1. Plumbing and Building Suppliers
Strategic Case study
Strategic Analysis
P Plc
Plumbing and Building Suppliers
Nick Best
with

2. Welcome to Nick Best’s CIMA Strategic Case Study preseen analysis
For those of you who don’t know me, I am the Managing Director of Astranti Financial Training. I’ve tutored CIMA for over 15 years for BPP, Kaplan, First Intuition and Reed Business School and have authored a number of official CIMA study text’s and revision guides.
For Mock Exams on the latest case, free preseen analysis videos and course notes visit

3. Introduction to the case
The plumbing and building retail industry is the focus for the latest Strategic Case Study. Hardly ‘exciting’ but it’s easy to associate with – real products which are around us all the time and which anyone with a house has probably had to buy. That’s a help!
The case company P Plc is based in the UK, but operates worldwide. It’s grown through acquisition, and is profitable, but needs to rationalise its structure and divest unprofitable business units.

4. Strategic analysis – the rational model
This analysis uses the rational planning model of strategic analysis, summarised in the following diagram
Governance
& Ethics
Business Environment
FUTURE
Mission &
Objectives
PEST
5 Forces
NOW
S W
Business Strategy
O T
Generic strategies
Ansoff’s matrix
Method of growth
Internal
analysis
Stakeholder
Mapping
Product analysis
Product life cycle
BCG matrix

5. Strategic analysis – the rational model
Governance
& Ethics
The first stage of analysis is to ensure we fully understand where the organisation is heading, along with its approach to meeting stakeholder needs.
FUTURE
Mission &
Objectives
Stakeholder
Mapping

6. Mission
The mission statement sets the direction and tone of the organisation, and guides strategic decision making. The case study gives us the following mission related elements:
Corporate values:
Trading fairly and honestly
Responsive to customer needs – continuous improvement
Employing committed people
Respect for cultural diversity
Strategic objectives
Market leader
Deleverage underperforming parts of the business
Continuous improvement of products and service
Remember to use these in the exam to help guide the decisions you make on how to move the business forward.

7. Objectives and performance measurement
The objectives provide a focused target to move towards to direct planning, motivate staff and enable accurate performance measurement
We are given few specific targets in the case study. They are likely to have more specific strategic targets we are not told about. If the unseen suggests they do not, then this is a weakness in the company’s planning approach.
They do record performance, but the analysis in the preseen does not offer much valuable insight – both divisions are very similar. More detailed analysis is needed. Benchmarking of comparable retail divisions might help to identify units to sell or ways to improve underperforming divisions.
Balanced scorecard would be beneficial to P Plc with a focus on their key goals by measuring:
Customer service and satisfaction
Product quality
Innovation

8. Astranti Strategic Mock Exams
“Hi Nick,
I passed! To say that I am extremely happy is a gross understatement!
I would like to thank you for helping me cross that bridge (not an easy one) and achieve another milestone in my life. Your mocks made a big difference and really helped me - this was my 3rd attempt. There is something very right in what you are doing.
Keep up the good work!
Kind Regards,
Edmore Chinhakwe”
Passed November 2011
The biggest criteria for success in my opinion is practising mock exams based in this case study These are key since:
They help you with Time Management, a critical problem for most students
They enable you to practise a range of issues that you may see in the real exam
Our strategic mocks are tailored to this industry and give you vital exam practise
Mock marking with very detailed focused feedback is also available (don’t underestimate how important feedback on approach and technique is to you success!

9. Governance
P Plc have 6 Non-executive Directors (including the Chair) bringing independence to the board
However they have 7 executive directors – which is more than half, which is not good practise under the UK’s combined code
There is a concern about the power of the ‘Executive committee’ – are they too powerful and so making the NEDs roles insignificant.
Little evidence in the case of other key governance issues. They are listed so should conform to governance requirements and probably do, but look out for weaknesses in the unseen in areas such as:
Committees of Non-execs – Audit, remuneration, nomination
Disclosures of directors and pay
Financial reporting and control
Information for directors
All directors involved in decision making
Regular meetings with institutional shareholders
Good use of the AGM

10. Ethics and CSR
P Plc have a clear statement of ethics. This suggests this will be an important part of the exam.
Key elements of CSR for P Plc:
Staff training, development and safety
High ethical standards
Minimise environmental damage
Safe, reliable products
Look out for ethics issues in the exam, and ensure you recommend P Plc focus on continued high ethical standards in this area.

