This is a sample SFP Project submission. Please note that the emphasis of this particular project brief is different to yours and has been provided to you simply as an example that may help with the preparation of your own submission.
It is not a submission which scored 100% and it is not perfect but it does cover a number of the aspects relevant to the specific assignment brief it related to. Be aware that there are numerous ways in which to approach your project brief so this is NOT meant to be used a checklist of things to include. Nor is it to be used as a ‘model’ answer.
The usage of this sample is strictly prohibited and remains the intellectual property of the author - the author has given their permission for it to be used as a sample piece of work. Any copying of this work will be considered an act of plagiarism. The company used in this particular project brief is a fictious one.
Rubbersole Business Plan Report
To succeed and survive, Rubbersole must develop new footwear markets and offer new footwear products responding to changes in consumer demand and behaviour. Rubbersole cannot compete on price and nor can it differentiate itself selling its current branded products. Latest projections show the business making increasing and unsustainable losses to 2021.
A ‘perfect storm’ of increased costs, rising inflation, and low wage growth threatens consumer confidence (Deloitte, 2017). The shift to online sales has empowered customers with information, choice and increasing expectations. (Retail Economics 2017). Clothing and footwear retailers are exposed to additional variables: fashion, seasonality and even the weather.
However, market analysis demonstrates that there are opportunities in an increasingly polarised market. Rubbersole should adopt a strategic position to meet the needs of a wider demographic of more affluent consumers, particularly men, who are more focused on quality, style and comfort and who are less price-sensitive.
The UK had a retail footwear market worth £10.6bn in 2016 (Statista, 2017), part of a global footwear consumer market estimated to be over $200bn annually (Euromonitor, 2016). The UK market has been growing against a backdrop of low inflation with 39.3% growth in the
last five years and 6.2% in 2015-2016, pre-referendum. Since the referendum, the rate of retail sales growth has slowed and begun to decline as sterling weakness has driven higher inflation (FT, 2017). Online sales for clothing and footwear account 14.1% of the market and continue to grow strongly: 11.7% year on year to April 2017 (ONS, 2017).
Although women’s footwear is the largest part of the market, growth in male footwear sales has been stronger than female in recent years. In the US, the value of male footwear sales is fast catching up with female (Woolhouse, 2017). Men are adopting a wider choice of footwear driven by changing work patterns, images of ‘success’, culture and social media.
Retail Gazette finds the same trend for UK males with the male/female spending gap narrowing. ONS data puts the ratio of female/male/children’s footwear sales at 49%/28%/23% for the UK. There seems little doubt that male footwear is the fastest growing segment.
Market share of the UK’s largest footwear retailers is as follows:
A segmental analysis can be drawn from this secondary data combined with primary market research from visits to UK footwear retailers (Appendix) and online:
Manufacturers are growing vertically, controlling marketing, retail experience, and margins. Church’s, Eco, Geox, Hunter and Ugg are adopting this model focusing on higher-spending brand-conscious affluent urban consumers.
and own-branded footwear. Schuh aims to offer “aspirational but accessible fashion footwear”. Dune and Office are less focused on price and more focused on fashion, brand, quality and innovation.
Charles Clinkard is typical - owner-managed with 33 UK stores and online selling
branded footwear with a family, quality and fit orientation.
Together the large retailers graphed had a 74.9% market share with multiples the largest segment at 43.4% leaving around 25% of the market for independent and other retailers.
The number of UK footwear stores is in long-term decline, down 20% from 2008 to 2014 (ONS). Brantano, Jones Bootmaker, are Barratts Priceless are examples of recent insolvencies.
Further secondary research was conducted by analysing the financial statements of a sample of leading footwear retailers:
With total annual sales of £160m, Rubbersole has a market share of around 1.5% with a falling trend. The graph indicates that Rubbersole is generally underperforming compared with its similarly-sized competitors regarding margins and ROCE.
From the primary and secondary market analysis and macro review, the table below summarises the PESTEL factors applicable to Rubbersole to inform its choice of strategic options.
