CORK INSTITUTE OF TECHNOLOGY
INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ
Semester 2 Examinations 2016
Module Title:
Integrated Case Study
Module Code:
MGMT7042
School:
Business
Programme Title:
Bachelor of Business in Management (ACCS) – Year 3
Programme Code:
BMNGT_7_Y3
External Examiner(s):
Internal Examiner(s):
Mr Aidan Walsh
Mr B. Vallely
Instructions:
Answer any FOUR questions. All questions carry equal marks.
Duration:
2 Hours
Sitting:
Semester 2 2016
Requirements for this examination:
Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the
correct examination.
If in doubt please contact an Invigilator.
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Hair Care Ltd
Sam and Annabelle Burns own and manage the firm Hair Care Ltd, based in the Cork, Ireland. The
firm was formed in 2002 when Sam and his wife re-mortgaged their house and borrowed heavily
from the bank to buy out the company from a conglomerate organisation who were disposing of noncore businesses. Sam had been a senior salesman with the hair-care subsidiary of the conglomerate.
This subsidiary bought hair care products, mainly small value items and consumables – scissors,
brushes, combs, hair nets, curlers and hair driers, from manufacturers and resold them to wholesalers
and large retail chemist chains within Ireland, mainly for use in hairdressing salons. The new
business has continued in this direction. The manufacturers are almost entirely non-Irish suppliers,
many based in Hong Kong but with manufacturing facilities in mainland China, Taiwan and
Malaysia. However, about 30% of the products are sourced in Europe – Italy and Germany
predominantly.
The company has met with success very quickly and the initial loans have already been repaid ahead
of schedule. The company now owns the freehold of a large warehouse/distribution centre, which is
five times the size of the original depot, leased when the company first started trading five years ago.
Sales revenue, now in excess of €5million, has increased by more than 50% each year and shows
little signs of slowing down. Despite this apparent rapid growth Hair Care Ltd only accounts for
about half of the current market, leaving some potential for growth. The company is run cost
effectively, with minimum staffing. Sam, as Managing Director is solely concerned with the
marketing side of the business. He spends most of his time in the selling role and in customer care,
which he rates as a major contributor to the company’s success. The only other key manager is his
wife who is responsible for managing the warehouse staff, arranging distribution, general
administration and financial management. The company started with six employees, in addition to
Sam and Annabelle, and now has 15. Staff rarely leave the company. The staff is almost entirely
employed in the distribution and packaging function, although there are two other sales people apart
from Sam, but they only deal with the smaller buyers. With the continued growth in sales revenue, it
is inevitable that the number of employees will have to increase. It is expected that there will have to
be a total of about 30 staff, all non-managerial, in two years if sales continue to increase at the current
rate. The success of Hair Care Ltd can be accounted for by a number of factors. Sam is a very good
salesman who is responsible for looking after all the major accounts. He is popular and much of the
business is built on his personal relationship with the key clients. There is a considerable amount of
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customer loyalty which is mainly attributable to Sam, and both he and his wife are always accessible
to customers and they go out of their way to provide a first class service. Even on vacation the two
owners are in daily contact with the office. The company has been able to manage its purchases
wisely. Most of the products, being purchased abroad, require payment in a foreign currency. Hair
Care has been adversely affected from the relative weakness of the euro on international currency
markets. Although most of the products sourced in the Far East are priced in US dollars, the relative
strength of that currency has enabled Hair Care Ltd to negotiate lower purchasing prices. However,
it is questionable as to how long this situation concerning foreign exchange can be held. The
situation may change should the United Kingdom leave the European Union.
Sam has also developed strong links with his suppliers and he has, until recently, attempted to trade
with only a few so that his lines of communication and control are kept as simple as possible. Most
of his current suppliers have been with him since the start of the company in 2002. This has provided
the company with reliable and good quality products. In fact Hair Care Ltd often has exclusive
access to certain products. For example, it has the sole rights to distribute an Italian hair-dryer which
is generally recognised to be the best on the market. This product strength has enabled the company
to build on the customer loyalty. However, it is inevitable that as demand has increased, existing
suppliers have not been able to keep up with the necessary volumes and Sam has had to look for, and
buy from new manufacturers.
