HKICPA QP Case Analysis Competition

Transcription

1 HKICPA QP Case Analysis Competition Team number : 18 Team Leader : Ng Wing Chong Cynthia Team Member : Ng Ho Ching Ng Wing Yin Claudia Yip Chung Kin Calvin

2 10-Year business strategic plan for Charlottes Ltd 1. Strategic Planning Process 2. Strengths of Charlottes strategy 3. Financial analysis 4. Recommendations for future development 5. Conclusion

3 SWOT Analysis Strengths: 1. Total Woman Concept 2. Strong Experience in the apparel industry Opportunities: 1. Busy lifestyle of businesswomen 2. CEPA Weaknesses: 1. Limited production capacity 2. Inadequate distribution outlets Threats: 1. Possible introduction of GST 2. Increased competition and globalization effect

4 Developing appropriate strategies Ansoff Matrix Market Penetration Market Development Product Development Diversification More distribution outlets in HK, promotional events, CRM & online wardrobing Setting up overseas self-managed shops, selling franchises & taking part in HKTDC exhibitions Acquiring licensed brands from overseas, producing crossover products with other brands Clothing/ wardrobing service for men or children & the set-up of a beauty centre

5 Developing appropriate strategies Porter s generic strategies Differentiation focus strategy Differentiation: competitive advantage over its competitors Focus: targets at a narrow segment and tailors its strategy to serve them to the exclusion of others

6 10-Year business strategic plan for Charlottes Ltd 1. Strategic Planning Process 2. Strengths of Charlottes strategy 3. Financial analysis 4. Recommendations for future development 5. Conclusion

7 2. The strengths of Charlottes Total Woman Concept 1. Total Woman as a new concept 2. Personalized marketing 3. Low distribution costs

8 Survey 100 working women in Central from 29/9 to 10/10 Based on two main questions: (1) How do they view the wardrobing service? (2) What do the ladies value the most?

9 Survey results Price 22% What Customers Value most others Service 3% 11% Quality Quality 64% Price Service others Dislike 10% Views on wardrobing service Neutral 8% Support Dislike Neutral Support 82%

10 10-Year business strategic plan for Charlottes Ltd 1. Strategic Planning Process 2. Strengths of Charlottes strategy 3. Financial analysis 4. Recommendations for future development 5. Conclusion

11 3. Financial analysis Assumptions: 1. Economic downturn in Same market segment 3. Similar market environment 4. Same treatment of depreciation charges and inventory costing 5. Tax and interest rates are assumed to be the same

12 External comparison (1) Profitability Analysis 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 49.8% MJ Fashions The Ascot Adrianne Keefe Peter Fang Charlottes 33% 27.5% Operating profit / operating assets operating profit / sales

13 External comparison (2) Efficiency 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Production Cost (as % of Sales) MJ Fashions 3.8% Production cost (as % of sales) Charlottes Ltd 55.7% Industry Average 55.68% The Ascot Adrianne Keefe Peter Fang 2.4% Charlottes 1.8% Production overhead

14 External comparison (3) Asset Management MJ Fashions The Ascot Fixed Asset Utilization (per 1000 of sales) Adrianne Keefe Peter Fang Charlottes Plant and Machinery Vehicles

15 Income statement analysis Profit Margin Projected Sales $48,940,000 Projected Operating Profit $23,576,300 Projected Profit Margin 48.2% Actual Profit Margin 27.5% Operating cycle 35 days to produce and sell 60 days credit terms for loyal customers A total of 95 days

16 10-Year business strategic plan for Charlottes Ltd 1. Strategic Planning Process 2. Strengths of Charlottes strategy 3. Financial analysis 4. Recommendations for future development 5. Conclusion

17 4. Recommendations Our vision of Charlottes Ltd. in 10 years time: Improvement on our Value Chain 4 Southeast Asian countries VISION annual sales of $5 billion 30% return on sales Expansion through organic growth and diversification in new markets VISION

18 Recommendations Porter s Value Chain Model Inbound Logistics Operations Outbound Logistics Marketing & Sales Services MARGIN Firm Infrastructure Human Resources Management Technology Development Procurement

19 Phase 1 (Year 1-5) Outbound logistics Operations Procurement Increase distribution outlets, online wardrobing service Increase production capacity by outsourcing Search for new suppliers Inbound logistics Marketing and Sales New warehouse required Train new and current wardrobe consultants, marketing campaign (ongoing)

