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Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
On March 17, 2010, Anita Norris, owner of Anita Norris Model Management (ANMM) of London, Ontario was contemplating the future of her business. In the two years since Norris started ANMM, the business had grown quickly through her efforts to pursue any revenue stream that presented itself. Although Norris welcomed ANMM’s success, she believed that continuing to operate in this manner would stretch her business model too thinly. ANMM’s current revenues came from four sources: modeling workshops, signing and booking models, model development, and speaking fees. Norris now wanted to develop a strategy that would focus her business and allow her to spend most of her time developing and managing her models. She knew that, in order to do this, she would have to carefully analyse the strengths and weaknesses of her company and her own abilities.
THE MODELING INDUSTRY
The modeling and talent industry in the United States consisted of over 30,000 firms in addition to many sole proprietorships, including both agents and personal managers.1 Clients included actors and professional athletes as well as models. Although large players such as Creative Artists Agency, William Morris Endeavor, International Creative Management, and IMG dominated the US$5-billion industry, the top 50 agencies accounted for only 45 per cent of its revenue. Thus, the industry was fragmented enough to support a significant number of smaller agencies such as ANMM. Unlike the superstar agencies in the market, smaller agencies could be successful by specializing in a specific area or location in order to develop niche client relationships. On average, agencies with more than one employee generated revenues of US$200,000 per year, whereas one-person agencies had revenues of US$40,000 per year. Modeling agencies could be grouped into two large segments: high fashion and non-high fashion. High fashion referred to haute couture or the most fashionable and influential design and dressmaking. Consequently, high fashion modeling agencies specialized in sending their models to photo shoots involving brand name designers and popular magazines. These companies contracted with a diverse
1
The information in this paragraph was taken from: “Talent and Modeling Agencies Industry Profile,” First Research, Quarterly Report, November 9, 2009.
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In contrast, non-high fashion agencies recruited talent based on unique sets of attributes to satisfy their clients’ requirements. They also did not limit candidacy based on physical measurements. With the cultural diversification of the Western world, ethnic diversity had become an important factor for all players in the industry. As such, models of various nationalities and backgrounds were becoming increasingly prominent. Models were usually discovered between the ages of 12 to 20 by agents or scouts. Some potential models took the initiative and mailed their photo shoots to an agency. This approach, termed a dry call, was typically ineffective when dealing with larger agencies, as they were usually overwhelmed by unsolicited portfolios of modeling candidates’ photo shoots. The portfolios, referred to as comp cards in the industry, were frequently discarded as a result. Another approach was ‘a walk-in,’ where a model would simply call an agency to book an appointment to be interviewed. During the interview, the model would have the opportunity to review past experiences with an agent and present his or her portfolio. Some agencies held open call events, at which the agency allowed anyone to show up for an interview. Hundreds of candidates might show up during an open call, drawn in by the rosy dream of becoming the next top supermodel. It was not unusual for lines to extend several city blocks depending on the prestige of the agency hosting the call. Through these popular venues, modeling agencies were able to identify talent and obtain new faces. Modeling agency agents booked auditions and negotiated contracts for their models. Agents provided a wide variety of services to ensure that their models could focus on modeling and not on the business aspect of the industry. On the client side, agents worked to create positive matches between models and clients such as fashion magazines, TV shows and cosmetic companies. In this way, agents took care of administrative tasks such as billing for the jobs, promoting models and handling details surrounding contractual agreements. For their services, agents received between 10 per cent and 20 per cent of the project fee. However, the commission structure varied between domestic and international bookings. A constant concern of smaller modeling agencies was the practice of poaching rising talent. As new models gained fame, larger agencies attempted to lure them away by offering them larger clients and taking a smaller commission. Although boutique agencies had local networks necessary to work with rising talent and their parents, many models disregarded these relationships in favour of the significant resources available at larger agencies. The number of models in an agency depended on the demand brought in by its agents. Essentially, the capacity and skill of the agents determined an agency’s revenue. The agents also identified and managed talent. In the process of identifying and developing a model, agents developed a strong bond with the models and became trusted managers. As a result, when agents left their firms for competing organizations, the models would typically follow along. For example, Chanel Iman left Ford Models when her agent joined a rival agency.3 The 20 year old was a rising superstar who had contracts with a number of high-end brands. However, she valued her relationship with her agent more than the doors
2 3
See the Association of Model Agents Website: www.associationofmodelagents.org, accessed May 2010. See: nymag.com/daily/fashion/2010/03/_chanel_iman_will_reportedly.html, accessed May 2010.