Political Volatility makes planning uncertain Forces behind globalisation are shifting Brexit: negatively impacting supply chain and margins Brexit: Uncertainty of residency and employment status for EU nationals in the UK affecting customers and staff Post-election UK uncertainty. |
Technological Online search is driving all retail sales, both online and instore Automation technologies, analytics and big data can drive competitive advantage Increasing mobile device usage among consumers Dependency on IT systems, the risk of failure and cybersecurity threat. |
Economic Consumer confidence is falling with rising inflation and pressure on incomes Brexit uncertainty for trade, imports and tariffs. Business rates increases, particularly in the South-East Depreciation of sterling Forex hedging to expire in supply chain. |
Environmental Sustainability an increasing concern for customers and stakeholders Potentially less use of leather and tanning, and more environmentally-friendly shoes and packaging. Having an ethical supply chain, particularly supplier employee welfare is essential for long-term value creation. Risk of underage workers in the supply chain. |
Social Changes in lifestyle and buying trends – shoes as a status symbol Men buying more footwear Cultural diversity trend Urban migration, more people living in towns and cities Social media and fashion influencers increasingly driving demand Changes in retail shopping habits, rise of the malls, airports and stations Ageing population |
Legal Changes in regulated pay likely to increase staff costs eg National Living Wage Statutory levies eg apprenticeship levy increasing the cost burden Digital regulation increasing complexity and cost Equal pay, pensions, and parental care legislation tending to increase compliance burden. |
Key: Opportunity | Threat | Both
Rubbersole sells a pair of shoes on average for £37. Data from Numbeo would suggest an average men’s price of around £60 and this was broadly substantiated by the retailer visits. This positions Rubbersole towards the value-led category where it cannot compete against far larger rivals.
Retail research is indicating a polarisation of the clothing and footwear markets.
In the children’s market, population and birth rate growth, the trend towards parenting
later in life, and an ageing demographic of grandparents with higher disposable incomes are
all driving growth at the premium end. The children’s footwear market is driven by growth (literally). Children are harder to fit, increasingly fashion conscious and sales online have a 50% returns rate compared to 35% for women’s footwear (KPMG, 2017). However, of the
three market segments, PwC see this as the market with the least potential for growth:
UK Clothing, Footwear and Accessories Market CAGR |
|||
Forecast |
|||
2009-15 |
2015-20 |
||
Footwear |
2.6% |
3.4% |
|
Childrenswear |
2.1% |
2.6% |
|
Menswear |
3.1% |
5.3% |
|
Womenswear |
3.6% |
5.0% |
|
Source: PwC |
Footwear comfort matters more than style to over 75% of males and 85% of females (Levin, 2015) and independent shoe retailers are the go-to source for expertise and footwear that fits. Rubbersole should exploit this opportunity.
In-store experience can help drive brand identity and loyalty online. Around 20% of the
£50bn clothing, footwear and accessory sales market in 2015 was online, up from 9.3% in 2010 (PwC, 2017). The online channel is expected to continue to take market share from the in-store channel accounting for 28% of sales by 2020. All this research is though pre- referendum. KPMG reports that:
The UK and Europe has a long heritage in high-quality men’s footwear and the weakness of sterling makes these home-produced products more attractive. A further trend Rubbersole can exploit is ‘athleisure’ wear - how sports footwear has morphed into leisure and office wear. ‘Premium sneakers’ worn with a business suit is a very different segment to value- oriented sports footwear and represents an opportunity for Rubbersole.
Data from Statista (2014) showed that the 30-49 age group spend the most on footwear, 9% more than the under 30s, an average of £6.30 per week compared £5.80. UK Census data shows that 28% of the population are the 30-49 age group, a market currently not served by Rubbersole. This represents a significant opportunity to broaden the customer base and products to meet the needs of this segment, focused particularly on the premium lifestyle and aspirational drivers identified.
