the direction and tone of the organisation, and
guides strategic decision making. The case study gives us the following
mission related elements:
Corporate values:
1.Trading fairly and honestly
2.Responsive to customer needs – continuous improvement
3.Employing committed people
4.Respect for cultural diversity
Strategic objectives
1.Market leader
2.Deleverage underperforming parts of the business
3.Continuous improvement of products and service
Remember to use these in the exam to help guide the decisions you make
on how to move the business forward.
Objectives and performance measurement
The objectives provide a focused target to move towards to direct planning,
motivate staff and enable accurate performance measurement
We are given few specific targets in the case study. They are likely to have more
specific strategic targets we are not told about. If the unseen suggests they do not,
then this is a weakness in the company’s planning approach.
They do record performance, but the analysis in the preseen does not offer much
valuable insight – both divisions are very similar. More detailed analysis is needed.
Benchmarking of comparable retail divisions might help to identify units to sell or
ways to improve underperforming divisions.
Balanced scorecard would be beneficial to P Plc with a focus on their key goals
by measuring:
Customer service and satisfaction
Product quality
Innovation
Astranti Strategic Mock Exams
“Hi Nick,
The biggest criteria for success in my
opinion is practising mock exams based in
this case study These are key since:
• They help you with Time Management, a
critical problem for most students
• They enable you to practise a range of
issues that you may see in the real exam
Our strategic mocks are tailored to this
industry and give you vital exam practise
Mock marking with very detailed focused
feedback is also available (don’t
underestimate how important feedback on
approach and technique is to you success!
I passed! To say that I am
extremely happy is a gross
understatement!
I would like to thank you for
helping me cross that bridge
(not an easy one) and
achieve another milestone in
my life. Your mocks made a
big difference and really
helped me - this was my 3rd
attempt. There is something
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Keep up the good work!
Kind Regards,
Edmore Chinhakwe”
Passed November 2011
Governance
•
P Plc have 6 Non-executive Directors (including the Chair) bringing
independence to the board
•
However they have 7 executive directors – which is more than half,
which is not good practise under the UK’s combined code
•
There is a concern about the power of the ‘Executive committee’ –
are they too powerful and so making the NEDs roles insignificant.
•
Little evidence in the case of other key governance issues. They are
listed so should conform to governance requirements and probably
do, but look out for weaknesses in the unseen in areas such as:
 Committees of Non-execs – Audit, remuneration, nomination
 Disclosures of directors and pay
 Financial reporting and control
 Information for directors
 All directors involved in decision making
 Regular meetings with institutional shareholders
 Good use of the AGM
Ethics and CSR
P Plc have a clear statement of ethics. This suggests this will be
an important part of the exam.
Key elements of CSR for P Plc:
• Staff training, development and safety
• High ethical standards
• Minimise environmental damage
• Safe, reliable products
Look out for ethics issues in the exam, and ensure you
recommend P Plc focus on continued high ethical standards in
this area.
Stakeholder Analysis Mendelow’s Matrix
Low Interest
Minimal interest
Low Employees of suppliers
Power Occasional customers
Keep satisfied
Governments
High
Power Most institutional shareholders
Bank
High Interest
Keep informed
Loyal customers
Most suppliers
Most employees and minor directors
Small shareholders
Key Players (Keep close)
CEO and Chairman
Major branded suppliers
Strategic Preseen Video Series – Now available
With Nick Best
Managing Director
Astranti Financial Training
Strategic Review - all subjects
E3 - Full Strategic Analysis
(including a review of the models)
F3 - Financial Analysis
P3 - Risk Analysis
Most likely issues - all subjects
Strategic level guide
Examiner’s expectations at strategic level
The reasons people fail
Exam technique guide
How to prepare for strategic level
Preview the first video for free at www.astranti.com
Strategic analysis – the rational model
Business Environment
PEST
5 Forces
S W
NOW
O T
Internal
analysis
Product analysis
-Product life cycle
-BCG matrix
Next we need to analyse the current position
of the business
This helps us ensure the strategies we
decide upon are appropriate to the
business’ current position and issues
they face in the industry and more
broadly
This position is summed up in a SWOT
analysis
SWOT
Strengths
1.
2.
3.
4.
5.
6.
7.