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group of models. Except for models who had not yet finished growing, high fashion agencies often stipulated height and body shape requirements. For example, the Association of Model Agents suggested that women should be at least 5’8” (173 cm) tall and have bust, waist and hip measurements of more or less 34”−24”−34” (86 cm−61 cm−86 cm). Men should be at least 6’0” (183 cm) tall and have a chest measurement of 40” (102 cm) and an inseam length of 33” (84 cm).2 Agencies’ clients had strong preferences for standards close to these.
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When I left Wilhelmina, about 90 per cent of the models I had originally signed were willing to leave with me. They didn’t care that Wilhelmina was an industry powerhouse. They only cared about the relationships we had developed. However, I was moving to another country and they were unwilling to deal with the complexities that would involve. I was also hesitant to take them, since I was unsure of my ability to accurately represent them to New York clients when operating in London, Ontario. It’s quite important to realize that the agent-model relationship is sacred in this industry. No agent in her right mind will do anything to jeopardize her models’ careers! As modeling agencies grew, they required agents who could consistently identify top talent. The ability to uncover hidden beauty through open calls and other recruiting efforts was a coveted talent and one of the reasons why top agents were rewarded so handsomely. Because the success of an agency hinged upon agents’ effectiveness when recruiting great models and obtaining projects, it was vital that these companies supported, developed, and attracted skilled agents. Ultimately, agents were among a modeling agency’s most important assets. Because an agency’s financial health depended on models gaining work, cash flows were often unpredictable. This uncertainty was a major source of bankruptcies in smaller agencies. New agencies required significant working capital and revenue in order to survive. However, as agencies grew, they typically focused on a small number of revenue-generating activities. In addition, as an agency’s models became more successful, it could get them signed to international agencies. This new ‘guest agency’ would act as the model’s representative in markets where the ‘mother agent’ did not operate. The ‘mother agent’ would collect up to 10 per cent of the project fee under this scenario (see Exhibit 1). This setup was a distinct advantage for boutique agencies such as ANMM. The modeling industry had benefited significantly from the advent of the Internet. Many of an agency’s typical costs, such as mailing headshots, booking models and paying for photo shoots had been significantly reduced, and, as a result, agents and models both experienced increases in income. Although not everyone could become a model, the agent function was experiencing an influx of participants because agents required no certification and had no unique skills.
COMPETITION
Despite not being located in Toronto, a bustling metropolitan area with about five million people, ANMM still faced significant competition for talent from large agencies such as Ford Model Management, Elite Model Management and Next Model Management. Because these agencies all had offices in Toronto, close to many of the industry’s major clients, they had a competitive advantage when it came to attracting young models. However, because many young models did not live in the Toronto metropolitan area, agencies such as ANMM had an opportunity to recruit and develop promising young models from underserved areas. As Norris put it:
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Ford Models had opened for her. Agent defection was a serious challenge facing the industry. It usually caused negative publicity and affected the agency’s revenue as well. Norris commented on the loyalty of models:
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However, ANMM still had notable agency competitors in Southwestern Ontario, and the agency faced some strong competition within its modeling workshop revenue stream.
Elegance Schools Inc.5
Elegance Schools Inc. (ESI) was well established in the London market, having been in business since 1976. ESI prided itself on providing top quality instruction to young models. It was a member of the Modeling Association of Canada, the Models Alliance Group, and the Better Business Bureau. The firm was registered as a private career college under the Private Career Colleges Act of 2005. As outlined on its website: “(ESI) has graduated eight Miss Londons, six Miss Teen Londons, Miss Teen Canada ’89, Canada’s only Miss Universe ’82, and Canada’s only 1994 finalists in Teen Magazine finalists.” ESI offered a variety of courses, including classroom and practical training for models. The agency kept the number of participants to a minimum during these courses in order to maximize the level of attention each student received from the instructors. ESI was also reputed for having instructors with many years of experience, some of whom were currently working in the fashion industry. The school’s directors firmly believed their instructors’ expertise and experience were key success factors that allowed them to develop many prominent models. Alongside modeling courses, ESI also offered esthetics courses, which ran for 39 weeks per year that required a full-time commitment from the participants. Despite its history in London, the school’s course offerings were approximately 50 per cent cheaper than those of ANMM (see Exhibit 2). Regardless, ANMM believed that ESI’s strong track record made it a powerful competitor in the Southwestern Ontario market.
