Superstyle plc Q4
A problem for Superstyle plc in trying to go ahead with Gemma’s proposed strategy, from an operational point of view is that they are already operating at 100% capacity, this will mean they will need to subcontract it to someone outside of the UK even though there Index cost is 80% point more than industry average, and Superstyles faulty products is 5% point lower than industry average, this means the quality of their products is better when its been produced in the UK, this means that subcontracting may mean more faulty products which could affect the company’s brand image, which could reduce the company’s cash flow as customers may choose to it competitors as customers won’t be satisfied. This is significant as they are planning to invest £200m on this strategy, even though the current Total equity is only £83,973,000 and they hope to get the rest from selling more shares which is 58% more, but they may not be able to achieve as if there brand image lowers, shareholders may not be willing to invest the rest of the £116,027,000.
A benefit for Superstyle plc in trying to go ahead with Gemma’s proposed strategy, from a financial point of view is that by opening more stores throughout the UK this has increased their sales revenue and their share prices has risen by 220%, they archived this by rising finance as they moved from a private limited company to a public limited company, this has helped them grow finically as there ROCE is 30%, as this means there capital employed are funded by shareholders, this means they wouldn’t have to pay interest on the money they receive from shareholders, and combined with their profit margin of 20.2%, this will mean they are a profitable company that has better control over its costs. This is significant as they are planning to invest £200m to grow the business, this information should help shareholders make their minds up.
A problem for superstyle plc in trying to go ahead with Gemma’s proposed strategy, from a HR point of view is that if the strategy is approved, superstlye will employee 50% more employees and also increase the levels of hierarchy by 50%, this means they are planning to grow as they are expanding their employees, but the production staff on temporary contracts will increase by 20%point and the shares owed by employees will decrease by 2% point, this will demotivate there employees as only 70% are permanent staff, meaning each employee will only be worth (83,973/100=*3=£2,519,190/1500=)£1679.46 where as they would have been worth 83,973/100=*5=£4,198,650/100=)£4198.65, this will mean they will be demotivated according Maslow’s- safety needs, which could lead to the faulty products increasing more than the industry average. This is significant as they are planning to invest £200m internationally, and from doing a quick payback calculation, it should take them about 5years and 1 month to return their initial investment, but this may not be accurate, if they are planning to subcontract there work from outside UK companies as last time they had did this, it had increased there faulty products.
A benefit for superstlye plc in trying to go ahead with Gemma’s proposed strategy, from a marketing point of view is that they will be expanding into(36+1UK=) 37 countries throughout Europe, the middle east and the USA, according to Ansoff’s theory this is Market development, this would attract more customers but since superstlye is expanding internationally, they have spent on both primary and secondary research, this would help them see a clear picture on what their new customers need, this should help them to be successful in the propose strategy as there customers would be satisfied, this should help the growth of business. This is significant as there corporative objective is growth.
To Conclude I think shouldn’t go ahead with the proposal, because it will be very unlikely that they will be able to return their initial investment of £200m because there as they are Market developing according to ansoff, it means they are moving into a new market with the same product, this won’t be efficient as there are cultural difference between the other countries compared to the UK meaning it is unlikely they will support the product such as the UK, but from Appendix A, it is proves that there profit margin will increase leading them to receiving their initial investment because there share prices has increased by 220% resulting them to value at £16. But even though they will be able to get there initial investment, it will be a bad idea to move because they won’t be efficient aborad.