11. Stakeholder Analysis Mendelow’s Matrix
Low Interest
High Interest
Low Power
Minimal interest
Employees of suppliers
Occasional customers
Keep informed
Loyal customers
Most suppliers
Most employees and minor directors
Small shareholders
High Power
Keep satisfied
Governments
Most institutional shareholders
Bank
Key Players (Keep close)
CEO and Chairman
Major branded suppliers

12. Strategic Preseen Video Series – Now available
With Nick Best
Managing Director
Astranti Financial Training
Strategic Review - all subjects
E3 - Full Strategic Analysis
(including a review of the models)
F3 - Financial Analysis
P3 - Risk Analysis
Most likely issues - all subjects
Strategic level guide
Examiner’s expectations at strategic level
The reasons people fail
Exam technique guide
How to prepare for strategic level
Preview the first video for free at

13. Strategic analysis – the rational model
Next we need to analyse the current position of the business
This helps us ensure the strategies we decide upon are appropriate to the business’ current position and issues they face in the industry and more broadly
This position is summed up in a SWOT analysis
Business Environment
PEST
5 Forces
NOW
S W
O T
Internal
analysis
Product analysis
Product life cycle
BCG matrix

14. SWOT Strengths Weaknesses Customer service Product quality
Well recognised brands in local markets and for specific products (e.g. kitchens/ bathrooms)
Large company – should be able to obtain economies of scale in purchasing
Listed – should help raising of new finance
Profitable – helps generate more finance and ensure dividends can be paid
Good relationships with suppliers
Confused and inefficient organisational structure. Too many functional departments, and a two way divisional split suggesting inefficiencies, repetition and lack of working together
Some underperforming divisions – to be sold off, or merged with successful brands
Weak purchase process – many underperforming divisions came from poor purchase decisions.
No warehouses in Africa/Asia
Lack of detailed benchmarking or good performance measurement (possibly!)
Opportunities
Threats
Divest unprofitable parts of the business
Purchase of new brands
Expansion into Asia/Africa, including new warehouses
Expand online operations
Onsell products between different brands
Foreign exchange
Return to recession in main countries in which they operate
Competition – lower prices/better quality/better marketing
Quality of products from suppliers is poor – leading to poor customer satisfaction

15. Astranti T4 Courses Detailed video exam guides
Full video debrief of the preseen
2 full day live masterclasses
The exam and marking criteria
Prioritisation of Issues – they new key skill at T4
Preseen analysis and discussion
How to pass the T4 exam
Industry analysis
5 full mock exams
Marking and personal feedback on 3 mock exams
60 industry examples to use on exam day
3 mini-mock exams
Detailed feedback on 2 mini-mock exams
Detailed course notes
Calculations e-book to practise calculations questions
Ethics e-book – ethics is a guaranteed 10 marks at T4!
Private forum:
debate the case with others
focused tutor support
Ongoing support
Progress reviews
Keeping you on track for a pass
“Hi Nick,
I passed with 62% - huge relief.
Thanks again for your support – I’m relieved I stumbled across you before signing up with one of the mainstream training providers.
Kind Regards,
Marc”
Marc Thomas
Passed  September 2011
“I could not recommend this service strong enough and honestly feel this was the reason for my successful pass”
Paula Roberts
Passed  November 2009

16. Social (inc sustainability)
PEST analysis
Political/
Legal
New laws on – Health and Safety of staff, Product safety
Political uncertainty in overseas markets could threaten some markets
Economic
Worldwide economic downturn now ending – opportunity to grow
Exchange rate impact as overseas operations
Interest rates likely to rise over next few years – may make borrowing more expensive
Social (inc sustainability)
Trend towards DIY/renovations of houses – likely to increase once economies recover
Increasing customer awareness and focus on CSR, ethics and sustainability – important P Plc operate ethically.
Technological
New technologies in distribution and sales will be key to continued efficiencies
Increasing trend towards online sales – important P Plc have addressed this issue in their various markets

17. 5 Forces Analysis
The 5 forces analysis enables the analysis of the industry according to a range of key factors affecting that industry
Each force can be given a strength (e.g. High, Medium, Low). Where all the forces are high, the profitability of the industry is low, and divestment may be a good strategy.
The lower the forces the more attractive the industry is.
Companies may look at the areas where forces are high and develop strategies which may lower these.
The 5 forces analysis for this industry is on the next page
In this case the average of the forces is medium so the industry would be deemed averagely profitable.

18. Factors increasing Force Factors lowering force
5 forces analysis
Factors increasing Force
Factors lowering force
Buyer Power
Medium
Customers can easily switch to competitors as products are standard (the competitor’s are likely to be very similar)
Lots of small customers. No particular customer can negotiate price discounts as none as over-riding power.
Supplier Power
Low
Good suppliers on long term contracts may have some power when renegotiating contract.
Some suppliers with strong brands may have power (e.g. ICI with their Dulux paint brand)
Lots of suppliers (90,000) means lots of choice for P Plc on standard products – so most of the time the power lies with P Plc
Competitors
High
Lots of small competitors in every town worldwide
Some large competitors
Products are not differentiated greatly so easy for customers to switch
Relatively few very large providers – the direct competitors of P Plc
New Entrants
Easy to enter this market as products easily sourced
A mature market that is unlikely to attract significant new players to the market
Substitutes
Main substitute is going without where there is a choice (e.g. during a recession customer may just choose not to have a new kitchen or bathroom)
Very few substitutes for most products (e.g. if you need a new tap there are few alternatives)
P Plc provide all alternatives so are at little risk of not providing most substitute products

19. Strategic analysis – the rational model
Next we need to analyse the strategic options, and make a conclusion on the way forward for the business
FUTURE
Mission &
Objectives
NOW
S W
Business Strategy
O T
Generic strategies
Ansoff’s matrix
Method of growth
The usual approach to defining a business strategy is to begin with a definition of the generic strategies, followed by analysing options in Ansoff’s matrix, looking at how these might be implemented with the ‘Methods of Growth’ and then deciding upon a final strategy

20. Opportunities and Threats Products/Generic Strategy
Generic Strategies
BCG/
Product Life
Cycle
Most products in the maturity phase of the product life cycle. Most are likely to be cash cows generating ongoing revenues – although there may be the opportunity to review product profitability to examine the product range in more detail and divest unprofitable products.
Products are standard so their may be few opportunities for significant product innovation
Wide product range providing virtually all customer needs
Cost leadership
Not followed by P Plc
Differentiate
Quality is key for P Plc
Customer service is their key Critical success factor
Focus
Broad focus used to a very wide customer base of consumers and builders throughout the world.

21. Ansoff’s Matrix and methods of growth
Ansoff’s matrix enables the generation of strategic options.
Those you’ll find in my analysis over the page are just ‘options’, not my recommendations.
You might like to add your own options
(1) Based on your own ideas to take the business forward
(2) Based on those in practise exams you undertake
The final stage is then to decide on the methods which the organisation can use to take the options (as generated in Ansoff’s matrix) – again these are just possibilities at this stage

22. Ansoff’s Matrix and methods of growth
Existing Market
New Market
Existing Product
Divest unprofitable products and brands
Continue to improve customer service and quality to retain new customers
Increased marketing to attract new customers
Brand consolidation
Africa and Asia expansion, including new warehouses
Other regions where they do not have a presence e.g. Russia, Brazil
New Product
Possible product expansion into:
Gardening/Plants
Lighting
Furniture
Carpets
Potential to onsell P Plc products within each brand e.g. kitchen retailer starts selling bathroom products
Vertical integration – e.g. buying a manufacturer (unlikely as they have previously moved away from doing this)

23. Methods of Growth Internal Development Store growth of current brands
New warehouse
Ongoing efficiencies
Acquisition
Significant part of growth strategy over recent years. Further opportunities to expand by acquisition may present themselves, but care needs to be taken about the price paid and appropriateness of the company due to previous errors having been made.
Joint Venture
Possible joint ventures in countries where little market knowledge e.g. China
Divest
Unprofitable brands
Unprofitable products
More analysis of brand and products is needed.

24. Defining a business strategy
On the following page you will find my recommended strategy for the company.
Remember that this is my view and is not a definitive answer
Also remember that in the exam, you are NOT expected to define a way forward like this – you MUST deal with the unseen issues and only those issues
However, dealing with those issues in light of a strong logical approach to how the business should be taken forward can help you make a strong argument in your recommendations.

25. Nick’s Strategies going forward
Continue with the successful areas of the business
Strong, profitable brands
Existing wide product ranges
Take further purchase opportunities as they arise
Clear generic strategy
Continue to develop excellent customer service and retain high product quality to cement differentiated position
Structural review
Remove current two divisional split
Fewer functional areas
Regional divisions
Merge brands where significant links so all part of coherent structure
Retailers report to retail manager not warehouse manager
Ensure half board are NEDs and they have power, through a review of the role of the current executive board

26. Nick’s Strategies going forward
Continued organic growth in existing markets
Expand retail outlets of successful brands
Product and brand profitability analysis
Divest unprofitable products or brands or consider merging brands within profitable groups
Wider expansion into new markets through acquisition – particularly high growth markets such as China, Russia and Brazil
Including analysis and purchasing of new warehouses.

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So that’s what I would do. I’m sure you’ll have your own views. Just remember not to hold onto these too tightly in the exam – you must primarily deal with the unseen issues!
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