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TRANSCRIPT
Senior Finance Manager of Rio
You are the Senior Finance Manager at Rio Fashions, A Fashion Retailer.
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Role of the Senior Financial Manager
Your role includes the following activities from each of the subjects in the CIMA Strategic Level
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E3
• Analysis of strategic options
• Recommendation & justification of analysed strategic options
P3
• Risk associated with strategic options needs to be scrutinised
F3
• A financial strategy needs to be formulated ensuring the strategy is adequately funded
Fashion Industry
Fashion industry is multibillion-dollar global enterprise devoted to the business of making and selling clothes.
Some observers distinguish between the fashion industry (which makes “high fashion”) and the apparel industry (which makes ordinary clothes or “mass fashion”), but by the 1970s the boundaries between them had blurred.
Fashion is best defined simply as the style or styles of clothing and accessories worn at any given time by groups of people.
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Worlds Largest Fashion Retailers
Ranking is based on Forbes - Global 200
Which ranks of the World’s largest Public Companies
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Source: http://www.forbes.com/global2000/
Name – Rio
Industry – Fashion Industry
Home Country – Sealand
Inception – 1990
Flotation – 2007
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Company Profile
Operations – Principally a fashion retailer, but a key part of its business model is managing a complex distribution network. – The majority of Rio’s products are manufactured by carefully selected outsourced suppliers. – It also has its own production factory based in northern Europe. Rio also operates its own distribution centres and manages a road haulage fleet of trucks in Europe and in Asia.
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Company Profile
Revenue – € 2,557 million
Gross Profit –€ 401 million
Net Profit – € 286 million
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Company Profile
(2015)
Rio – Company History
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Founded by Rita Irina Oliviera
First named as Rio Stores
First store opened in Capital city of
Sealand
Timeline
1990
2015
Flotation on a major
European stock exchange 2007
Rio operates 976 stores
across several European &
Asian countries
after 2001
New designers & experienced
managers recruited
Raising loan finance
2010 Launched website for online sales
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Rio and Rita
Rita Oliviera’s born in 1957 was 33 years when she started the Rio in 1990. She was not very young which means she should have work for at lease of 10 years.
Company started growing for 12 years (1990-2002) with the cash generated from Operations and Bank loans.
In the year 2001 it was clear that the shortages of long term fund and lack of senior management skills.
In the year 2007 Rio registered under a major European stock exchange.
There will be a huge impact if Rita resigns from Rio; She is the founder
She holds 20% of shares
CEO of Rio with a greater knowledge on Business and Industry
She was running the business by herself till the IPO happened (2007)
She is also a Fashion designer which adds value to Rio
Rio’s Board & Senior Management
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Name Designation Age Year of Joining
Rita Irina Oliviera CEO 58 1990
Cedric Pirlo Non-executive Chairman 56 2002
Stella Erikson Finance Director 52 2003
Mani Kaur Logistics Director 44 1993
Carly Edmonton Marketing & Merchandising Director
49 2005
Diana Templeman IT Director 42 2007
Kamal Singh Procurement Director 53 2006
Linda Lee Human Resource Director 34 2011
Sabine Roos Head of Property 29 2013
Ralf Helber Head of Franchising 38 2008
Veronique LeFevre Head of Design 47 2012
Stavros Axis Head of CSR 39 2010
Most of the Board of directors have joined Rio before the IPO in 2007
Fast Fashion
Fast fashion is a contemporary term used by fashion retailers to express that designs move from catwalk quickly in order to capture current fashion trends.
Fast fashion clothing collections are based on the most recent fashion trends presented at Fashion week in both the spring and the autumn of every year.
Emphasis is on optimizing certain aspects of the Supply chain in order for these trends to be designed and manufactured quickly and inexpensively to allow the mainstream consumer to buy current clothing styles at a lower price.
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Fast Fashion
This philosophy of quick manufacturing at an affordable price is used in large retailers such as H&M, Zara, Peacocks, and Topshop.
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Rio’s stores sell well designed, quality products.
