Reference no: EM132311533 , Length: word count : 4000
Assignment : Team assignment
Introduction
Your group is asked by a consulting firm, ‘We will make your business great again’, to design a strategic management system for a business specialising in retailing home improvement and outdoor living products called ‘The Business’.
‘The Business’ was recently acquired by a grocery and liquor retail chain and trades on the Australian Stock Exchange. You were told that although ‘The Business’ made A$1 billion in sales last year, its operating income was nil, and the new manager, John Clarkson, was given five years to improve the operation of ‘The Business’. The five-year goals for ‘The Business’ are:
Increase sales by 30%.
Achieve positive operating income with a Return on Sales of 10%.
Increase the market share to at least 10%.
Currently, the business owns 23 stores, mainly in Victoria, New South Wales and Queensland. However, the parent company will make a financial commitment of $2 billion to open new stores and improve existing stores in the next two years. Though part of the group, ‘The Business’ will operate as a separate company and its management will be responsible for all decisions in relation to the expansion, types of products being sold, and other activities of carrying on the business.
Background to ‘The Business’ and to the Hardware and building supplies retailers’ industry
Like most hardware and home improvement companies, ‘The Business’ is exposed to a range of factors such as price, product range, consumer sentiment, discretionary income, and residential construction activity which all affect demand for hardware and building supplies.
‘The Business’ operates in a highly competitive market. National chain stores such as Bunnings, Mitre 10 and Home Timber & Hardware dominate the market. However, the industry is still fragmented. Most businesses are relatively small, privately operated, employ fewer than 20 staff, and have annual revenue of less than $2 million. The majority of hardware stores are located in New South Wales, Victoria and Queensland, accounting for an estimated 77.2% of industry enterprises. Tasmania, the Northern Territory and the Australian Capital Territory account for a small proportion of the industry’s hardware stores.
It is anticipated the industry’s growth will slow over the next five years. However, some firms that offer extra services, such as product advice, sale and instalment services are expected to continue growing.
Please note: You can find more information about the Hardware and building supplies retailers’ industry on the IBISWorld – Database available from Swinburne Library website.
Some key financial data:
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'The Business' financial data
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Operating revenue (A $m)
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1,000
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Earnings before Interest and tax (A $m)
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0
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Current Assets (A $m)
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540
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Total Assets (A $m)
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1,700
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Current Liabilities (A $m)
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364
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Total Liabilities (A $m)
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372
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Return on Investment
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0
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Required Rate of Return
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12%
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The hardware stores operations
After a quick visit to a number of stores owned by ‘The Business’ you concluded that stores are located rather inconveniently, or next to busy shopping centres, where customers need to compete for car parking with other shoppers. You found the stores offered a poor range—old or out of season—and often inappropriate products. You wondered why the stores have hundreds of light fittings, but none you would want to install in your own house.
You were disappointed to find out that the advertised 20% discount applied to very few products, which were otherwise unsaleable, while the products you could have been interested in were offered at full price or discounted by 5%. You felt that it was misleading advertising. Furthermore, prices of many products were higher than those of competitors.
The stores themselves were rather dark and lacking appropriate signage resulting in wasting a lot of time just to find a product. It was challenging to find a product but even more frustrating to learn that the particular product had its price tag missing.
The floor staff were scarce so it was difficult to find a staff member to help and if there was someone available, they usually had very little knowledge about the products. You had to wait for half an hour for someone to mix your paint, and when finally an employee appeared, he did not know how to read the mixing instruction.
One of the staff members said to you that she never learned about the products they sell and none of the staff had received any training about customer service. She also was quite dismissive about her boss, stating that the floor managers or even top management did not know how to deal with their employees and with customers.
Although there were not many people in the shop, you observed long queues at the checkouts. A number of people were complaining about being overcharged.
On the way to the car park you noticed that there was no one to help an elderly lady to carry a plant to her car.
The balanced scorecard
After assessing the financial situation of ‘The Business’ and its operations, you realised that ‘The Business’ needs a total overhaul of its management system. You decided that the balanced scorecard—with its measures that drive performance—will be a perfect strategic planning and management system for ‘The Business’.
Steps to completing this assignment
Perform a SWOT analysis of ‘The Business’:
You need to list at least four issues for each element of a SWOT analysis – Strengths, Weaknesses, Opportunities and Threats.
You also need to elaborate why you considered these particular issues in your analysis.
Formulate a vision, mission and overall strategy(ies) for ‘The Business’.
Design a balanced scorecard for ‘The Business’.
In particular you need to:
Draw a strategy map based on the objectives that you develop for ‘The Business’. You should utilise your SWOT analysis in developing the objectives for ‘The Business’.
Briefly define the objectives included in the strategy map and explain why these particular objectives are important for ‘The Business’.
Prepare a balanced scorecard with measures, targets and initiatives (action plan) that you need to develop for 'The Business’.
Explain how your balanced scorecard will help to achieve the overall strategy(ies) of ‘The Business’. You need to support your discussion with appropriate literature.
Evaluate how your balanced scorecard will promote goal congruence for ‘The Business’. Again, you need to support your discussion with appropriate literature. An appropriate reward system will be useful in promoting goal congruence.
Write a memorandum to John Clarkson summarising your report and outlining what you believe to be the strengths of your balanced scorecard. Write a memorandum instead of an executive summary.