Age |
Population |
% |
% |
|
0–4 |
3,914,000 |
6.2 |
||
5–9 |
3,517,000 |
5.6 |
||
10–14 |
3,670,000 |
5.8 |
||
15–19 |
3,997,000 |
6.3 |
||
20–24 |
4,297,000 |
6.8 |
||
25–29 |
4,307,000 |
6.8 |
37.5 |
Current Rubbersole demographic |
30–34 |
4,126,000 |
6.5 |
||
35–39 |
4,194,000 |
6.6 |
||
40–44 |
4,626,000 |
7.3 |
50–54 |
4,095,000 |
6.5 |
||
55–59 |
3,614,000 |
5.7 |
||
60–64 |
3,807,000 |
6 |
||
65–69 |
3,017,000 |
4.8 |
||
70–74 |
2,463,000 |
3.9 |
||
75–79 |
2,006,000 |
3.2 |
||
80–84 |
1,496,000 |
2.4 |
||
85–89 |
918,000 |
1.5 |
||
90+ |
476,000 |
0.8 |
||
Total |
63,183,000 |
100 |
65 |
Combined demographic |
Porter (1985) provides a framework for evaluating the strategic options available to Rubbersole by analysing competitive forces and generic strategic approaches to gain competitive advantage based on the preceding market analysis:
Cost Leadership: exploiting sources of cost advantage through its products and supply chain to compete industrywide on price. This is the strategy of footwear retailers such as the supermarkets and Primark.
Differentiation: unique product range industrywide in a way which has value for customers and potentially allows a premium price. Selfridges is an example of a footwear retailer differentiated on style, aspiration and luxury for more affluent customers.
Focus: meeting the needs of a market segment with two variants: cost focus and differentiation focus. The footwear retailer Herring has a differentiation focus on largely English branded premium quality men’s shoes sold mostly online.
Porter argues that the firm must adopt one of these strategies or face being stuck in a strategic no man’s land. Applying the ideas of Porter to Rubbersole:
Competitive Force |
Generic strategy which could be adopted by Rubbersole |
||
Cost Leadership |
Differentiation |
Focus |
|
Buyer Power |
Footwear customers can easily switch between large national retailers offering the same brands or alternatives at the lowest price. Rubbersole is unable to |
Rubbersole is mostly selling branded footwear which is not unique to the market. |
Core competencies around range, quality, fit and customer service can enable Rubbersole to reduce customer price-sensitivity |
compete. |
|||
Supplier Power |
Rubbersoles’ relatively low market share at 1.5% diminishes leverage with suppliers on terms. |
Rubbersole is not likely to be able to offer a unique product or control a market segment industry-wide to increase its bargaining power with suppliers. |
Developing Rubbersole’s own- brand footwear range could reduce dependency on manufacturers’ brands and provide competitive advantage. |
Competitive Rivalry |
Competition is intense among low-cost retailers. |
Luxury footwear retailers achieve differentiation with unique and desirable products but with high capital and marketing costs. |
Focus on customer service, customer experience and a more distinctive product mix can give some differentiation focus. |
Entry Barriers |
Ability to offer low prices is restricted to |
Selling branded shoes makes differentiation |
Core competencies offer some protection from new |
other higher volume retailers |
difficult for Rubbersole. |
entrants but the threat remains, particularly online. |
|
Threat of |
Footwear cannot be substituted for another |
Rubbersole must |
|
Substitutes |
product but rivalry is high. A threat exists in |
ensure its online |
|
substitution of in-store for online sales by |
product offer is |
||
competitors and new entrants. |
differentiated and |
||
online customer |
|||
experience is better |
|||
than competitors. |
Hunt and Morgan (2001) advocate that comparative advantage and market orientation will enable a business to compete where it chooses its target market more astutely than its competitors and its products and services are better suited to customers’ preferences. In line with this and based on the opportunities identified in the market analysis, a mission statement for Rubbersole on which to base its strategy is conceived:
To provide the best footwear products and buying experience to attract, engage and delight our customers through our stores and online, always focused on quality, style and fit.
Combining Porter’ notion of focus for Rubbersole and based on the work of Ansoff (1957) and the market analysis, four alternatives strategies are considered in line with this mission:
Rubbersole Strategic Options |
||
Existing Products |
New Products |
|
Existing Markets |
1. Market penetration |
3. Product development |
New Markets |
2. Market development |
3. Related diversification |
This strategy focuses on existing markets and existing products:
A new market for existing products potentially exists in Europe. This could be achieved with stores in European locations and/or online sales in Europe with a multi-language mobile enabled website and pricing selling existing products.
However, this would require significant research on the European footwear market of which it is assumed the current management have limited knowledge. The uncertainty around Brexit and the economic risk factors identified in the PESTEL analysis make trading in Europe unattractive at this time and this option is rejected.