Exclusive Models
Exclusive Models (EM) was another firm that focused on the Southwestern Ontario market. This agency did not have a specific industry focus and did not provide any training or development services to its models. Like ESI, EM was much older than ANMM, having been created in 1986. Norris contrasted what she saw as the key differences in the recruiting policies of EM and ANMM: Exclusive hires anybody and everybody. The firm doesn’t have height requirements and doesn’t even test potential models! Their “models” work as hostesses at trade shows. Mine walk the runway in New York. They focus on quantity; I focus on quality. Having worked as a talent scout, I know how to spot, develop, and sell models. Exclusive doesn’t. End of story.
Kitchener, Waterloo and Cambridge were three adjacent communities some 100 kilometres west of Toronto, with a combined population of about 440,000. London, with a population of about 350,000, was about 200 kilometres west of Toronto. Sarnia, population 71,000, was about 300 kilometres west of Toronto. All these communities were connected by major, multi-lane, divided highways. 5 Much of the material in this paragraph came from Elegance Schools’ Website: www.eleganceschools.on.ca, accessed, May 2010.
4
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Three specific cities are ripe for an agency like mine: London, KitchenerWaterloo-Cambridge, and Sarnia.4 These areas have great model talent that requires a scout that can train and connect them to premier clients, both domestically and internationally. Having been a top scout, I know how to identify talent, and that is the true source of my competitive advantage over the bigger, more established firms in Toronto.
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Exclusive claimed that its models had worked with all the major hair and beauty product companies, and had appeared in numerous publications and many fashion shows.6 According to the agency, its models were booked into events every week across Ontario and Michigan. The company specialized in booking models for print ads, flyers, bikini contests, fashion shows, photo shoots, trade shows, beauty pageants, calendars, talent competitions, and live theatre.
NEXT Canada
NEXT had grown steadily since 1946, when it was founded in Paris.7 By attracting the right talent and matching them with the right designers in what many called “the fashion capital of the world,” NEXT was able to establish a strong foothold in the industry. Since then, the company had expanded geographically, opening a branch in Montreal in 1999, one in Toronto in 2000, and another in Vancouver in 2010. To attract new talent, the company held weekly open calls in its Canadian offices. By 2010, NEXT Canada had one of the largest portfolios of Canadian models in the industry. Candidates who were successful had the opportunity to train with top models and travel abroad for modeling projects.
Elite Model Management
Elite Model Management (Elite) was a Paris-based modeling agency founded in 1972, along with a sister agency, John Casablanca’s Modeling and Career Centers.8 In 2010, the company represented over 800 models and had expanded its reach by setting up offices in 35 other locations, including one in Toronto. Elite was known for having recruited and managed stars such as Cindy Crawford and Cameron Diaz; the company had significant market share and exposure in the industry. Elite created the Elite+ Division to improve the management of its high-demand models, most of whom worked in the entertainment and high fashion industry. When an agent asked about the models’ main reason for joining Elite, many indicated that the success of current and past models was one of the most important factors to consider when making an agency choice.9
Ford Models
Established in 1946, Ford Models had long been one of the most prominent modeling agencies in the world. Recently, the company began promoting itself through YouTube with a string of fashion-tips and self-help videos straight from the fashion industry.10 Beginning in 1980, the company organized the annual Ford Supermodel of the World Contest; the winners of the competition would be groomed to
6 7 8
Exclusive Models’ homepage: http://www.exclusivemodels.net, accessed May 2010. Much of the material in this paragraph came from NEXT Canada’s homepage: http://www.nextmodels.ca, accessed, May 2010. www.elitemodel.com/casting_room.aspx?city=TO&dtc=20100403125242, accessed May 2010. 9 www.newyork.bbb.org/SitePage.aspx?site=24&id=c88e49e6-031e-4c67-a2fd-daad7071cc9d, accessed May 2010. 10 See: www.supermodeloftheworld.com, accessed May 2010.
