Professional Documents
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Student name
Shobana Ramamurthi
Student number
(starts with 00xxxxxxxx)
0061020029
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MGT8022_2014_A1
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Overall Results
* Total Assessment Mark (TAM)
Ways to improve:
Shobana Ramamurthi
Email: U1020029@umail.usq.edu.au
Signature:
Shobana Ramamurthi
Date: 14-Apr-14
Disclaimer: Much of this information has been sourced from internal company information and systems.
This information is not to be made public for confidentiality reasons.
1.
2.
Business Case
Yatsal currently faces multiple business challenges which makes them uncompetitive in their
market segment. The purpose of this business case is to provide necessary information and
justification around the proposed project which will address issues around Yatsals product
development, sales and marketing processes to make it competitive among its peer segment in
the market.
Business Problem
Business problems faced by Yatsal have been identified and broadly divided into following
categories
Product Development
Marketing
Sales
Product Development
Yatsals product line categories personal, pets, cleaning and stationery are the weakest
among their 23 product line categories. New product planning is skewed towards short term and
there are no long term strategy, roadmap and research and development efforts in place. The
product manager currently decides on each new development without consultation with other
department heads or sales personnel. This was the case with a newly launched product StickFx.
Current state of new product development is limited to only certain categories like electrical,
hardware and craft, however in categories like kitchen, stationary and pets there is very little
developments.
Marketing
Yatsals marketing department currently operates as a function of the business with an internal
focus instead of external customer focus. Marketing efforts are reactive and marketing control
processes are not effective. The current marketing communication information is not available
until after the products come into stock so it can take some time for the sales personnel to learn
this information and pass it on to the retailers. Many competitors in the industry carry one or
more of the category solutions that Yatsal carries. Some of the competitors have a better
distribution model that is more efficient, smaller minimum orders and more areas for FIS
delivery areas. Competitors could move to a similar corporate strategy focus on specializing in
category solutions. There are price wars from the competition in competing categories.
Competitors could have a more advanced reordering model and distribution network that would
enable them to have the right products in at the right time and in the right quantities.
Sales
Yatsals current sales processes are not very effective as the roadshow program is the main
selling tool. The effectiveness of the roadshow program is limited as information such as retailer
historical information, RRPs (Recommended Retail Prices), clearance prices and the
classification of products essential, core and range are inadequate and not shown during the
roadshows. Planning or preparation for the sales process is underutilised due to the complexity of
obtaining data. Yatsals current CRM system is very basic and relies on the sales personnel
updating it manually at the end of each sale and after contact with each retailer. There are high
number of out of stocks due to an ineffective just in time ordering model in the buying
department. There are delays in processing, picking and packing orders during peak times. The
pricing of essential products are uncompetitive due to a cost plus margin pricing strategy model.
The ordering tools like website and roadshow programs do not offer enough information when
promoting the products. Based on the consumer value assessment for Yatsal and the major
competitors for their stick on hook ranges, the consumers rating for Yatsals indicate that their
rating is lower in Handy Products, is not cost effective, hard to understand instructions in the
package and longer time to fulfil orders.
Benefits
Yatsals business objective for the year is to achieve a sales target of AUD $20 Million which is
20% growth target from last year, expand in to new territories and industries and expand their
new StickFx Product Line to 120 products from current 36. The proposed changes will help
increase the sales and in turn achieve sustainable growth of 20% year on year, expand into new
territories that are not already covered as well as increase the market share through increased
number of IDV retailers carrying Yatsal products thereby increasing the customer reach. The
improvements in marketing operations will help to get the new products in to shelf faster, which
will result in quicker order fulfilment
Risks
Following are the risks assessed as part of the proposal. There is a fierce competition in the IDV
industry and competitors are scaling up faster than Yatsal and launching new products. Hence
there may not be sufficient time for Yatsal to revamp its growth strategy. The price to cost
margin for Yatsal is high and the pricing needs to be made competitive for comparable products
in the market. However such pricing differentiation may not help in achieving growth targets
unless volume can be substantially increased. Due to technical revolution, Yatsals stationery
products have been facing a year on year decline of 5% in revenue due to replacement with
online products. Hence expansion in stationary product lines may not yield desired business
benefits and there is a pressure to expand new product lines in the market to grow the business
and gain market share. Yatsals business objectives and sales goals are aggressive and the
timelines are ambitious to achieve them. There will be costs involved in engaging the external
consultants and internal resources utilization for project management and landing of deliverables.