Rio differentiates itself from other fashion retailers by its innovative, up-to-date designs.
Rio also provides an excellent customer experience, due to attractive stores and high levels of customer service.
Rio does not compete on price. The prices charged by Rio
reflect the reputation which the brand has established.
Rio’s Fast Fashion Business Model
Rio sells only its own designs under the ‘Rio’ label in its own stores, which range from high street stores to out of town and city centre shopping malls. Rio’s basic business model is based on the ‘fast fashion’ concept, whereby designs are prepared and approved within Rio.
Rio’s Fast Fashion Business Model
Zara
Zara is a Spanish clothing and accessories retailer based in Arteixo, Galicia, and founded in 1975 by Amancio Ortega and Rosalía Mera.
It is the flagship chain store of the Inditex group, the world's largest apparel retailer.
Zara was described by Louis Vuitton Fashion Director Daniel Piette as "possibly the most innovative and devastating retailer in the world.“
Zara has also been described as a "Spanish success story" by CNN.
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Zara Responding to Consumer Trends!
Spanish apparel company Zara has built its strategy around consumer trends, embracing the fast-changing tastes of its customers.
To do this successfully, Zara has developed a highly responsive supply chain that enables delivery of new fashions as soon as a trend emerges.
Zara delivers new products twice each week to its 1,670 stores around the world. This adds up to more than 10,000 new designs each year! It takes the company only 10 to 15 days to go from the design stage to the sales floor.
Because of this streamlined model, Zara is not forced to be ahead of the curve. Rather, they exist on the curve, evaluating trends first, then following.
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Pricing
From the Pre-seen:
The above statement in the pre-seen states that in order for Rio to stay competitive it needs to consider its pricing strategies as well.
‘Primark’ is a company which has an aggressive pricing strategy giving out fashion at ‘cheap’ prices.
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‘’ However, whilst price is still an important determinant of customers’ buying behaviour….’’
Primark’s Pricing Model
An aggressive pricing strategy practiced by Irish fast-fashion retailer Primark is a threat to its competitors.
Primark is long known to European shoppers as a place to find affordable yet stylish additions to their wardrobes.
Primark’s prices are drastically lower than any other U.S. competitor in the fast-fashion market such as H&M, Old Navy and Forever 21.
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Primark’s Pricing Model
The Irish chain offers lower prices by about 40% from H&M, according to a Sanford Bernstein analysis.
And while Old Navy and Forever 21 may only share overlapping consumer segments with Primark, their prices are still on average 30% and 20% percent higher, respectively.
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Why do we grow Franchised stores? 21.6% growth in the number of stores compared to the year 2014.
This could be due to expansion of the Brand around the Globe.
Franchising would increase the value of the brand and market share however there is also a high franchising risk when it comes to Quality and standard.
Since the size of the stores are not given it is difficult to accept the given growth rates of the managed and franchised stores.
Rio’s operating profit margin is 15.7 % for the year ended 2015. The analysis on each type of Sales given below.
Sales Growth of Rio
€’million Year ended 31 Dec 2015
Year ended 31 Dec 2014
% growth in sales revenue
% growth of the no of stores
Managed stores 2,323 2,070 12.2% 9.9%
Franchised stores 32 25 28.0% 21.6%
Internet sales 202 146 38.3% -
The total operating profit margin given as 15.7% cannot be the margin generated in each revenue segment.
Activity based costing should be used to identify the actual operating profit generated from each revenue segment.
Sales & Profit of Sales Channels
Year ended 31/12/2015
Revenue (€’million)
Operating Profit (€’million)
Operating Profit %
Managed stores 2,323
Franchised stores 32
Internet sales 202
Total Revenue 2,557 401 15.7%
Activity based costing (ABC)
‘’An approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs.
Resources are assigned to activities, and activities to cost objects based on consumption estimates.
The latter utilize cost drivers to attach each activity cost to outputs’’
CIMA official terminology
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Appendix 7 of the Pre-seen contains the 5 year business plan of Rio. (page 29)
When comparing the actual revenue growth percentages from 2014 to 2015, the planned figures seems to be aggressive and could prove to be unrealistic as well.