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That firm was able to succeed simply because in the past there weren’t agencies like mine who had the ability to identify top talent. Many of the quality models that would have gone to Exclusive are now coming to me because of my track record. Despite being only two years old, I’ve already developed two models that have booked international work and are on the cusp of being signed to one of the major fashion designer’s North American campaigns. I’m talking about Calvin Klein, Dolce & Gabbana, and Ralph Lauren.
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Despite ANMM’s geographic location, Norris faced stiff competition from all directions. A key success factor for developing her niche market lay in determining how to attract potential models and not losing them to the competition.
ANITA NORRIS MODEL MANAGEMENT
Norris grew up in London, Ontario. When she was 18, she moved to New York to pursue a successful career as a fashion model. She then moved into her second career as a scout at the prestigious Wilhelmina agency, where she honed her ability to identify and develop young talent. She worked directly with many of the biggest names in the modeling industry. Rising through the ranks to the position of Head of New Faces and Development in seven years, Norris was well on her way to becoming a central player in the New York modeling scene. However, she believed that her skills could be put to better use in her hometown. In 2007, she decided to move back to London, Ontario, and open her own agency. ANMM focused on the untapped potential within Southwestern Ontario, and the firm experienced rapid growth. As of 2010, it was staffed by two interns and had 26 female and eight male models. Many of ANMM’s models had been signed to guest agent contracts in Toronto, and several had even been signed to international modeling agencies. Norris also worked with a network of professional photographers and make-up artists in London and Toronto. Exhibits 3 to 5 show selected financial information for ANMM, which indicates that the firm’s financial performance varied considerably from year to year. The firm achieved revenue growth of 150 per cent from the first to the second year and was on track to produce similar growth in its third fiscal year. Most of this growth had come from increased sales of modeling courses and commission revenues. As the firm continued to grow, Norris wanted to ensure that the growth was organic and achieved according to a unified, coherent strategy. Norris had a strong opinion about this idea: Without a strategy, ANMM will look like Frankenstein’s monster in 10 years. The firm will be chasing every business line and will have revenue streams attached to it that it really has no business pursuing. My desire is for the firm to resemble a finished puzzle in 10 years, with all the pieces neatly in place. In order to get that done, I have to think deeply about what I’m good at and where I want to take the firm.
ANMM’S BUSINESS MODEL
ANMM had four distinct revenue streams: modeling workshops, signing and booking models, model development, and speaking fees.
Modeling Workshops
ANMM ran approximately eight to 10 workshops per year for different gender and age groups. Exhibit 6 gives details for one workshop. The courses were designed by Norris and incorporated many of the key
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
become successful models. Since then, more than 60,000 hopeful candidates gathered from around the world to claim the top spot. Chanel Iman became a Ford model after she placed third at the contest in 2006. Ford Models also used its extensive global network to place its models and celebrities on large projects.