Customer service
Product quality
Well recognised brands in local markets and
for specific products (e.g. kitchens/
bathrooms)
Large company – should be able to obtain
economies of scale in purchasing
Listed – should help raising of new finance
Profitable – helps generate more finance and
ensure dividends can be paid
Good relationships with suppliers
Weaknesses
1.
2.
3.
4.
5.
Opportunities
1.
2.
3.
4.
5.
Divest unprofitable parts of the business
Purchase of new brands
Expansion into Asia/Africa, including new
warehouses
Expand online operations
Onsell products between different brands
Confused and inefficient organisational structure.
Too many functional departments, and a two way
divisional split suggesting inefficiencies, repetition
and lack of working together
Some underperforming divisions – to be sold off, or
merged with successful brands
Weak purchase process – many underperforming
divisions came from poor purchase decisions.
No warehouses in Africa/Asia
Lack of detailed benchmarking or good performance
measurement (possibly!)
Threats
1.
2.
3.
4.
Foreign exchange
Return to recession in main countries in which they
operate
Competition – lower prices/better quality/better
marketing
Quality of products from suppliers is poor – leading
to poor customer satisfaction
Astranti T4 Courses
•
•
•
•
•
•
•
•
•
•
•
•
Detailed video exam guides
Full video debrief of the preseen
2 full day live masterclasses
 The exam and marking criteria
 Prioritisation of Issues – they new key skill at T4
 Preseen analysis and discussion
 How to pass the T4 exam
 Industry analysis
5 full mock exams
 Marking and personal feedback on 3 mock exams
60 industry examples to use on exam day
3 mini-mock exams
 Detailed feedback on 2 mini-mock exams
Detailed course notes
Calculations e-book to practise calculations questions
Ethics e-book – ethics is a guaranteed 10 marks at T4!
Private forum:
 debate the case with others
 focused tutor support
Ongoing e-mail support
Progress reviews
 Keeping you on track for a pass
“Hi Nick,
I passed with 62% - huge
relief.
Thanks again for your
support – I’m relieved I
stumbled across you before
signing up with one of the
mainstream training
providers.
Kind Regards,
Marc”
Marc Thomas
Passed September 2011
“I could not recommend this
service strong enough and
honestly feel this was the
reason for my successful
pass”
Paula Roberts
Passed November 2009
PEST analysis
Political/
Legal
Economic
• New laws on – Health and Safety of staff, Product safety
• Political uncertainty in overseas markets could threaten some markets
• Worldwide economic downturn now ending – opportunity to grow
• Exchange rate impact as overseas operations
• Interest rates likely to rise over next few years – may make borrowing
more expensive
• Trend towards DIY/renovations of houses – likely to increase once
Social (inc economies recover
sustainabil
• Increasing customer awareness and focus on CSR, ethics and
ity)
sustainability – important P Plc operate ethically.
• New technologies in distribution and sales will be key to continued
Technologi efficiencies
cal
• Increasing trend towards online sales – important P Plc have addressed
this issue in their various markets
5 Forces Analysis
•
The 5 forces analysis enables the analysis of the industry according to a
range of key factors affecting that industry
•
Each force can be given a strength (e.g. High, Medium, Low). Where all the
forces are high, the profitability of the industry is low, and divestment may be
a good strategy.
•
The lower the forces the more attractive the industry is.
•
Companies may look at the areas where forces are high and develop
strategies which may lower these.
•
The 5 forces analysis for this industry is on the next page
 In this case the average of the forces is medium so the industry
would be deemed averagely profitable.
5 forces analysis
Factors increasing Force
Buyer Power
Medium
Supplier
Power
Low
Competitors
High
New
Entrants
Low
Substitutes
Low
Factors lowering force
• Customers can easily switch to competitors
• Lots of small customers. No particular
as products are standard (the competitor’s are
likely to be very similar)
customer can negotiate price discounts as
none as over-riding power.
• Good suppliers on long term contracts may
• Lots of suppliers (90,000) means lots of
have some power when renegotiating contract.
