Draft for Comments

T4 Case study - TOPCIMA

Strategic Analysis

Papy

Nick Best
with
www.astranti.com
 Welcome Draft for Comments

Welcome to Nick Bests TOPCIMA strategic

analysis

For those of you who dont know me, Ive

tutored TOPCIMA for BPP, Kaplan, First
Intuition and Reed Business School, am
the author of the official CIMA T4 learning
system, on which I worked together with
one of the TOPCIMA examiners, and now
work for Astranti Financial Training on
their TOPCIMA Personal Coaching
Programme.

For Mock Exams on the latest case, and a

range of other TOPCIMA information visit
www.astranti.com
 Introduction to the case Draft for Comments

The supermarket industry is the focus for the latest T4 Case Study. That will no
doubt be a relief to many of you, as it is an industry which is very familiar to
us all. Weve all been to and shopped in supermarkets and have at least a
little knowledge of the competitors and their differences. This should also
make finding industry examples (necessary for the diversity marks) very
easy to find.

The case company (Papy) is a successful company operating in 8 European

countries. It is growing has strong margins, and a loyal an increasing
customer base.

The key twist this time around is the focus on sustainability, which is the
companies key weakness. It lags behind competitors in this increasingly
important area. There is a new CEO, and he is demanding a big improvement
in this area, and has employed a new director to look after this.
 Strategic analysis the rational model Draft for Comments

This analysis uses the rational planning model of strategic

analysis, summarised in the following diagram Governance
Business Environment & Ethics
PEST 5 Forces
S W FUTURE
Business Strategy
NOW Mission &
O T Generic strategies Objectives
Internal Ansoffs matrix
analysis Method of growth
Stakeholder
Product analysis Mapping
-Product life cycle
-BCG matrix
 Strategic analysis the rational Draft for Comments
model

Governance
& Ethics
The first stage of
analysis is to ensure we
fully understand where FUTURE
the organisation is Mission &
heading, along with its Objectives
approach to meeting
stakeholder needs.
Stakeholder
Mapping
 Mission Draft for Comments

The mission statement sets the direction and tone of the organisation, and
guides strategic decision making. As is the case with most T4 Case Study
exams, we are not given the companys mission statement.

If it were to have one, we could perhaps conclude that it might focus on

good customer service, keeping costs low, looking after employees, and
delivering strong returns for shareholders.

Going forward, it should also include a focus on the CSR particularly

sustainability.
 Draft for Comments
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 companys planning
approach, which could be the case here, as their has been a lack of strategic
focus for the last 2 years due to the ill-health of the former CEO.

We are also told very little about how director and staff performance is measured
and rewarded. Again you would assume they do have motivating performance
targets but look out for evidence in the unseen for a weakness in this area.
 Governance Draft for Comments

Papy have 7 Non-executive Directors good, and aligned with good

practise under the combined code
Non-Executive Chairman some independence on the board, and
separate from the CEO we like this!

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 Draft for Comments

Ethics is 10 marks in the exam and hence is a very

important area

Lack of clear strategy and integrated approach

CSR weak according to new CEO who is keen to
improve this

High free plastic bag count compared with competitors

High carbon emissions high compared with competitors

New Director taking charge of this area

 Ethics and CSR - continued Draft for Comments

Some progress recently made:

Reduced waste

Reduced energy consumption 911 (2008) to 858 (2010)

Less plastic (plastic bags) from 744 (2008) to 549 (2010)

Carbon emissions 1,109 (2008) to 1,042 (2010)

More fair trade products

Fish responsible purchasing practises

90% suppliers treated with respect

Suppliers inspection on working conditions

Employees valued, training

Customer healthy eating ranges expanded 100% nutritionally labelled

Press statement (appendix 5) Welcomed but progress must now be made

Critical area in this case study

 Stakeholder mapping Draft for Comments

Doing a stakeholder map as an appendix in the exam is almost always

something which is useful to do. An appendix and done well will usually
gain 2 marks possibly more.

You must update the map for changes in the unseen, and add all new
stakeholders which are in your top 4 issues

Refer to your map in the main body of your text, adding a comment to say
what the position of that stakeholder on the map means in relation to this
specific issue (e.g. a key player should be involved fully through regular
meetings, and incorporating their views into the final decision)
 Stakeholder Analysis Mendelows Matrix Draft for Comments

Low Interest High Interest

Minimal interest Keep informed
Most customers
Low Employees of suppliers Smaller Suppliers
Power Most employees and minor directors
Small shareholders

Keep satisfied Key Players

Governments CEO and Chairman

High
Power Some major shareholders Major shareholders
Major branded suppliers (e.g.
Unilever, Diageo)
 Strategic analysis the rational model Draft for Comments

Business Environment Next we need to analyse the current position

PEST 5 Forces of the business

S W
This helps us ensure the strategies we
NOW decide upon are appropriate to the
O T business current position and issues
they face in the industry and more
Internal broadly
analysis
This position is summed up in a SWOT
Product analysis analysis
-Product life cycle
-BCG matrix
 SWOT Draft for Comments

On the following page youll find my SWOT analysis.

Remember that you MUST do a SWOT analysis as
Appendix 1 in your answer.

You will score 1 mark in the technical section for this, and
up to 3 further marks in the application section - if done well.

You must update this SWOT for unseen issues (underline or

bold these in your exam script), and should aim to include
ALL your top 5 issues in your SWOT.

A recent CIMA student script review I read, also made it

clear that 2-3 word points in the SWOT will not score as well
as points made in more depth, so it is worth writing 5-68
words for each point in your SWOT AND aim for roughly 5
points per heading.
 SWOT
Strengths
Listed, increasing EPS facilitates raising
finance
Strong financial position = Large revenues,
profitable, stable financial position, cash
generating, increasing margins = well run
Reduced inventory levels, and good IT control
Loyal customers, increasing numbers
Mix of supermarkets and convenience stores
Experienced Chairman
New IT solutions improve efficiency/cut costs
order tracking, 70% linked to suppliers,
investment allows for growth
Continued growth in stores (particularly
convenience)
Share scheme motivation of staff
Opportunities
Expansion outside Europe
Expansion into other European countries
CSR improvement re branding
Draft for Comments
Weaknesses
CSR lack of overall strategy + Poor carbon emissions
vs competitors, high plastic bags (some improvement
in last year)
Lack of CSR reporting no EMS
Lack of leadership due to ill-health of old CEO for 2
years + new CEO lacks industry knowledge
Small number of weak convenience stores
Few large supermarkets opened
Paying suppliers earlier (less free finance)
Much smaller than competitors 1 and 2 difficult to
match their buying power re prices
Threats
Very competitive market price competition (competitor
2 appears to be growing due to lower prices), new store
locations, etc
Do not achieve CSR goals re reputation in market
One off issue affects reputation e.g. food hygiene
 PEST analysis Draft for Comments

On the following page youll find my PEST analysis.

The PEST analysis is always an optional appendix in this exam,

although this is one of the best case studies for a long time for this
model as there are so many relevant points.

Do aim to add one or two additional issues from the unseen into
your PEST if you do one in the exam

You MUST cross reference your PEST in your script however, and
many students do not do this well. Aim to do this 2-3 times in your
script
 PEST analysis Draft for Comments

Political/ New laws on Health and safety, Carbon emissions

Legal Carbon trading schemes
Difficult economic times increases importance of price e.g. value range
Many supermarkets not adversely affected by economic downturn as
Economic food is a necessity and other products sold at the value end of the market
Exchange rate impact as overseas operations
Euro crisis uncertain impact
Trend in sustainability supermarkets slow to and some do not
Social (inc incorporate it into strategic plans (e.g. Papy)
sustainabil
ity)
Global scope for improvement in reporting sustainability
Increasing customer awareness and focus on sustainability
Technologi
New technologies in procurement, inventory management, purchasing,
will be key to continued efficiencies (Papy appear on course except in the
cal
area of environmental reporting)
 5 Forces Analysis Draft for Comments