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In fiscal 2010, ANMM generated approximately 60 per cent of its revenue from workshops. As an added benefit, ANMM was able to recruit approximately 85 per cent of its models from the workshop participants. As Norris put it: Despite having 200 or more people run through my classes each year, I recruit only three or four new models. This is because I look for quality and talent. These characteristics are first and foremost in my mind. I could sign 50 models this year and get them menial work, but I want models that will be in Vogue, not the London Free Press. As more people attend the classes, I don’t anticipate the number of new models increasing, since I use the workshops mainly to diversify my revenue sources. The demand for ANMM’s modeling workshops had expanded quickly since 2007, and Norris wondered whether she should hire another instructor to teach the courses. Although this seemed like a good idea, Norris was unsure whether the participants were drawn to her courses because of the content or because of her personally. She also wondered whether hiring an instructor would change the quality of the workshops. ANMM was also considering expanding by offering these courses in other cities (Exhibit 7). Two specific cities seemed ideal for such expansion: Kitchener-Waterloo-Cambridge and Sarnia. These cities had similar demographics to London, and there appeared to be minimal local competition. Exhibit 8 shows selected data; the exhibit includes data concerning Guelph and Brantford because of the proximity of those cities to Kitchener. In addition, such a move would fit well with ANMM’s original corporate objective of dominating the Southwestern Ontario region. Norris’s comments on the subject revealed the numerous issues involved in this expansion: What would we need in place to expand successfully? Would we need offices in each city? How much would that cost? Would we hire instructors? If we did, we run into the same problem as expanding within London. There may be a chance that participants are interested in being taught by me, or by someone with a reputation in the modeling industry, rather than by an anonymous instructor. What would the reporting structure look like? I’m not so sure that I can actively manage all three locations physically. Perhaps we would have to hire a site manager. How much would that cost, and what would be his or her responsibilities? Even beside all that, would this expansion help me get to my goal of becoming a full-service modeling agency? Although there were clearly many benefits to expanding, ANMM was worried about diluting its brand image by hiring instructors. However, this business line had significant growth prospects as Norris projected it to grow by approximately four per cent annually for the next five years if she did not expand. If ANMM expanded into one city, workshop revenues were projected to increase by 100 per cent in the first year, and three per cent annually for the next four years. If ANMM expanded into both cities, ANMM projected workshop revenues to increase by 150 per cent for the first year and three per cent annually for the next four years.
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
tips and tricks that had made her a successful model. Although the workshops for men, women, and children varied in content, all were designed to build a solid base of modeling skills. They typically ran on a daily basis for two weeks, from 7 p.m. to 9 p.m., and they were taught by Norris at ANMM’s office in London.
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Commissions Revenue
When a new model joined the agency, ANMM drafted a standard agency contract that guaranteed the firm a certain percentage of the model’s income. For models who were booked within Canada, the rate was 15 per cent. The rate was 10 per cent for models who were booked internationally. This difference arose from costs involved when developing a domestic and international model. Domestic models had to be developed by the mother agency. As such, ANMM had to pay for the model to do an initial photo shoot, which involved renting a location and hiring a photographer, makeup artist, and lighting specialist. These fees totaled approximately $6,000 on average. Once the photo shoot was completed, ANMM had to sell the model to clients around the country by sending the model on test shoots. To do this, ANMM had to pay for travel, food, and accommodation. Although these expenses varied from model to model, they still placed a significant strain on ANMM’s finances. Although ANMM also had to develop international models, the nature of development was significantly different. Photographers, who would typically charge ANMM, often would not do so for these models because photographers were always interested in shooting up-and-coming young models for free. Thus, a big portion of the development fee was removed immediately. Moreover, ANMM used the photographs of its models to make a pitch to international guest agencies, such as IMG Models, where ANMM had been able to place several models. When a model signed a contract with a guest agency, the guest agency paid for all the travel fees involved in booking a client. ANMM, as the mother agency, still received 10 per cent of the booking fee. Norris outlined the hardest part of signing and booking models: The contracts are standardized and the development process is quite efficient, but, as with any industry reliant on talent, the hardest part is obtaining quality candidates. Of all the potential models out there, I’d say maybe two to five per cent are international-level supermodels. This forces larger agencies to rely on smaller, regional players like myself in order to expand their geographical presence. Another issue that arises is the collection of accounts receivable. Although contracts have specific collection periods listed in them, agencies tend to operate on their own schedules. I am basically stuck waiting for cash from bookings that occurred months ago. This not only hurts my business but, more importantly, my relationship with my models. A significant part of my free time is spent on the phone with my international models since they tend to be 18- to 20-year-old girls who are temperamental and hate listening to authority figures. These girls are doing $30,000 photo shoots but refuse to spend half an hour exercising! I had a case where a Japanese cosmetics company actually sent one of my models home because she hadn’t been following her diet. It’s embarrassing to me and typically spells the end of the model’s career. ANMM had a roster of domestic and international talent that had been performing quite well. Commissions for 2010 were approximately 20 per cent of the total revenues; Norris believed they were poised for rapid growth in the future. Norris estimated that the management of this business line took up approximately 80 per cent of her time, and she knew that she would require extra administrative help in order to expand. ANMM had collected administrative salary data from around the Southwestern Ontario region (see Exhibit 9) in order to estimate how much it would have to pay for such help. Norris also knew that an industry study11 had projected that the modeling industry as a whole would grow at 4.2 per
11
“Talent and Modeling Agencies Industry Profile,” First Research, Quarterly Report, November 9, 2009.
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Developing Models
For potential models who ANMM did not sign, ANMM provided model development services, including a full-service photo shoot at the model’s expense. The vast majority of people who used this service had already attended an ANMM workshop. Many models in the area would come to ANMM for this service before they approached Toronto modeling agencies hoping to get signed. Model development was currently a small but consistent source of revenue for ANMM. Norris was worried that if she expanded this segment of her business, it would put her in direct competition with firms like Elegance. Norris was also determined that ANMM would eventually be a full-service modeling agency. She wondered whether it was possible to expand this business line temporarily until ANMM was large enough to focus solely on signing models. Norris believed that if she spent between $5,000 and $10,000 to hire a freelance photographer and market the service, she would experience an annual demand of 100 to 150 people for ANMM’s development services. Although expanding to other cities would increase the demand for these services, ANMM did not want to market these services in the Waterloo region or in Sarnia, as the firm did not have the right contacts to deliver a high-quality offering. This past year, development revenues accounted for 15 per cent of ANMM’s total and had 50 customers at $450 each.
Speaking Fees
Because of her success at Wilhelmina, Norris was a popular speaker at conferences and tradeshows where she spoke of her experiences as a model, scout, and business owner. She noticed that many people who came to hear her were particularly interested in her ideas on how to grow a modeling agency, as she had when she was at Wilhelmina. Although speaking made up only about five per cent of ANMM’s revenue, Norris thought she could develop her experience into a consulting service for small to medium-sized agencies looking for insight into how to become an industry powerhouse. She had been approached by a modeling firm in Toronto for such a service and was considering the idea of actively marketing herself in this fashion. Although Norris had no experience in this type of business, she wondered how she would go about building the infrastructure necessary to make it a success. Moreover, Norris was worried that the time required might affect her ability to manage ANMM’s main business. Also, adding this business line might diversify ANMM’s revenue streams, but Norris questioned how it would fit into the rest of the business. One possible solution was to set up a separate company in order to pursue this venture, but the underlying issues still weighed heavily on Norris’s mind. Lacking any concrete data to make projections, ANMM projected that if it committed to this business line, it would experience a 20 per cent annual growth rate for the next five years. If it did not, ANMM expected to achieve a growth rate of between three per cent and five per cent annually.
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cent annually for the next five years. However, she believed that ANMM’s commissions would grow much faster.
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Other Opportunities
The growth opportunities Norris was exploring were ones in which she had some form of prior experience. Norris thought there might be other avenues for growth that she was not currently pursuing, and she was interested in exploring potential ideas. Her main goal was to ensure the financial viability of the company long enough for her model base to mature. This would allow the cash flow from commissions to be stable enough for ANMM to rely on it as a main source of revenue. In addition Norris was interested in adding services that would be of interest to her model roster so that the firm could reduce the risk of poaching. This would allow ANMM models to feel that they were valuable and would also allow the firm to expand without worrying too much about potential defections. One of ANMM’s contacts at a major Toronto modeling agency recently mentioned the idea of ANMM being acquired, which would see ANMM become the London branch of another agency, possibly from Toronto, and could allow Norris to continue to run the business. This would also mean that Norris would become a salaried employee. Norris was concerned that the sweat equity she had invested might not be properly recognized. Although she believed the idea might give the firm some much needed capital, Norris was wary of working for another large agency. Perhaps, she thought, there was a way to structure a deal so that the other agency was only a shareholder and not an outright owner.
THE DECISION
Deciding which business lines to focus on would require a sound mix of quantitative and qualitative analysis. Norris was determined to put together a growth strategy that would enable her to retain her core principle of quality over quantity. Specifically, the combination would have to fit into her overall objective of becoming a full-service modeling agency. Norris was also concerned about the amount of time each business line would take up on a daily basis. She was already working seven days a week and did not think she had much more time to devote to the business. The time she currently spent on the business had to be divided between the different business lines. A secondary problem was the amount of cash necessary for the expansion. ANMM, functioning as an agency with very few assets, would have difficulty obtaining a bank loan at a reasonable rate. Private investors were suspicious of firms with no hard assets to fall back on in case of bankruptcy or to offer as collateral. Norris was also interested in outlining the factors that had made ANMM a success thus far. She was particularly concerned with understanding what she could change without negatively affecting her business. This assessment would help her develop a strategy that would retain what worked and improve those factors that did not. The issues surrounding each business line were clear to Norris as she settled into the Ligne Roset sofa in her office. Norris was reviewing her latest income statement and was aware of the success she had achieved; however, she was concerned about her ability to continue to maintain the same pace. She knew that the corporate strategy she developed today would affect her company’s fortunes over the next five years. Norris mulled over all of her firm’s issues, took the last sip of her caramel macchiato and put pen to paper.
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
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Exhibit 1 RELATIONSHIP BETWEEN MOTHER AGENCY AND GUEST AGENCY
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Mother Agency (ANMM)
Guest Agency
Region A Region B Region C
Mother agency scouts, signs, and develops models
Guest agency acquires models under a contract with mother agency. Guest agency has access to areas outside the reach of smaller (mother) agencies
Typical cash flow arrangements: • Client pays 100 per cent of the project fee • Guest agency takes 5 per cent of the total • Mother agency takes 10 per cent of the total • Models get 85 per cent of the total
Source: Case writer’s estimates.
Exhibit 2 DETAILED INFORMATION ON ELEGANCE MODELING SCHOOL’S COURSE OFFERINGS Pre-Teen Workshop Price $250
● Skin care, sun care, grooming ● Manicure and pedicure ● Make-up applications for young teens ● Wardrobe care and planning ● Communication skills and etiquette ● Self image and self confidence ● Industry 101 ● Runway and photography movement ● Make-up for runway and photography ● Auditions and go-sees ● In-class informal photo shoot
Teen Workshop $325
● Visual poise, body image and maintenance ● Skin care, sun care, grooming ● Manicure and pedicure ● Daytime and evening make-up applications ● Wardrobe care and planning ● Communication skills and etiquette ● Self image and self confidence, business skills ● Industry 101 and professionalism ● Runway and photography movement ● Make-up for runway and photography ● Commercial and editorial work ● Promotional work ● Auditions and go-sees ● In-class informal photo shoot
Offering ● Visual poise, body image and maintenance
Duration April 10, 2010 to May 8, 2010 (Saturdays 10: a.m. to 2:30 a.m.)
April 10, 2010 to May 8, 2010 (Saturdays 10 a.m. to 2:30 a.m.)
Source: www.eleganceschools.on.ca/elegance/model/workshops.asp, accessed May 2010.
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Exhibit 3 INCOME STATEMENT FOR THE 314-DAY PERIOD, MAY 1, 2009, TO MARCH 10, 2010 Revenues Model workshops Commissions received Model development Speaking fees Total Cost of Goods Sold Commissions paid Hair and makeup Photography Total Gross Margin Expenses Advertising Entertainment Office supplies Professional fees Lease Telephone Travel Total Profit
Source: Company files .
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Exhibit 4 BALANCE SHEET AS OF APRIL 30, 2009 Assets Current assets Bank Accounts receivable Undeposited funds Total current assets Fixed Assets Computers and hardware Furniture and equipment Accumulated amortization Total fixed assets Liabilities Current liabilities Accounts payable Credit cards Due to Anita Norris GST payable PST payable Total liabilities Equity Retained earnings Share capital (Class A special) Share capital (common) Net income Total equity Total Liabilities and Equity
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
Exhibit 5 SELECTED FINANCIAL RATIOS FOR FISCAL YEAR 2009 Income Statement Net sales Gross profit Operating income Net profit after tax Selected Ratios Cash to total assets Quick ratio Assets to sales Accounts receivable period Interest coverage Sales to working capital
Source: Company files.
ANMM 100.0% 65.80 13.20 10.00
Industry Average 100.0% 50.70 5.80 4.60
0.68 0.81 0.48 13.4 days N/A N/A
0.16 1.35 0.47 0.7 days 10.3 times 1.8
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Exhibit 6 ANMM MODEL 101 CLASSES
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
Details Self Image
● Developing self-esteem ● Projecting self confidence ● Positive body image ● Personality and communication skill ● Individual style ● Developing your personal style ● Planning and coordination ● Grooming ● Skin and body care ● Hand and nail care ● Hair care and styling ● Walking, posture and poise ● Social graces and etiquette ● The model’s image
Wardrobe
● Wardrobe and accessories ● The model’s tote bag
Beauty
● Health, nutrition and fitness ● Make-up techniques and trends ● Day/natural make-up ● Fashion show and stage make-up ● Photo movement: the camera and you ● Live mannequin and freeze modeling ● Haute couture video lecture ● Music and choreography ● Turns, techniques and styles
Photography and Photo movement Runway
● Markets in photography ● Building your portfolio ● The model’s photo shoot and testing ● Markets in runway
● Fashion shows ● Behind the scenes: fittings and rehearsals
Acting
●On-camera training ● Audition techniques for TV and film ●Talent headshots and résumés ● Improvisation ● Monologues
● Script and scene study ● Cold readings ● TV commercials ● Markets in television and film ● Fashion and music videos
Age Group Start Date
Children’s Group (8-11 yrs.) 7 p.m. to 9 p.m., Tuesdays September 21 to January 11, 2011
Teen-Adult Course (12 yrs.+) 7:30 to 9 p.m., Tuesdays September 21 to January 11, 2011
Source: www.anitanorrismodels.com/index/php/become_a_model/model_101, accessed May 2010.
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Exhibit 7 PROJECTED ANMM ACTIVITY UNDER DIFFERENT SCENARIOS Women Men Children
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
No expansion One-city expansion Two-city expansion
Source: Case writer’s projections.
5 10 13
3 5 8
1 2 3
Exhibit 8 DEMOGRAPHIC DATA FOR LONDON AND SELECTED COMMUNITIES1
London
Population Female/Male Ratio Median Age (Years) Portion 65 Years of Age and Over Portion Below 15 Years of Age Population Growth Rate4 Median Annual Income5 352,395 1.08 38.2 13.6% 17.3% 4.7% $28,169
Aboriginal 1.45% Visible Minority Status6 Chinese 1.80% South Asian 1.78 Black 2.19 Filipino 0.51 Latin American 2.22 Southeast Asian 1.06 Arab 2.21 West Asian 0.63 Korean 0.56 Japanese 0.14 Visible Minority Not Identified Elsewhere 0.22 Multiple Visual Minority 0.43 Not a Visible Minority 86.25
1
The data in this chart originated in the 2006 census of Canada. Metropolitan areas were used whenever available. The census relies upon self-reported data; it is s serious offence not to complete a census form or to provide false information. 2 Waterloo Region includes the cities of Waterloo, population 97,475; Kitchener, population 204,668; and Cambridge, population 120,371. 3 Guelph is a city about 20 kilometres east of Kitchener. Brantford is a city about 35 kilometres south of Kitchener. 4 The ratio of the populations in the 2006 and 2001 censuses. 5 The median income is for people 15 years old and over with earnings. 6 The Employment Equity Act defines visible minorities as “persons, other than Aboriginal peoples, who are non-Caucasian in race or non-white in colour.” The data are based on a sample. Source: 2006 Canadian census, www12.statcan.gc.ca, accessed May 2010.
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Exhibit 9 SALARY INFORMATION FOR AN ADMINISTRATIVE CLERK Location Windsor-Sarnia Kitchener-Waterloo-Barrie-Guelph London-Woodstock Hourly Wage Average High $15.80 $23.20 16.35 22.65 16.05 23.45
Authorized for use only in the course BSAD 471 Strategic Management at St. Francis Xavier University taught by Brad Long from Jan 05, 2015 to Apr 17, 2015. Use outside these parameters is a copyright violation.
Low $10.50 11.50 11.00
Source: www.labourmarketinformation.ca/standard.aspx?ppid=43&lcode=E, accessed March 2010.
