BUSINESS ORGANISATION & PRACTICE SIMULATION WORKSHOP STEPS

STEP 1 Form a Team of either 3 OR

the debate goes on forever).

5 ONLY (No even numbers or

STEP 2 YOU make your INDIVIDUAL decisions

Each individual must read the case study and rate each strategy on a scale of 1 to 5. Record your choice column provided.

STEP 3 Get together with your team and DEBATE. Make a TEAM DECISION.
For every strategy reveal your individual decision to the rest of the team then debate until the team chooses how to vote on each strategy. Record the teams decision in the column provided.

STEP 4
Vote, vote, vote... every team is asked to state their team decision. Listen to what others chose you may be surprised! The floor is then open to debate. It is the teams chance to voice their opinions, debate and defend...

BUSINESS ORGANISATION & PRACTICE, THE SIMULATION & YOU

It is important to put your academic studies into their commercial context and so BOP is for non-business students. The module helps you to understand the basics of business and understand how the business world operates. This is why the following

Page 1 of 6

simulation was developed. By working through it you gain an understanding of the different situations that can affect a business. The case study simulation is designed to help you to develop skills which are valued by employers. It requires you to use the following skills: Analysing and assessing a complex case Recalling events Problem solving Decision-making Ethics Communication, debating and defending your decisions Collaborating by working with others to achieve your goals

Simulation: The Case of Cotton-On Limited BACKGROUND

You were recently appointed a manager after joining Cotton-Ons fast-track management training programme straight from Kingston University. Cotton-On is a clothing manufacturer and retail business that used to dominate the UK market for selling cotton-based casual wear. All the shares are owned by its four of its five directors. (The Human Resources (HR) director does not hold any shares in the company business.) Its headquarters is in the North of England at York. It manufactures clothes at two factories (in Scotland and Northern Ireland). It imports high-quality raw dyed cotton from overseas. Its customers are UK1 and Ireland-based (South Ireland). At present it has no direct sales presence outside these areas. The firm owns 10 retail shops in the UK. To sell its products it advertises its them on the Internet, but does not sell them on the Web. The site directs customers to either phone-in an order, or print out and send an order form. It also sells through a 30-page mail-order catalogue. The Financial Situation: Last year its total annual sales were 60 million. This years sales have fallen for the first time ever in its businesses history to 54 million, so they are incurring a loss because their costs and expenses are greater than their income. As a result the business MUST take urgent action. The flowing is a summary of their key figures: 'million Sales Costs (*see below) Profit or (Loss) 2008 60 54 6 2009 60 54 6 2010 54 60 (6)

Costs Analysed 'million Cost of Stock

1

2008 18

2009 18

2010 20

The UK includes Northern Ireland. Southern Ireland is an independent European Union (EU) country.
Page 2 of 6

Sales and Manufacturing Costs Wages and Salaries Other Expenses Total Costs

9 14 13 54

9 15 12 54

10 17 13 60

It employs approximately 600 people of which 200 are shop staff in 10 shops; 250 are telephone sales staff at five main sites in the UK, 100 at the two factories, and the rest are sales, administrative and management staff. The five directors are paid million salary each year. Cotton-On has offices at several strategic key sites across the UK and one in Northern Ireland. The retail market is competitive, but Cotton-On has always held the largest market share. Until last year this represented 20 percent of the UK and Irish customer (by number of customers) market and is equivalent to 30 percent of the entire UK and Irish by sales revenue. An urgent meeting of the directors and managers (you included) is called to discuss the appalling business circumstances. On the agenda are three key questions: 1. Sales: Why has Cotton-On lost sales? 1a. Is it the product? 1b. Is it our competitors? 1c. Is it other factors? 2. Suggestions to reverse the loss of sales. 3. Suggestions to ease the financial dilemma. The Managing Director, Sales Director, Finance Director, Operations Director (responsible for producing the product), and the HR Director do not agree on business strategy. Their arguments divisive arguments are creating unease and disrupting staff and consequently the business. The Sales Director is determined to show his department in a good light for the benefit of the newer managerial staff present at the meeting. My Sales department offers the customer a service thats second to none. We get dozens of letters of appreciation from our customers each year. He boasts. Our customers ages range from 25-70. We sell a range of cotton clothing consisting of over 100 product lines in a huge variety of colours to suit every taste. Theyre all available through our mail order catalogue or in any one of our 10 stores located throughout the UK and Northern Ireland. The Operations Director interrupts, Mail order is out-of-date! The Sales Director responds No its not. It serves the needs of our customers. Its cheap and effective! We distribute the catalogue four times a year as an insert in several of the leading Sunday newspapers to gain the widest circulation. Customers can look at our range and phone our freephone hotline to place their orders, and to check-up on their orders progress, or the progress of returned goods. Plus, there are the retail stores. We have 10 stores nationwide across the UK and Northern Ireland. The Operations Director interrupts again, OK then, tell us what the sales break-down by product is? This business has got to know what products and colours are selling and
Page 3 of 6

whats not. The Sales Director ignores the question because he doesnt have the answer. The Finance Department havent produced the last months sales analysis. The Finance Director (in charge of a department of 25 staff), reveals, Weve had a few problems with the computers. My assistant lost all the business data before they could pass it to me when their computer crashed. The Operations Director chips in Not only that but were so slow at paying our stock and other suppliers that were being charged interest on outstanding invoices thats costing us all a great deal of money. Less profit is bad for business, bad for all of us! The Managing Director opens the floor to debate, We need to come up with information on why were losing sales and whats happening in the market place, especially with our competitors. Is it only Cotton-On losing sales or is every retailer also losing sales? Weve got good products so whats going on? How can we find out? And how can we reverse our business problems? As a new manager with undergraduate and postgraduate degrees in Computer Science and Information Systems from Kingston Universitys Faculty of Computer, Information Systems and Mathematics you tell them, Our website is a good one its got our range of products but customers cannot buy from it. They have to phone us with their orders. That takes time and its expensive because we pay for the phone call and we have to manually take down the order information and process it. We need to invest in information technology. We must provide customers with the ability not only to buy online but also to monitor the progress of order and returns. If they prefer to phone-in orders then we need to use computerised information systems, to process them. We can keep customers information on a database for repeat business. He explains, continuing; Plus we must have access to daily facts and figures so we can make decisions quickly. For example, react to any strategy our business competitors take. We also cant afford to wait while information is processed by the Finance department. Every department has the right to know what business they are doing and also how other departments affect them. A decision taken by one department is likely to affect other departments. For example, a drop in factory staff affects factory product output, which affects the Sales department and so on. Plus managers get their bonuses based on their departments level of business, such as sales and stock. So the faster its available for everyone, the better! The Managing Director says, What youre talking about is spending money; were supposed to be trying to save money, not going out and buying new computers and software. Sounds like wed need specialist staff, and wed have to retrain our existing staff. We dont have time and its probably no use to our customers either! What youre talking about would cost hundreds of thousands of pounds and thats why were in this meeting, were in a financial crisis... There is an awkward silence in the room. Weve got to come up with ideas. So you lot start thinking!

KEY CONCERNS OF COTTON-ON'S DIRECTORS AND MANAGERS

1. Why is Cotton-On is losing sales? 2. How can Cotton-On save money because its finances are stretched tight? You are part of the management advisory group. Make a decision on each of the following
Page 4 of 6

optional strategies and rate whether it is worth doing now (1), or not at all (5): 1. Very important. Do this at once! 2. Worth doing, but may take more time. Start planning it. 3. Yes and no. Depends how it's done and what else is going on. 4. Not very important. May even be a waste of effort. 5. No! Don't do this! Note your decision in the Your Choice. Then the teams overall decision in the Team column. You should consider the impact of what is happening in the UK, and globally. Deciding to do one strategy may have an effect on the other strategies! Nor do you, as a management trainee, have to be limited to the list of strategies below... if you can come up with something better... well.

POSSIBLE STRATEGIES YOU DECIDE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. The present economic difficulties of Cotton-On will change so do nothing. Expand the business by buying an online competitor. Increase sales prices immediately by 20%. Review the information system. Introduce a programme of rewards for cost-savings suggestions from employees. Research consumer buying habits. Move telephone sales lines to overseas sites. Reduce the number of product lines and colours sold. Stop selling via telephone. Scrap all sales discount schemes. Expand sales go into the European Union countries. Expand sales customer base by going global. Investigate the sales competition. Invest in a new online sales site. Sack the Sales Director to save money. Use in-house staff to create online selling and add to Cotton-Ons existing website. Begin online sales via internet immediately.
Page 5 of 6

YOUR TEAM choice choice

POSSIBLE STRATEGIES YOU DECIDE 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. Close all shops. Reduce the number of factories. Raise finance for the new initiative(s). Buy a new fully integrated information system. Save money, let staff learn new information system on the job. Introduce information system back-up. Buy RFID technology and use intelligent labelling for stock control in Cotton-Ons warehouse. Expand sales lines and introduce a range of footwear. Make 20% of staff across the board redundant to save money. Cotton-On products are overpriced compared to the competition. Reduce all sales prices by 25% immediately. Get the management team to agree to a one-year, 20 percent cut in their own salaries. Advertise for new specialist web-design staff to join Cotton-On. Buy and implement a security system to track transaction data in real-time, looking for fraudulent events. Buy and implement an automated merchandise (stock) receiving system to match orders and invoices equals a real-time check of arriving and available stock. Buy and implement a collaborative commerce information system so that Cotton-On can pass more accurate forecast demands to its suppliers for fast delivery and allocation of goods to different depots.

YOUR TEAM choice choice

32.

Source: This simulation is not intended to relate to any existing business. The views expressed within the simulation and the business Cotton-On are solely those of the author. The simulation is also loosely based around the Broadway Brokers simulation is from: Todd D. Jick & Maury A. Peiperl, (2003). Managing Change Cases and Concepts. Second Edition. McGraw-Hill Higher Education. ISBN: 0071122206 (6th Print).

Page 6 of 6