HKICPA QP Case Analysis · PDF fileHKICPA QP Case Analysis Competition ... Production cost (as % of sales) Production overhead 1.8% 3.8% ... factory of 45000 sq.ft

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

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

SWOT Analysis

Strengths:

1. “Total Woman” Concept

2. Strong Experience in the

apparel industry

Weaknesses:

1. Limited production

capacity

2. Inadequate distribution

outlets

Opportunities:

1. Busy lifestyle of

businesswomen

2. CEPA

Threats:

1. Possible introduction of

GST

2. Increased competition

and globalization effect

Developing appropriate strategies

Ansoff Matrix

Market Penetration More distribution outlets in HK,

promotional events, CRM & online wardrobing

Market

Development Setting up overseas self-managed

shops, selling franchises & taking part in HKTDC exhibitions

Product

Development Acquiring licensed brands from

overseas, producing “crossover”

products with other brands

Diversification Clothing/ wardrobing service for

men or children & the set-up of a

beauty centre

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

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

2. The strengths of Charlottes’ “Total

Woman” Concept

1. “Total Woman” as a new concept

2. Personalized marketing

3. Low distribution costs

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?

Survey results

What Customers Value most

Price

22%

others

3%

Quality

64%

Service

11% Quality

Price

Service

others

Views on wardrobing service

Dislike

10%

Support

82%

Neutral

8%

Support

Dislike

Neutral

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. Financial analysis

Assumptions:

1. Economic downturn in 2005

2. 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

External comparison

(1) Profitability Analysis

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

MJ Fashions

The Ascot

Adrianne Keefe

Peter Fang

Charlottes

Operating profit /

operating assets

operating profit / sales

49.8%

33%

27.5%

(2) Efficiency

Production Cost (as % of Sales)

• Charlottes Ltd

• 55.7%

• Industry Average

• 55.68%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

MJ Fashions

The Ascot

Adrianne Keefe

Peter Fang

Charlottes

Production cost (as % of sales)

Production

overhead

1.8%

3.8%

2.4%

External comparison

(3) Asset Management

-

50

100

150

200

250

300

350

400

MJ Fashions

The Ascot

Adrianne Keefe

Peter Fang

Charlottes

Fixed Asset Utilization (per 1000 of sales)

Plant and Machinery

Vehicles

390

280

370

63 49 28

External comparison

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

Income statement analysis

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

VISION

Improvement on our

Value Chain

Our vision of Charlottes Ltd. in 10 years’ time:

• 4 Southeast Asian countries

• annual sales of $5 billion

• 30% return on sales

• Expansion through organic growth and

diversification in new markets

4. Recommendations

VISION

Outbound

Logistics

Marketing

& Sales Services

MA

RG

IN

Operations

Inbound

Logistics

Firm Infrastructure

Human Resources Management

Technology Development

Procurement

Porter’s Value Chain Model

Recommendations

Outbound logistics Increase distribution

outlets, online

“wardrobing” service

Operations Increase production

capacity by outsourcing

Procurement

Search for new suppliers

Inbound logistics New warehouse required

Marketing and Sales Train new and current

wardrobe consultants,

marketing campaign

(ongoing)

Phase 1 (Year 1-5)

Outbound logistics Expand into the China

Market

Operations Increase production

capacity by renting a

factory of 45000 sq.ft.

at HK$1.5/sq.ft.

preferably in GuangXi

Human Resources

Management

Span of control

management

Firm infrastructure Departmentalization

Phase 2 (Year 6-8)

Outbound logistics Export to Southeast

Asian countries

(China, Singapore,

Thailand & Malaysia)

Operations Employ designers in

Southeast Asian

countries

Technology

development

Implementation of

Enterprise Resource

Planning system

Phase 3 (Year 9-10)

Financial indicators in 2005 (The World Bank Group)

Why these four countries?

Singapore China Malaysia Thailand

GDP growth

(annual %) 6.38% 9.9% 5.3% 4.5%

GDP (current

US$) 116.8

billion 2.2 trillion 130.1

billion

176.6

billion

Time required

to start a

business

(days)

6 48 30 33

Average

annual

growth of

imports

10.4% 15.3% 20.7% 8.9%

Outbound logistics Export to Southeast

Asian countries

(China, Singapore,

Thailand & Malaysia)

Operations Employ designers in

Southeast Asian

countries

Technology

development

Implementation of

Enterprise Resource

Planning system

Phase 3 (Year 9-10)

Beyond 10 years…

Charlottes

Contingency

• To meet unanticipated financial needs

• Invest in highly liquid investments

Increases Year 1 Year 2 total

Operating Expenses 30% per year 4,069,260.00 5,290,038.00 9,359,298.00

Accounting and Admin

Expenses 15% per year 1,192,320.00 1,788,480.00 2,980,800.00

12,340,098.00

Assumption of 30% increase in Operating Expenses due to expansion

Assumption of 15% increase in Accounting and Administration expenses

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

Conclusion

- Further development of “Total Woman” Concept

- Value chain improvement

Vision and Mission Achieved

Q & A Session

Appendix

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)

Projected Income statement

Income Statement

Sales 48,940,000.00

less: Cost of good sold 21,196,700.00

Gross Margin 27,743,300.00

less: Operating expenses 3,130,200.00

(expenses includes selling , product related expenses)

Accounting and Admin expenses 1,036,800.00

(expenses includes accounting and administrations)

Operating Income 23,576,300.00

Age pyramid of the 4 countries

Projected sales

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%

8.50%

9.00%

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

Prime Rate Over Time

8% from

11/8/06 on Prime Rate Over Time

• Bank Loans

• Mortgage Loans

• Fixed Assets

• Initial Public offer

• Bonds

External funding

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

http://www.hkex.com.hk/issuer/listhk/getting_listed.htm

Initial Public Offering

• Ongoing training for wardrobe consultants

- Adhere to Charlottes’ mission statement

- High retention rate targeted

• Marketing programs

- Social initiatives

- Environmental initiatives

• Application for patent

“Total Woman” Concept

Marketing 4Ps

Product • All 4 brands will be brought to the

countries

• Launching of wardrobing service

once retail store is opened

• Localized Designs

Price • 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

Promotion • Fashion shows

• Sweepstakes for free wardrobing

service

• Sponsors celebrity as well as well-

known 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)

Marketing 4Ps

The “Total” Concept

Total Men Wardrobing service for a new

target segment

Total Kids Wardrobing service for a new

target segment

Total Accessories Provide accessories including

watches, earrings, sunglasses,

etc.

Total Wedding

service

Wedding gowns, accessories,

shoes, etc.

Profit margins

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Products

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