The Future of Rio
2014 2015 2016 2017 2018 2019 2020
Number of stores 880 976 1086 1211 1351 1506 1676
% growth from prev year 10.9% 11.3% 11.5% 11.6% 11.5% 11.3%
€’million
Revenue 2,241 2,557 2959 3429 3975 4607 5332
% growth from prev year 14.1% 15.7% 15.9% 15.9% 15.9% 15.7%
Operating profit 349 401 482 576 688 819 973
% growth from prev year 14.9% 20.2% 19.5% 19.4% 19.0% 18.8%
Actual Plan
Rio and the Generic Strategies
Rio’s fast fashion model doesn’t concentrate on cost effectiveness instead they are following the Differentiation concept.
Rio differentiates itself from other fashion retailers by its innovative, up-to-date designs.
Rio and the Generic Strategies
As per Michael Porter’s generic strategies there are three concepts a company could follow to compete;
Cost Leadership : This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers. This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio (price compared to what customers receive).
Differentiation : Differentiate the products/services in some way in order to compete successfully. Examples of the successful use of a differentiation strategy are Hero, Honda, Asian Paints, HUL, Nike athletic shoes (image and brand mark), BMW Group Automobiles, Perstorp BioProducts, Apple Computer (product's design), Mercedes-Benz automobiles, and Renault-Nissan Alliance.
Focus : This dimension is not a separate strategy for big companies due to small market conditions. Big companies which chose applying differentiation strategies may also choose to apply in conjunction with focus strategies (either cost or differentiation).
Real World Retail Companies
Examples of Retailers following Differentiation concept; M&S Levis Hugo Boss PVH
Examples of Retailers following Cost leadership concept;
Tesco Wal-Mart Asda Primark
Fashion Seasons
The four seasons in Europe will have less effect on Rio’s Sales as Rio does not produce for each of the seasons, but it follows a continuous fashion and style changes throughout the year.
Operations
The steps of design to finish products in a Rio Store;
Information about the latest customer trends comes directly from Rio’s
own stores on a daily basis.
Each store manager, using a tablet device and through the Point of Sales (POS) system within each store, feeds back the store’s daily sales data.
Rio aims to have any new design or modification of an existing design in the stores within three weeks.
New and updated product designs from Rio's design teams are downloaded daily, via a secure Electronic Data Interchange (EDI) system to the selected outsourced supplier’s Information System.
Rio’s design team will place a firm order based on a mixture of criteria including price, quality of material and delivery times
Manufactured products are then delivered to the distribution centre nearest to the outsourced supplier.
Transport & Logistics
From the Pre-seen:
This operation is not a core activity of Rio as its different to the main line of business.
Mani Kaur, the Logistics Director is the head of this function.
At the exam there could be possible questions relating to outsourcing of this function.
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‘’ Rio also operates its own distribution centres and manages a road haulage fleet of trucks in Europe and in Asia.’’
Revenue Analysis
Revenue from customers for
sales
Franchising fee received by Rio
The mark-up on inventory
supplied to Rio’s franchisees
Rio’s Revenue Analysis
Multi Channel Retailer
Rio operates a number of routes to market which are: Rio managed stores Internet sales Franchising
Since Rio is a multi channel retailer the online prices could be different to the in-store prices. Its highly likely that the online
store offers a lower price or prices with discounts.
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Rio’s Stores
All of Rio’s stores in Europe are managed by Rio.
However, since expanding into Asia, Rio has identified the need to operate franchised stores.
The table below shows the number of managed and franchised stores.
No of Stores at 31/12/2015
No of Stores at 31/12/2014
% growth
Managed Stores
886 806 9.9%
Franchised Stores
90 74 21.6%
Total Stores 976 880 10.9%
Rio’s Stores by Continent
No of Stores at 31/12/2015
No of Stores at 31/12/2014
% growth
Europe 838 776 8.0%
Asia 138 104 32.7%
Total Stores 976 880 10.9%
85.9% stores in Europe
14.1% stores in Asia
Rio’s Stores in Europe
Rio’s European stores are predominately in northern and central Europe
Rio does not currently have many stores in southern Europe
Rio’s Stores Setup
Rio refers to the statement that it doesn’t follow the format “Shop within a shop”. This means Rio does not currently rent space in department stores.
A store-within-a-store is an agreement in which a retailer rents a part of the retail space to be used by a different company to run another, independent store.
Sales and Demand
Over 90% of Rio’s sales revenue is generated by full price products this means Rio has developed a high Brand value which creates customers to accept the price it has been quoted on the products.
Rio’s focus on shorter lead times has allowed it to develop its high fashion principle and the scarcity of supply provides an image of exclusivity amongst its customer.
When there is a scarcity of supply the demand for the products increases which creates the customers to buy the products at it’s full price.
Internet Sales
The act of purchasing products or services over the Internet.
Online shopping has grown in popularity over the years, mainly because people find it convenient and easy to bargain shop from the comfort of their home or office.
Online shopping has revolutionized the business world by making everything anyone could want available by the simple click of a mouse button.
Internet Sales of Rio
In 2010, Rio invested over €25 million on the launch of its website to offer online shopping to its customers within the European market.
At the end of 2015 Rio’s website was fully operational across 20 of the 30 European countries in which Rio currently operates stores.
Rio’s website allows customers to view and order the full range of products they could otherwise find in its store.
In the year ended 31 December 2015, Rio achieved internet sales of €202 million.
This is a 38% growth from last year. (Year ended 31 December 2014)
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Franchising
Franchising is the practice of the right to use a firm's business model and brand for a prescribed period of time.
The Franchisee will have to pay a franchising fee.
Franchising is a network of interdependent business relationships that allows a number of people to share:
A brand identification
A successful method of doing business
A proven marketing and distribution system
Franchising
Franchised stores are managed and run by the franchisee who retains all of the profit generated by the franchised stores but must pay Rio a franchising fee and also pay Rio for supplying the products sold.
The franchisee is also responsible for working capital management, running the franchised store and all revenues and operating costs associated with running the store, such as employing store staff.
Franchising
The franchised stores are allowed to sell only Rio branded products.
Rio provides the franchisee with support, the use of the Rio brand name, all of the products it can sell and also some marketing support.
Franchisees pay Rio directly for the inventory supplied
Supplier Management
Supplier management is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions. This entails creating closer, more collaborative relationships with key suppliers in order to uncover and realize new value and reduce risk of failure.
Supplier Management
Rio operates a mixed manufacturing strategy.
Rio’s own production factory manufactures 30% of the total sales volume, 40% is outsourced to suppliers in Asia and 20% is outsourced to suppliers in eastern Europe.
The remaining 10% of Rio’s production is manufactured by highly specialist outsourced suppliers.
Rana Plaza Collapse
The 2013 Savar building collapse or Rana Plaza collapse was a structural failure that occurred in April 2013 in Dhaka, Bangladesh where an eight-story commercial building named Rana Plaza collapsed.
It is considered the deadliest garment-factory accident in history.
Dozens of consumers in the United States spoke out against unsafe working conditions found in the factory building.
People also unleashed their anger at fashion & clothing retailers that did not have any connections to that specific building, but are known to source from factories located in Bangladesh.
Analysis on Rio
Rio’s haulage fleet (transport) is a different Business hence there can be some questions expected.
Rio’s Non- current assets details; This comprises Rio’s Head Office building, fixtures and fittings in all stores, plant, machinery and fixtures at the distribution centres, Rio’s vehicle fleet and IT hardware and software.
Rio leases all of its stores and distribution centres. Rio does not believe that its lease arrangements give it the risks and rewards of ownership and these are therefore excluded from non-current assets.
KPIs
Rio has a system of indicators to measure the performance of the company.
The Balance score card can be applied to measure the performances.