This strategy would be focused on new products for existing markets:
This would focus on developing new footwear products for new footwear markets leveraging the current retail infrastructure and management competencies.
With each of these strategies goes a measurable commitment to customer and employee satisfaction addressed with other KPIs below.
The following operational factors have been considered in defining these strategic options:
Staff motivation is critical to a successful change of strategy. For this reason, a staff sales incentive scheme is proposed linked to growth to enable staff to share in the success of the strategy.
expansion of the men’s range and the pressure on floor space may make the coffee shops obsolete or even a hindrance to growth in the long term.
Other major strategic choices for Rubbersole considered but rejected where:
The potential financial outcome from each of the three strategies identified (1,3 and 4) is modelled below.
Rumelt (2011) believes that strategy involves identifying critical factors and directing management actions to deal with these factors. Based on the external market analysis and PESTEL analysis, three critical success factors can be identified for Rubbersole:
Smith (2015) describes shareholder value as the creation of additional wealth for the ultimate business owners and whether management is acting appropriately to create this wealth. Smith believes this requires a rate of return higher than the cost of the capital utilised to generate that return, with the rate of return given by:
Operating cash flow
Shareholder’s equity and net debt
However, by itself this return on capital (ROCE) is not necessarily an effective indicator of long-term value creation. Measuring the cost of capital involves theoretical assumptions on
the risk-free rate, market rates of return and risk sensitivity. Agency theory suggests that conflicts of interest can arise in the narrow management of ROCE and it can be manipulated by management. Lazonick and O’Sullivan (2000) suggest that an aggressive short term pursuit of narrow shareholder value may run down a company for example attempting to reduce workforce or pay, increase dividends, or creating unjustified incentives for senior management.
Rappaport (1998) describes ‘enlighted self-interest’ as a more comprehensive alternative where long-term shareholder value is created by sound commercial and financial management but also engaging with shareholders and stakeholders. Mauboussin and Rappaport (2016) suggest that shareholder value can be 'reclaimed' from manipulation and Friedman’s (1970) now unpopular view of profit maximisation by:
For Rubbersole, a more comprehensive measure of shareholder value creation necessitates a range of financial and non-financial KPIs which recognizes that stakeholder engagement is
the route to create long-term value for Rubbersole and its owners. Dividend level will not be a KPI for Rubbersole. In a period when the business is investing, the dividend may need to be temporarily foregone in the interests of long-term shareholder and brand value.
The following 10 KPIs are proposed for Rubbersole with indicative targets as a broader indicator of shareholder value:
Critical Success Factor |
KPI |
Target |
Financial sustainability and profitability |
Sales total and by category |
20% growth within 5 Years |
Gross margin |
5% growth within 5 Years |
|
ROCE |
5%, in line with competitors |
|
Attractive product and retail offer |
Sales per sq foot |
5% annual improvement |
Inventory Turn |
<6 weeks |
|
Average customer transaction spend |
5% annual improvement |
|
Footfall and conversion – in-store and online equivalent |
5% annual improvement |
|
Sales to retail staff costs |
5% annual improvement |
Satisfied stakeholders |
Customer satisfaction/Net Promoter Score |
50+ |
Employee engagement |
2% annual improvement |
A concise number of KPIs spanning the critical success factors is also consistent with the work of Kaplan and Norton (2004).
The reasoning behind each KPI is as follows:
Many of these KPIs can be looked at on a consolidated company level and sub-levels for products and individual stores.
There will be a larger number of operational performance indicators. For example, online sales performance indicators might be abandoned carts, retuning customers, social media engagement, pay-per-click traffic volume v organic search and returns rate.
Analysis of Rubbersole’s currently projected financial performance indicates escalating losses and negative ROCE. The liquidity and cash position is weakening and there is a risk that a breach of bank covenants linked to financial performance and position could lead to withdrawal of bank support and insolvency. Status quo is clearly not an option.