Hence the total cost is expected to be around 330,000 AUD. The benefit expected is an increase
of 3.5 million AUD in sales.
Recommended Solution:
Product Development - Innovation in Product and Packaging:
Implementing a quarterly product line launch plan throughout the year, subscribing to
various market research journals to keep abreast of the trends in their industry, implementing a
framework mechanism for capturing customer feedback (Eg: Customer Satisfaction Surveys) and
ensuring the voice of the customers feedback in to the product design and development process.
All of these will ensure there is innovation done constantly in the product and packaging of
Yatsals product lines, to continue maintain the high level of product quality and packaging and
look for areas to innovate them to stay competitive.
Marketing - Expanding the new StickFX product line to 120 products:
To expand the market share as fast as possible for current stores, Yatsal is to use existing
retailer relationships which have been built up over time through purchasing other product
categories, as a platform to introduce the StickFx product line. For new markets segments
across many geographical locations the retailers to initially focus on to achieve rapid market
share are the ones already purchasing from other competitors these categories; Hardware,
Gardening, Auto or Stick on Products. Plan to expand the product lines into new territories
(areas not already covered) WA, NT, TAS, NZ and Pacific Islands, to increase the number of
IDV retailers carrying Yatsal Products to 1500 and stores to 2500, to increase the number stores
from other industries sold into 10 new distributors, 100 new hardware and 100 new food stores
and to reduce the time it takes to bring the product to shelf for interstate retailers.
These strategies and tactics will ensure StickFx achieves the required growth and
market share expansion which will contribute to the overall objective of $20 million dollars in
sales and also expand the product lines.
Sales - Differentiated Pricing Strategy for Yatsals Products:
The differentiated pricing strategies can be implemented by making the wholesale prices
to be better than major competitors, wholesale prices costing structure on a cost plus margin
basis, Include RRPs (Recommended Retail Prices) processes and programs to ensure that the
retailers have a point of comparison as the nearest competitive offer in the market place and to
have a competitive price offer for comparable competitor products. As part of sales processes,
ensure that at any one time to have out of stock less than 5% of Essential and Core and 10% of
Range products. This is to assure that the products are always stocked to demand to promote
sales.
Critical Analysis of the Business Case
The subject of critical analysis in this document is the business case prepared for the project to
address the issues impeding the growth of Yatsal. The purpose of the business case is to
understand the business need of the project and assess whether the approach and the investment
in the project is going to yield the necessary benefits. This critical analysis reviews each of the
business case sections and assesses whether it satisfies the requirements of a business case such
as valid benefits to costs in order to proceed with the necessary investments.
benefits,
risk,
timescale,
The business case prepared for Yatsal clearly does not cover the impact on operations as well as
organizational capability to deliver the project outcome. In addition, among the areas which have
been covered, there are multiple areas where there is not enough reasoning to substantiate that
the steps recommended will indeed result in necessary benefits.
Business Problem:
In this section, problems have been identified in three different areas namely product
development, marketing and sales. However the methodology that has been used to identify the
problem areas has not been disclosed. This is a fundamental flaw as the issues identified may not
be the priority items which have to be addressed and may not contribute to the expected
growth. While there is a mention that there are no new product developments in Kitchen,
stationary and pets, the new product which has been launched StickFX is in the household
category. In the marketing section, there is no clear elucidation of the problems faced by the
department. There are lot of loosely coupled sentences about how competitors may be (or) are
different than Yatsal. There is no clear explanation of how the issues in marketing department
are dragging down the growth of Yatsal. In the sales area, few issues around systems and sales
process have been identified. Overall, the identification of problems needs to be more structured
(eg. through interviews, root cause analysis etc) and a clear link needs to be established between
the problems and impact they are having with respect to bottom-line of the company.