This is a concept which measure Financial as well as Non-financial measures of Rio.
Four indicators such as Financial, Customer focus, Learning and growth, Internal process can be used in order to prepare the score card.
Example :
Rio monitors the ‘footfall’, which is defined as the number of customers entering all of its stores, irrespective of whether a purchase is made or not. This could be taken under customer focus so that can identify why the sale is made out or not?
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Glory Soccer Club vs. Rio Fashions
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Applicability of Strategic case study – August 2015 to Strategic case study – February 2016
August 2015 Case – Variant 1 – Task 1
Glory - Variant Summary
Signing an expensive
player to the team and it’s implications
Task
Risks of getting the player and factors
relevant to be considered
Financial impacts both positive and
negative
Application to Rio Case
Rita Oliviera could decide to get a
fashion designer who is famous in the
world of fashion as a celebrity stylist due to the novelty in her
designs.
The same questions could be asked based
on this situation.
Risks
1)We might get more sales (upside risk)
2)remove the risk that our competitor would sign her (upside risk)
3)the performance could not be worth the investment
4)risk that other designers would quit the company due to demotivation
5) If the designer doesn’t perform well we won’t have a choice but, to cancel the contract.
6) risk that the designer will not fit our fast fashion culture
Financial impacts
Positive
1)Increase in revenue from the new customers that get attracted
2) more sales from existing customers
Negative
1)increase in costs(wages, other benefit entitlements)
2)incurring a higher investment
3) Competitors recruiting more reputed designers due to our action of recruiting will make us recruit more in order to match with their position.
August 2015 Case – Variant 1 – Task 1
August 2015 Case – Variant 1 – Task 2
Glory - Variant Summary
Signing an expensive
player to the team and it’s implications
Task
Share price reaction,
communication to media
Motivating and driving team
performance and ethical implication
of misleading players
Application to Rio
The signing of the fashion designer could create a
huge uproar in the market and the investors would see this as a good sign.
However, we will have to manage with the fashion designers as this person would entitle for more
benefits and compensation than the
industry par which would lead to demotivation of
others.
Share price
1)Possibly increase
2) Rita holds 20% of shares and if she holds on to them positive signal. If not, share prices would fall.
3) 64% institutional shareholders and could be loyal to the Rio brand. If so, share price increase.
(Consider the shareholders that we have in the company and their possible reaction and then, give your view about the short term reaction and the long term reaction)
Communication to media (Key message)
This is done for the betterment of Rio; to improve our designs and to provide a better customer service (message should always be positive)
August 2015 Case – Variant 1 – Task 2
Implications for Motivating and driving performance
1)the demotivation would be higher within the team having an impact on their performance
2)other designers feeling jealous about the new designer having an impact on motivation
3)however, the new designer could also inspire to perform better
Ethical implication
-lack of integrity
[Based on the situation write practical points and then it would be better to make reference to the CIMA code of ethics]
August 2015 Case – Variant 1 – Task 2
August 2015 Case – Variant 2 – Task 1
Glory - Variant Summary
National team Participating
in international
matches
Task
Challenges in building and
motivating the national team
Predicting long term success and the use
of big data in the purpose
Application to Rio
We could decide to go for a new geographical
region (Australia or South America) and
meet new competitors of a different scale.
These questions would then be applicable. The
question could be to motivate and build a
team of store managers to operate in
the new market.
Challenges
1)Resourcing the team
2) selection of the best combination of members to the team
3) how to motivate the team members
4)rewards (financial incentives, career progression)
5)appointing a team leader
Predicting long term success
1)Delphi method
2)get the view of our experienced management team
3) past practice and similar incidents happened before
4) Rita will have a good experience in predicting results due to her involvement in the industry for a long time.
Big data
-small description about what is big data
-modes- social media, researches, industrial magazines, articles
- show how the above modes can be specifically used
August 2015 Case – Variant 2 – Task 1
August 2015 Case – Variant 2 – Task 3
Glory - Variant Summary
National team Participating
in international
matches
Task
Share price movement to the
said proposal
Viability of structure
Performance evaluation of the
new proposal
Application to Rio
If it be a share price movement it will be likely due to the fact that we go for a new region. A question on share price movement
could be expected. Also, there could be a question on how we
can evaluate the performance of the
new managers.
Share price
-consider the shareholders that we have in the company and their possible reaction and then, give your view about the short term reaction and the long term reaction
Viability of structure
1)briefly mention the current structure
2)mention the benefits and the drawbacks of the current structure
3) based on the above mention whether the structure has a viability to succeed or not
Performance evaluation of the new structure
-if we are going for a new region it is unfair for us to measure the performance of managers using financial indicators because, it is unlikely for them to gain a considerable sales amount.
Therefore, we will need to measure performance in other nonfinancial methods.
-the answer should be written based and related to the scenario specifically.
August 2015 Case – Variant 2 – Task 3
August 2015 Case – Variant 3 – Task 1
Glory - Variant Summary
Expanding the current
stadium and an implication
on possible renaming
Task
Is expansion sensible
Will scenario planning help the
decision
Is a rights issue possible
Application to Rio
The scenario could come as either to
expand our operations within
the regions that we now operate or
either go for new regions.
Expansion sensible
1) Evaluate the position of the company (cash position, ability to get extra funding, management expertise etc.)
2) Look at the related external environment factors too.
3) Based on those factors suggest whether it is sensible to expand or not.
Scenario planning
-What is scenario planning (give a brief description)
-How will it assist if we use it
Rights issue
-Advantages of going for a right issue- cost is low, we are already in stock market etc.
-will our rights issue succeed in getting enough funds
(Consider the share holders, share holder impression about the company, current share price, market condition etc.)
-If the above are favorable then suggest to go for a rights issue
August 2015 Case – Variant 3 – Task 1
August 2015 Case – Variant 3 – Task 2
Glory - Variant Summary
Expanding the current
stadium and an implication
on possible renaming
Task
Handling shareholders and
media
Will the unhappiness of the
fans matter
Implications on share price and
ethics
Application to Rio
These questions would be exactly
applicable only if we change the company
name.
Handling share holders and media
-Never give a wrong message or let anyone misinterpret.
-Inform then the current condition and always be ready to respond to them on any concern
-single point of communication
[Based on the specific scenario given the question should be answered ]
Unhappiness of Customers
-If the customers are unhappy with our new name it will definitely matter as sales will go down and they might consider moving to another brand. Customer loyalty is the key to the success of Rio.
Share price and ethics
- consider the shareholders that we have in the company and their possible reaction and then, give your view about the short term reaction and the long term reaction
- Based on the situation write practical points and then it would be better to make reference to the CIMA code of ethics
August 2015 Case – Variant 3 – Task 2
August 2015 Case – Variant 3 – Task 3
Glory - Variant Summary
Conflict in internal
management between the chairman and
the team manager
Task
Risks associated with chairman of
Glory
Process management
Team managers accountability
Managing working relationships
Application to Rio
It is possible even at Rio where the
internal parties could make
decisions in their own accord without
proper processes and streamlined decision making.
For Rio it could be the intervention of
Rita.
Risks associated with active management
-the chairman may not be the expert
-demotivation of the management team
-the responsibility of a decision cannot be clearly allocated
-the lower level staff would get confused over whom they need to listen to.
[ based on the specific situation the points would need to be altered]
Team managers accountability
-should only be made accountable for the decisions he has made otherwise, it would lead to demotivation.
Managing working relationships
1)Explain the roles of the people who are in conflict
2)Explain the importance of their contribution to the company
3) Appoint a suitable party with good communication skills and personality to resolve the conflict and to do the communication with both the parties.
[ specific points will need to be mentioned as per the scenario ]
August 2015 Case – Variant 3 – Task 3
August 2015 Case – Variant 4 – Task 1
Glory - Variant Summary
Fault with our t-shirt supplier
Task
Response to claim
Conducting internal audit
Application to Rio
This would be a severe issue in the
context of our company, as already
the industry is heavily regulated
and as we too have processes to avoid
such situations.