Rubbersole Shoes: Liquidity Analysis
2015 2016 2017 2018 2019 2020 2021 |
||||||||
Current Assets - Current |
Liabilites |
10,183 |
10,495 |
10,920 |
10,264 |
8,204 |
4,739 |
-242 |
Current ratio |
1.52 |
1.52 |
1.53 |
1.50 |
1.38 |
1.20 |
0.99 |
|
Quick ratio |
0.06 |
0.06 |
0.06 |
0.06 |
0.06 |
0.05 |
0.04 |
|
Net Cash Flow £'000 |
5,531 |
-5,324 |
-1,866 |
-132 |
-894 |
-2,124 |
-3,488 |
|
Closing Cash £'000 |
-4,419 |
-9,743 |
-11,610 |
-11,742 |
-12,635 |
-14,760 |
-18,248 |
Rubbersole Shoes: 2016 Product Sales and margin analysis
Product line |
Margin |
SKUs |
SKU |
Weight |
Shelf space |
Sales £'000 |
Sales |
Weight |
Avg |
Item £ |
Web site |
53% |
401 |
9.4% |
15,663 |
9.9% |
39.09 |
||||
Female adult range |
55% |
2,093 |
49.2% |
55.0% |
90,927 |
57.7% |
43.44 |
|||
Male adult range |
48% |
515 |
12.1% |
17.0% |
18,898 |
12.0% |
36.68 |
|||
Children and Young Teenage |
60% |
998 |
23.4% |
22.0% |
31,045 |
19.7% |
31.12 |
|||
Accessories |
46% |
250 |
5.9% |
6.0% |
1,101 |
0.7% |
4.40 |
|||
Total |
4,257 |
100.0% |
100.0% |
157,634 |
100.0% |
37.03 |
Conclusions can be drawn from this data:
Based on the strategic options identified earlier, the following options have been modelled with assumptions shown:
Assumptions:
Outcome:
Strategic Option: Market Penetration
Income Statement |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
||
KPI |
Total Retail and Web Sales £'000 |
159,874 |
189,896 |
197,554 |
205,464 |
213,670 |
222,218 |
|
Direct Costs |
83,561 |
99,892 |
107,648 |
113,587 |
119,634 |
126,026 |
||
Gross Profit |
76,312 |
90,004 |
89,905 |
91,877 |
94,036 |
96,192 |
||
Retail outlet wages |
37,587 |
39,997 |
39,643 |
39,289 |
38,935 |
38,581 |
||
Marketing |
8,561 |
8,821 |
10,333 |
10,715 |
11,110 |
11,519 |
||
Overheads |
25,396 |
28,327 |
28,795 |
29,277 |
29,774 |
30,289 |
||
Operating Profit |
4,769 |
12,859 |
11,135 |
12,596 |
14,217 |
15,803 |
||
Interest and Tax |
1,554 |
3,735 |
2,903 |
3,041 |
3,182 |
3,301 |
5 Years |
|
Profit after Tax |
3,215 |
9,124 |
8,232 |
9,555 |
11,036 |
12,501 |
50,448 |
|
EBITDA |
15,389 |
23,754 |
21,972 |
23,374 |
24,936 |
26,461 |
||
KPI |
Gross Margin % |
48% |
47% |
46% |
45% |
44% |
43% |
|
Net operating margin % |
3% |
7% |
6% |
6% |
7% |
7% |
||
KPI |
ROCE |
6% |
17% |
14% |
15% |
17% |
18% |
|
Net Debt / Equity % |
54% |
36% |
25% |
8% |
-10% |
-26% |
||
Net Cash Balance |
-9,743 |
-640 |
5,146 |
15,204 |
26,142 |
37,778 |
||
5 Years |
||||||||
Base Case Operating Profit |
3,215 |
-735 |
-1,817 |
-2,874 |
-4,019 |
-5,267 |
-14,710 |
|
Improvement/(Decline) |
0 |
9,859 |
10,049 |
12,429 |
15,054 |
17,768 |
65,159 |
|
Sales Growth |
18.8% |
4.0% |
4.0% |
4.0% |
4.0% |
|||
KPI |
Sales per square foot |
6,765 |
7,792 |
8,143 |
8,509 |
8,893 |
9,297 |
|
KPI |
Inventory days |
180.3 |
159.6 |
131.7 |
104.4 |
78.2 |
53.2 |
|
KPI |
Average transaction value £ |
37.03 |
38.85 |
38.94 |
39.02 |
39.11 |
39.19 |
|
KPI |
Sales:retail staff costs ratio |
4.25 |
4.75 |