• Some suppliers with strong brands may have
power (e.g. ICI with their Dulux paint brand)
choice for P Plc on standard products – so
most of the time the power lies with P Plc
• Lots of small competitors in every town
• Relatively few very large providers – the
worldwide
• Some large competitors
• Products are not differentiated greatly so
easy for customers to switch
direct competitors of P Plc
• Easy to enter this market as products easily
• A mature market that is unlikely to attract
sourced
significant new players to the market
• Main substitute is going without where there
• Very few substitutes for most products (e.g. if
is a choice (e.g. during a recession customer
may just choose not to have a new kitchen or
bathroom)
you need a new tap there are few alternatives)
• P Plc provide all alternatives so are at little
risk of not providing most substitute products
Strategic analysis – the rational model
Next we need to analyse the strategic options, and make a
conclusion on the way forward for the business
S W
NOW
O T
Business Strategy
Generic strategies
Ansoff’s matrix
Method of growth
FUTURE
Mission &
Objectives
The usual approach to defining a business strategy is to begin with a
definition of the generic strategies, followed by analysing options in
Ansoff’s matrix, looking at how these might be implemented with the
‘Methods of Growth’ and then deciding upon a final strategy
Opportunities and Threats
Products/Generic Strategy
Products
Generic Strategies
• Most products in the maturity
phase of the product life cycle.
Most are likely to be cash cows
generating ongoing revenues –
although there may be the
opportunity to review product
profitability to examine the product
range in more detail and divest
unprofitable products.
BCG/
Product Life
Cycle
• Products are standard so their
may be few opportunities for
significant product innovation
• Not followed by P Plc
Cost leadership
• Quality is key for P Plc
• Customer service is their key
Critical success factor
Differentiate
•Wide product range providing
• Broad focus used to a very wide
virtually all customer needs
customer base of consumers and
builders throughout the world.
Focus
Ansoff’s Matrix and methods of growth
•
Ansoff’s matrix enables the generation of strategic options.
•
Those you’ll find in my analysis over the page are just ‘options’, not my
recommendations.
•
You might like to add your own options
(1) Based on your own ideas to take the business forward
(2) Based on those in practise exams you undertake
•
The final stage is then to decide on the methods which the organisation can
use to take the options (as generated in Ansoff’s matrix) – again these are
just possibilities at this stage
Ansoff’s Matrix and methods of growth
Existing Market
• Divest unprofitable products and
New Market
• Africa and Asia expansion,
brands
• Continue to improve customer
Existing service and quality to retain new
Product customers
• Increased marketing to attract new
customers
• Brand consolidation
including new warehouses
• Other regions where they do not
have a presence e.g. Russia, Brazil
Possible product expansion into:
• Gardening/Plants
• Lighting
New
• Furniture
Product • Carpets
Potential to onsell P Plc products
within each brand e.g. kitchen retailer
starts selling bathroom products
• Vertical integration – e.g. buying a
manufacturer (unlikely as they have
previously moved away from doing
this)
Methods of Growth
Internal Development
• Store growth of current brands
• New warehouse
• Ongoing efficiencies
• Significant part of growth strategy over recent years. Further
Acquisition
opportunities to expand by acquisition may present themselves,
but care needs to be taken about the price paid and
appropriateness of the company due to previous errors having
been made.
• Possible joint ventures in countries where little market knowledge
Joint Venture
Divest
e.g. China
• Unprofitable brands
• Unprofitable products
More analysis of brand and products is needed.
Defining a business strategy
•
On the following page you will find my recommended strategy for
the company.
•
Remember that this is my view and is not a definitive answer
•
Also remember that in the exam, you are NOT expected to define a
way forward like this – you MUST deal with the unseen issues and
only those issues
•
However, dealing with those issues in light of a strong logical
approach to how the business should be taken forward can help you
make a strong argument in your recommendations.
Nick’s Strategies going forward
• Continue with the successful areas of the business
 Strong, profitable brands
 Existing wide product ranges
 Take further purchase opportunities as they arise
• Clear generic strategy
 Continue to develop excellent customer service and retain high product
quality to cement differentiated position
•
Structural review




Remove current two divisional split
Fewer functional areas
Regional divisions
Merge brands where significant links so all part of coherent
structure
 Retailers report to retail manager not warehouse manager
• Ensure half board are NEDs and they have power, through a review
of the role of the current executive board
Nick’s Strategies going forward
•
Continued organic growth in existing markets
 Expand retail outlets of successful brands
•
Product and brand profitability analysis
 Divest unprofitable products or brands or consider
merging brands within profitable groups
•
Wider expansion into new markets through acquisition –
particularly high growth markets such as China, Russia
and Brazil
 Including analysis and purchasing of new warehouses.
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So that’s what I would do. I’m sure you’ll have your
own views. Just remember not to hold onto these
too tightly in the exam – you must primarily deal
with the unseen issues!
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