Response to the claim
-The way in which to respond to a claim would be dependent on the specific claim and the person to whom we are responding.
Generally, the answer points are;
1) A responsible and a reputed person with the necessary knowledge should make the response.
2) Have a structured response and avoid adding personal views.
3) Response should be brief and clear.
Internal Audit
-Mention whether it is a compliance audit is it of another kind.
-what will be covered during the audit (scope)
-who will conduct it
-Any other specific thing that needs to be done based on the individual situation should be mentioned.
August 2015 Case – Variant 4 – Task 1
August 2015 Case – Variant 4 – Task 2
Glory - Variant Summary
Fault with our t-shirt supplier
Task
Going for manufacturing and selling t-shirts on
our own.
Risks.
Financial management and
motivational challenges and how
to overcome.
Application to Rio
We are already in the process of manufacturing some garments
(30% of total volume)on our
own.
Risks
-mention the possible upside and the downside risks that we will encounter if we go for this process.
-make the risks scenario specific -general points would be;
1)possible failure
2) Managing the operations (working capital etc.)
3)lack of expertise
4)cost
Financial management challenges
-investment, quantification of the costs and spending on them, opportunity cost, working capital, purchase of inventory
Motivational challenges
-The motivation challenges would be based on the specific situation encountered
How to overcome
-This should be suggested relating it specifically to the respective situation and the company position
August 2015 Case – Variant 4 – Task 2
August 2015 Case – Variant 4 – Task 3
Glory - Variant Summary
Fault with our t-shirt supplier
Task
Additional skills required for new
business
Evaluating performance
Application to Rio
We will need more staff, more
experienced management and also new factory
complexes.
Skills required
For Rio manufacturing of garments is familiar therefore the additional skills will mostly be in respect of
1)managing operations
2) efficiency to supply within a short time frame
3) Quality control etc.
Performance evaluation
In general, performance evaluation should cover financial and nonfinancial indicators. Others should be suggested based on the situation.
August 2015 Case – Variant 4 – Task 3
August 2015 Case – Variant 5 – Task 1
Glory - Variant Summary
Going for a new business
with a previous not-so-good party.
Task
commercial viability
Associated risks
Application to Rio
A new business for Rio would be
to go for perfumes or it could be
going for interior designing or
starting a fashion institute that
awards degrees and other courses.
Commercial viability
1) Evaluate the position of the company (cash position, ability to get extra funding, management expertise etc.)
2) Look at the related external environment factors too.
3) Based on those factors suggest whether it is sensible to expand or not.
Risks associated
-mention the possible upside and the downside risks that we will encounter if we go for this process.
-make the risks scenario specific
August 2015 Case – Variant 5 – Task 1
August 2015 Case – Variant 5 – Task 2
Glory - Variant Summary
Going for a new business
with a previous not-so-good party.
Task
Leadership challenge within divisions
Accepting company chairman as mentor
Investment
Ethics
Application to Rio
A new business for Rio would be
to go for perfumes or it could be
going for interior designing or
starting a fashion institute that
awards degrees and other courses.
Leadership challenges
-scenario specific
Mentorship and investment
-Scenario specific
Ethics
[Based on the situation write practical points and then it would be better to make reference to the CIMA code of ethics]
August 2015 Case – Variant 5 – Task 2
August 2015 Case – Variant 5 – Task 3
Glory - Variant Summary
Going for a new business
with a previous not-so-good party.
Task
best valuation method(profit or asset
basis)
Glory’s supporters relationship with
Praree city
Encouraging Glory’s fans to support Praree
city
criteria to evaluate the management team
Application to Rio
The questions are applicable except
for ones specifically
relating to Glory.
Best valuation method
-List out the possible valuation methods and it’s applicability in the context of Rio
-Suggest the best and always support your answer with justification.
Management team
-Evaluation should be structured based on the specific situation and the purpose of evaluation
August 2015 Case – Variant 5 – Task 3