Benefits:
In the Benefits section, the high level benefit in terms of sales number i.e., 20% growth has been
provided. However in terms of the benefits in other areas like faster turnaround time, quicker
order fulfillment, there is no proper quantification. There is also no clear definition of how
getting the new products in to shelf faster as well as quicker order fulfilment will contribute to
the overall business growth. The statements are very subjective and unless proper quantitative
numbers are assigned (e.g., order fulfillment within x number of days which is better/equal to a
competitor), it is difficult to assess the benefits of these initiatives.
Risks
One of the key risks of any project is the ability of the organization to adopt the change. There is
no indication of whether the changes suggested have been discussed with all the stakeholders.
Moreover, there is an expectation of 20% commitment from 3 people in each of the departments.
While there is a mention of increase in sales staff, there is no proposed increase for product
development and marketing. While there is no indication of the current utilization of resources in
these two departments, it is safe to assume that with an additional objective of 20% growth year
on year, these departments will be hard pressed to delegate one of their resources to the project
tasks. The second risk which is not mentioned is the risk on existing operations due to the
changes in the process. Recruitment of additional resources in the sales department may not
immediately provide benefits as these people have to ramp up and blend into the organization
during a time when the whole organization is itself undergoing change. With the twin pressures
of stiff growth objectives and changes in the organization, there has to be an effective HR
mechanism to address the concerns of the organizational personnel. Overall, the risks associated
with multiple changes in the organization amidst ambitious growth targets have not been clearly
highlighted.
While a detailed project plan need not be provided as part of the business case, key milestones
should have been mentioned so that there can be proper evaluation and prioritization of the tasks.
Without the milestones, the timeline of one year to achieve all the changes seems
farfetched. While a cost of 330K AUD to achieve a growth of 3.5 million AUD seems very
attractive, the cost seems to have only considered personnel cost and not any increases in
operational costs due to changes in the process. For example, a quicker turnaround time to fulfill
orders can be probably achieved by having robust CRM system in place. This needs sufficient
investment and is not part of the costs. Moreover, such changes to the system will also have a
definite impact on the timelines. In addition, the complexities around introducing such systems,
usage & training, increases in resources to maintain the systems have not been factored in the
costs and timelines.
Recommended Solution:
Recommended solution seems to have taken the path of organic increase and diversification
within the same group of products. However there seems to be no mention of any analysis done
regarding how the different product segments which have been targeted for growth are identified,
how they fare with their competitors and how expanding into different geographies are going to
contribute towards the growth. The plan does not seems to have taken the concerns around
decrease in revenues in certain segments (e.g. 5% in the stationery segment). Unless the
management has a plan to produce better products than its competitors and cannibalize their
market share, there is no real reason to believe that expansion into this segment is going to yield
any growth benefits.
References:
a) Internal Systems:
a. Attach Program - for Sales Analysis, customer invoice and payment records, customer and
delivery information, cost prices, inventory levels etc.
b. Sales Matrix Program - for product and category sales info at a Customer, Account Manager
and Product level by periods.
b) Database: CRM database for all customer contacts, visitations, average orders, preferences
etc.
c) Internal Source documents: Company Sales and Induction Manual, Operations Manual,
Marketing brochures and Pricelists from company and competitor
a)
World link for Law 2013, Labour and Employment law data for Australia (Victoria),
b)
< http://australia.gov.au/topics/employment-and-workplace>
c)
<http://www.cf-sn.ca/business/business_plans/research.php>
d)
<http://www.ibbacademy.com/pestand%20swotanalysis.htm>
e)
<http://www.ibbacademy.com/pestand%20swotanalysis.htm>
f)
Appendix:
Business Case: