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)
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
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
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
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
Lady
Missy
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200
400
600
800
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1200
Products
Profit Margins
Lady
Missy
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