4.98 |
5.23 |
5.49 |
5.76 |
Assumptions:
Outcome:
Strategic Option: Product Development
Income Statement |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
||
KPI |
Total Retail and Web Sales £'000 |
159,874 |
202,851 |
214,835 |
219,307 |
223,023 |
228,247 |
|
Direct Costs |
83,561 |
103,284 |
116,299 |
123,090 |
124,341 |
130,901 |
||
Gross Profit |
76,312 |
99,566 |
98,536 |
96,217 |
98,682 |
97,346 |
||
Retail outlet wages |
37,587 |
40,351 |
40,351 |
40,351 |
40,351 |
40,351 |
||
Marketing |
8,561 |
10,398 |
13,051 |
13,798 |
14,095 |
14,400 |
||
Overheads |
25,396 |
28,623 |
29,337 |
29,772 |
30,184 |
30,661 |
||
Operating Profit |
4,769 |
20,195 |
15,798 |
12,297 |
14,053 |
11,934 |
||
Interest and Tax |
1,554 |
5,085 |
3,633 |
2,824 |
3,079 |
2,553 |
5 Years |
|
Profit after Tax |
3,215 |
15,109 |
12,165 |
9,473 |
10,974 |
9,381 |
57,102 |
|
EBITDA |
15,389 |
30,782 |
26,385 |
22,884 |
24,640 |
22,521 |
||
KPI |
Gross Margin % |
48% |
49% |
46% |
44% |
44% |
43% |
|
Net operating margin % |
3% |
10% |
7% |
6% |
6% |
5% |
||
KPI |
ROCE |
6% |
26% |
19% |
15% |
16% |
13% |
|
Net Debt / Equity % |
54% |
18% |
6% |
-3% |
-11% |
-20% |
||
Net Cash Balance |
-9,743 |
9,450 |
16,434 |
21,943 |
27,413 |
33,544 |
||
5 Years |
||||||||
Base Case Operating Profit |
3,215 |
-735 |
-1,817 |
-2,874 |
-4,019 |
-5,267 |
-14,710 |
|
Improvement/(Decline) |
0 |
15,844 |
13,981 |
12,347 |
14,993 |
14,648 |
71,813 |
|
Sales Growth |
26.9% |
5.9% |
2.1% |
1.7% |
2.3% |
|||
KPI |
Sales per square foot |
6,765 |
7,974 |
8,444 |
8,594 |
8,283 |
8,455 |
|
KPI |
Inventory days |
180.3 |
137.9 |
98.3 |
77.1 |
77.8 |
57.1 |
|
KPI |
Average transaction value £ |
37.03 |
40.45 |
40.56 |
40.64 |
42.63 |
42.71 |
|
KPI |
Sales:retail staff costs ratio |
4.25 |
5.03 |
5.32 |
5.44 |
5.53 |
5.66 |
Assumptions
Strategic Option: Related Diver |
sification |
|||||||
Income Statement |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
||
KPI |
Total Retail and Web Sales £'000 |
159,874 |
206,550 |
214,830 |
217,945 |
218,921 |
224,173 |
|
Direct Costs |
83,561 |
105,386 |
110,604 |
117,502 |
119,537 |
127,384 |
||
Gross Profit |
76,312 |
101,164 |
104,225 |
100,443 |
99,383 |
96,789 |
||
Retail outlet wages |
37,587 |
39,997 |
39,643 |
39,289 |
38,935 |
38,581 |
||
Marketing |
8,561 |
12,131 |
15,534 |
16,259 |
16,510 |
16,675 |
||
Overheads |
25,396 |
28,972 |
29,476 |
29,788 |
30,025 |
30,429 |
||
Operating Profit |
4,769 |
20,065 |
19,572 |
15,107 |
13,914 |
11,105 |
||
Interest and Tax |
1,554 |
5,030 |
4,464 |
3,521 |
3,197 |
2,530 |
5 Years |
|
Profit after Tax |
3,215 |
15,035 |
15,109 |
11,586 |
10,717 |
8,574 |
61,021 |
|
EBITDA |
15,389 |
30,959 |
30,409 |
25,885 |
24,633 |
21,763 |
||
KPI |
Gross Margin % |
48% |
49% |
49% |
46% |
45% |
43% |
|
Net operating margin % |
3% |
10% |
9% |
7% |
6% |
5% |
||
KPI |
ROCE |
6% |
26% |
24% |
18% |
16% |
12% |
|
Net Debt / Equity % |
54% |
13% |
12% |
4% |
-2% |
-11% |
||
Net Cash Balance |