The company has benefited from a period of relatively steady growth in the economy and even in the
current economic downturn Sam has argued that demand for hair care products is usually recessionproof. Furthermore, Hair Care Ltd has currently no near competitors. Many of the small competitors
in the wholesale market place have chosen to concentrate on other areas of the hair care business –
salon furnishings and the supply of cheap, low-value items such as towels, razors etc, leaving much
of this basic business (sales of other relatively low-value and mainly disposable products) to Sam’s
company. Additionally quite a number of the small firms have even left the market. All this has
helped to contribute to the overall growth rate of Hair Care Ltd. There are some major international
companies who make shampoos, conditioners and other cosmetic type products who also buy-in
consumer hairdressing products such as the ones sold by Hair Care Ltd. They then sell these mainly
to the retail trade for domestic use by consumers and not directly to the hairdressing salons as does
Hair Care Ltd. Furthermore, these are large companies and Sam believes that they do not currently
see his company as a major threat.
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The company has registered a brand name for its main products, which it re-packages, rather than
using the individual brands of the original manufacturers. This has enabled Hair Care Ltd to generate
even greater loyalty from its customers and often to obtain a price premium from these products.
Sam believes that part of the company’s success stems from the fact that he has an organisation with
minimal administrative overheads. He outsources all of his products, adding value mainly through
branding and the maintenance of customer care. He believes that strategy is not mainly about beating
the competition but in serving the real needs of the customer. The company has also been able to
develop a strong relationship with the country’s leading retail chemist chain, providing it with good
quality, low-cost disposable products such as hair nets and brushes to be sold under an own-brand
label. Although the margins are inevitably small, the volumes involved more than compensate for
this.
The company has had to incur increased investment as a result of the large growth in sales revenue.
The building of the warehouse, the increased inventory-holding costs, capital expenditure on items
such as computing systems, fork-lift trucks and automated inventory control and retrieval systems
could not be financed out of current earnings, but the company’s bank was only too ready to lend the
company the necessary money considering that the original loan had been repaid ahead of schedule.
All the success which Hair Care Ltd has achieved has not diminished Sam’s appetite for growth. He
now seems to be driven more by seeking power and influence than acquiring wealth. He questions
the ability of the company to continue its current growth in the prevailing environment and therefore
he is looking to replicate the successful formula by entering the US market. He realises he will
probably have to appoint a project manager to spearhead this strategy. He has asked you to provide
some options for him to consider.
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Details of Performance of Hair Care Ltd to 31st March 2013 – 2016
Table 1:
(unless otherwise stated, figures are in €000)
2013
2014
2015
2016
€000
€000
€000
€000
Sales revenue
2,300
3,500
5,010
7,500
Cost of sales
1,450
2,380
3,507
5,250
Marketing costs
200
250
290
350
Distribution costs
300
400
430
500
50
55
80
120
0
80
220
700
Operating profit
300
335
483
580
Accounts Receivables/Debtors
200
450
600
850
Number of suppliers (actual)
15
20
30
50
Range of products (actual)
35
85
110
130
Accounts Payables
190
320
490
790
Inventories
230
400
700
1,400
50
1,500
2,700
6.300
13.0
9.6
9.6
7.7
Administration
Interest payments
Non-current assets
Return on sales revenue (%)
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Answer any FOUR of the following questions relating to Hair Care Limited.
(All question carry equal marks)
Acting as an advisor to Hair Care Limited, prepare a report for Sam & Annabelle Burns which
considers the following issues:
1)
Calculate the working capital cycle for each of the two years ended 31st March 2015 and
2016 and assess the working capital management of Hair Care Limited as at 31st March 2016
(assume 365 working days per year)
2)
Explain the key elements of the successful marketing mix employed by Hair Care Limited.
3)
Evaluate the supply chain management of Hair Care Limited
4)
If Hair Care Limited was to consider expanding business into the US market using a Project
Manager. Prepare a draft Job Description for the post of Project Manager.
5)
Recommend an appropriate organisational structure for the organisation.
6)
Carry out a SWOT analysis of Hair Care Limited
7)
Describe four ways that Hair Care Limited could benefit from professional Human Resource
management.
Total 100 marks
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