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 Draft for Comments

Factors increasing Force Factors lowering force

Lots of competitors allows for easy switching Some loyalty most people shop in same
between competition store each week
Buyer Power
Often people choose most convenient
Medium
Buyers are small and not able to negotiate
special terms individually
Large brands can dictate terms as Many suppliers of undifferentiated products
Supplier supermarkets are forced to stock these items (e.g. Fruit, Milk, Own Brand manufacturers)
Power have little power
Medium/Low

Many large international competitors

globally recognised brands
Competitors
Wide coverage international, large and
High convenience
Price is key to being competitive
Global competitors do enter local markets Lots of competition they have economies of
New using organic growth scale this deters new entrants
Entrants
Difficult to get planning permission on new
Low large stores

Food is a necessity
Substitutes Clothing a necessity
Low
 Draft for Comments
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 FUTURE
Business Strategy
NOW Mission &
O T Generic strategies Objectives
Ansoffs matrix
Method of growth

The usual approach to defining a business strategy is to begin with a

definition of the generic strategies, followed by analysing options in
Ansoffs matrix, looking at how these might be implemented with the
Methods of Growth and then deciding upon a final strategy
 Opportunities and Threats Draft for Comments
Products/Generic Strategy

Products Generic Strategies

Wide range of products- VITAL to success in this industry

food<75% Most competitors must keep costs
Branded, Own Brand, Value low
BCG/ range Papy may find it difficult to
Product Life Value range important in difficult Cost leadership compete on price long term against
Cycle economic times much larger competitors with high
Convenience vs large Economies of Scale
supermarkets Papy are potentially Stuck in the
Middle
Growing convenience stores Products are mostly generic
hard to differentiate
Some competitors such as M&S
Strengths Differentiate and Waitrose operate in the higher
quality area
Papy do not appear to have clear
differentiating factors
Convenience stores increasing
Few new large stores focus
Limited economies of scale vs
Weaknesses larger competitors Focus
 Ansoffs Matrix and methods of growth Draft for Comments

Ansoffs matrix enables the generation of strategic options.

Those youll 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 Ansoffs matrix) again these are
just possibilities at this stage
 Ansoffs Matrix and methods of growth Draft for Comments

Existing Market New Market

Value chain review remove non- Expand into new overseas markets
value adding activities cost South America, Africa, other
reduction European countries
Improve CSR
Existing
Product New technologies increase
efficiencies + reporting (EMS)
Continue focus on customer
satisfaction and service, and
achieving efficiencies
Some uncertainty exactly what their Food production
product range incorporates but could Logistics (e.g. to competitors or
expand wider like Tesco into areas other retailers)
such as financial services Other retail areas e.g. Coffee
New
Product shops, PC sales
 Draft for Comments
Methods of Growth

Cost reduction
Internal Development New products
New markets
Competitors
Small companies
Acquisition Suppliers
Companies which are in new markets e.g. India, China

New markets (e.g. India, China)

Joint Venture Some new products e.g. Coffee chain within large stores

Unprofitable stores
Divest Unprofitable profits lines
 Draft for Comments
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.
 Nicks Strategies going forward Draft for Comments

Continue with the successful areas of the business

Keeping costs low

IT investment (inventory, ordering)

Customer service and satisfaction

Clear generic strategy undertake strategic review of existing

products and markets perhaps with a focus on convenience stores
which is a growing area with higher margins

Continued organic growth in existing markets consider profitability

and viability of growth in areas convenience vs large stores

Wider expansion into new markets through acquisition particularly

high growth markets

CSR strategy devised and implemented, with clear targets and CSR
reporting
 Nicks TOPCIMA Coaching Programme Draft for Comments

So thats what I would do. Im sure youll have your

own views. Just remember not to hold onto these
too tightly in the exam you must primarily deal
with the unseen issues!

Remember to use www.astranti.com for more

specific guidance towards the exam, and if you
dont pass this time, perhaps consider working
with me in my personal coaching sessions for the
next sitting.