20 Phase 2 (Year 6-8) Outbound logistics Operations Human Resources Management Firm infrastructure Expand into the China Market Increase production capacity by renting a factory of sq.ft. at HK$1.5/sq.ft. preferably in GuangXi Span of control management Departmentalization

21 Phase 3 (Year 9-10) Outbound logistics Operations Technology development Export to Southeast Asian countries (China, Singapore, Thailand & Malaysia) Employ designers in Southeast Asian countries Implementation of Enterprise Resource Planning system

22 Why these four countries? Financial indicators in 2005 (The World Bank Group) Singapore China Malaysia Thailand GDP growth (annual %) GDP (current US$) Time required to start a business (days) Average annual growth of imports 6.38% 9.9% 5.3% 4.5% billion 2.2 trillion billion billion % 15.3% 20.7% 8.9%

23 Phase 3 (Year 9-10) Outbound logistics Operations Technology development Export to Southeast Asian countries (China, Singapore, Thailand & Malaysia) Employ designers in Southeast Asian countries Implementation of Enterprise Resource Planning system

24 Beyond 10 years Charlottes

25 Contingency Assumption of 30% increase in Operating Expenses due to expansion Assumption of 15% increase in Accounting and Administration expenses Increases Year 1 Year 2 total Operating Expenses 30% per year 4,069, ,290, ,359, Accounting and Admin Expenses 15% per year 1,192, ,788, ,980, To meet unanticipated financial needs Invest in highly liquid investments 12,340,098.00

26 10-Year business strategic plan for Charlottes Ltd 1. Strategic Planning Process 2. Strengths of Charlottes strategy 3. Financial analysis 4. Recommendations for future development 5. Conclusion

27 Conclusion Vision and Mission Achieved - Further development of Total Woman Concept - Value chain improvement

28 Q & A Session

29 Appendix

30 Selecting the company s long-term objectives McKinsey and Company Matrix Categorized as a Winner due to its high market share and rapid growth rate Recommended business strategy for winners invest/ grow strongly (the build strategy)

31 Projected Income statement Income Statement Sales 48,940, less: Cost of good sold 21,196, Gross Margin 27,743, less: Operating expenses 3,130, (expenses includes selling, product related expenses) Accounting and Admin expenses 1,036, (expenses includes accounting and administrations) Operating Income 23,576,300.00

32 Age pyramid of the 4 countries

33 Projected sales

34 Prime Rate Over Time 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% Prime Rate Over Time 8% from 11/8/06 on 5.00% 7/1/05 9/1/05 11/1/05 1/1/06 3/1/06 5/1/06 7/1/06 9/1/06 11/1/06

35 External funding Bank Loans Mortgage Loans Fixed Assets Initial Public offer Bonds

36 Initial Public Offering Profit test At least HK$50 million in the last three financial years (with profits of at least HK$20 million recorded in the most recent year, and aggregate profits of at least HK$30 million recorded in the two years before that) Market cap 200 million Market cap / revenue Market cap - At least HK$4 billion at the time of listing Revenue - At least HK$500 million for the most recent audited financial year Market cap/ revenue / cash flow test Market cap at least 2 billion Revenue at least 5 million in the recent years Cash flow at least 100 million aggregate for the three preceding financial years

37 Total Woman Concept Ongoing training for wardrobe consultants - Adhere to Charlottes mission statement - High retention rate targeted Marketing programs - Social initiatives - Environmental initiatives Application for patent

38 Marketing 4Ps Product Price All 4 brands will be brought to the countries Launching of wardrobing service once retail store is opened Localized Designs Quantity discount offered to fashion houses with large quantity order Market-skimming pricing strategy Prices will be the same as Hong Kong in the long run

39 Marketing 4Ps Promotion Fashion shows Sweepstakes for free wardrobing service Sponsors celebrity as well as wellknown working women Magazine advertisements Place Major department stores Retail shops in most recognized shopping centers (i.e. Orchard Road in Singapore, Twin Tower in Malaysia and Emporium in Thailand)

40 The Total Concept Total Men Wardrobing service for a new target segment Total Kids Wardrobing service for a new target segment Total Accessories Total Wedding service Provide accessories including watches, earrings, sunglasses, etc. Wedding gowns, accessories, shoes, etc.

41 Profit margins Profit Margins 1200 Lady Missy Relax Time-out Lady Missy Relax Time-out Products

42 Contribution margins Contribution Margins 1200 Lady Missy Lady Relax Time-out Missy Relax Time-out Products