-9,743 |
12,383 |
12,708 |
17,329 |
21,289 |
27,769 |
||
5 Years |
||||||||
Base Case Operating Profit |
3,215 |
-735 |
-1,817 |
-2,874 |
-4,019 |
-5,267 |
-14,710 |
|
Improvement/(Decline) |
0 |
15,769 |
16,925 |
14,460 |
14,736 |
13,841 |
75,731 |
|
Sales Growth |
29.2% |
4.0% |
1.5% |
0.4% |
2.4% |
|||
KPI |
Sales per square foot |
6,765 |
7,772 |
7,410 |
7,540 |
7,262 |
7,467 |
|
KPI |
Inventory days |
180.3 |
120.1 |
144.5 |
115.4 |
112.6 |
85.1 |
|
KPI |
Average transaction value £ |
37.03 |
42.45 |
46.29 |
46.39 |
48.35 |
48.45 |
|
KPI |
Sales:retail staff costs ratio |
4.25 |
5.16 |
5.42 |
5.55 |
5.62 |
5.81 |
It is concluded that the related diversification strategy is the recommended option for Rubbersole giving the best financial KPI performance over the other options for profit and ROCE and cash. However non-financial KPIs would also have to be modelled and taken into account before reaching a final decision.
In addition to the generic PESTEL risks identified, the selected strategy of related diversification presents specific risks:
Rubbersole should follow a strategy of related diversification to reposition itself towards serving a more affluent urban consumer by focusing on:
This must be combined with improving customer and staff satisfaction and optimising the financial and non-financial KPIs identified. A 5-year plan for the strategy is as follows:
Appendix: Retailer Visits
Retailer |
Store Location |
Date of Visit |
Asda |
Watford |
03-Jun-17 |
Church's |
Bicester |
27-May-17 |
Clarks |
Bicester |
27-May-17 |
Dune |
London, St Pancras |
31-May-17 |
M&S |
Watford |
03-Jun-17 |
Next |
Watford |
03-Jun-17 |
Office |
London, Bruswick Centre |
31-May-17 |
Primark |
Watford |
03-Jun-17 |
Schuh |
Watford |
03-Jun-17 |
Selfridges |
London, Oxford Street |
31-May-17 |
Shoe Zone |
Watford |
03-Jun-17 |
Sports Direct |
Borehamwood |
28-May-17 |
Tesco |
Watford |
03-Jun-17 |
Tod's |
Bicester |
27-May-17 |
Ugg |
Bicester |
27-May-17 |
Retailer |
Website |
Date of Visit |
Asda |
http://direct.asda.com/george/women/shoe s/D1M1G20C20,default,sc.html http://www.church-footwear.com/it/en https://www.clarks.co.uk/ https://www.dunelondon.com/http://www.herringshoes.co.uk/http://www.marksandspencer.com/l/wome n/shoes-and-boots/all-shoes http://www.next.co.uk/shop/productaffiliati on-footwear http://www.office.co.uk/ https://www.primark.com/en/products/cate gory/women,womens-shoes,ladies-shoes http://www.schuh.co.uk/http://www.selfridges.com/shoes https://www.shoezone.com/http://www.sportsdirect.com/mens/mens- shoes https://www.tesco.com/direct/clothing- accessories/footwear/cat3376662.cat |
04-Jun-17 |
Church's Clarks Dune Herring |
04-Jun-17 04-Jun-17 04-Jun-17 04-Jun-17 |
|
M&S |
04-Jun-17 |
|
Next |
04-Jun-17 |
|
Office |
04-Jun-17 |
|
Primark |
04-Jun-17 |
|
Schuh Selfridges Shoe Zone |
05-Jun-17 05-Jun-17 05-Jun-17 |
|
Sports Direct |
05-Jun-17 |
|
Tesco |
05-Jun-17 |
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