A lot of people will be saddened - but probably not shocked - by the news that HMV looks like it may be the latest casualty amongst big-name retailers. There's a lot of coverage of this story, so I've put together several links and questions to encourage you to consider some independent research on what's gone wrong, and what may be the way forwards from here.
I'm enjoying using Storify at the moment, and the links and suggestions for the HMV story are all posted here.
When it comes to understanding business strategy, I’m a firm believer in keeping things simple. And here’s something very simple to remember when evaluating the strategies being considered by the case study firm and management in the BUSS3 exam.
There are only three words you need to remember about strategic decision-making…
“STRATEGY IS CHOICE”
Actually, let’s give you two more short phrases to use that explain the nature of the strategic choices faced by firms:
Strategic choice can be summarised into two more, simple decisions:read more...»
This short video interview with Amazon.com founder and CEO Jeff Bezos is business studies gold dust.
Jeff Bezos was recently named Fortune Magazine Business Person of the Year for 2012. Here he talks about his long-term strategy for Amazon. Bezos has always maintained that the success of Amazon is based on long-term thinking, recognising that not every innovation or invention will work.
Bezos defines the success of Amazon as being based on the following cultures and beliefs:
- Start with the customer - Amazon's goal is to be the most customer-obsessed business in the world
- Have a willingness to invent
- Think long-term: allow 5,6,7 years before you expect to see financial returns on investment (Bezos is dismissive of short-term payback criteria)
- Be inspired by what competitors do, but don't be afraid of them ("your margin is my opportunity")
Shareholders can be hard to manage and difficult to please.
On the one hand, a firm owes a debt of gratitude to shareholders for putting their money where their mouth is and backing the business with their cash.
However, shareholders – like all investors – look for a return on their shareholding. The return comes in two ways: (1) a dividend paid (in cash) out of retained profits and (2) an increase in the value of the shares (a “capital gain”).
For many quoted companies, the shareholder dividend is a permanent feature of doing business with investors. A dividend is typically paid twice each year: an interim (usually smaller) dividend paid after 6 months of the financial year; followed by a final dividend once the full results for the year are worked out.
The payment of dividends enables you (and investors) to calculate a key shareholder ratio: the dividend yield.
Dividend yield is simply the annual dividend paid divided by the average share price over the period covered. This gives a good indication of the percentage return on investment that a shareholder gains just from the dividend each year.
So, for example, an annual dividend payment of £0.50 per share for shares that were priced on average at £10.00 each would be a dividend yield of 5%.
So far, so good. But can you see a potential problem from the point of view of management?read more...»
Do I sense a few green shoots emerging from Finland - the home of Nokia which recently lost its position as the world's largest maker of mobile phones (a position it had held for 14 years).
Readers of the business blog will be familiar with the story of Nokia in recent times. The arrival of a new CEO Stephen Elop and his famous "burning platform" speech which set out this new strategic direction for Nokia. We've documented the resulting strategy of retrenchment which led to the loss of 000's of jobs at Nokia around the world and Elop's decision to enter into a strategic partnership with Microsoft as he chose Windows 8 as the mobile operating system ("ecosystem") for Nokia's new range of smartphones.
2012 was a pretty bad year for Nokia in total. However, there is is some evidence that the launch of the Lumia smartphones may have heralded a change in fortunes for the business. The Guardian reports here about very strong sales for the Lumia phone over the crucial Christmas trading period. And in the short video interview with Stephen Elop below, you can sense the emergence of a quiet confidence that things might be getting better.read more...»
Have you ever looked out of your aircraft window and stared at the wing and thought: "I hope that doesn't fall off"? No? Well I have and I'm always reassured that the wing was probably made in a high quality factory in the UK.
Here's a chance to take a look behind the scenes of the wings being made by Airbus in the UK. A fantastic video here from the FT's Peter Marsh who kindly joined us for the recent tutor2u Global Economy CPD day.
Peter (well worth following on Twtter) visits the wing factory of Airbus/EADS at Broughton in north Wales. There he learns how the factory works on a process of continuous innovation in technology, and he assesses the impact on skills and jobs across the UK.
The Harvard Business Review provides some excellent resources on the role of strategic leadership and I was taken by this short video on the HBR Channel in which Gareth Jones from the London Business School considers what is required for "exceptional leadership".
Gareth Jones explains that there has been a general decline in trust in leaders - including business leaders. He goes to provide a definition of leadership and then outline the four attributes which he believes followers want from their exceptional leaders: These four are:
or CASE if you are looking for a simple acronym with which to remember the attributes!read more...»
Sony is one of our favourite case study businesses and fantastic source of research insights for A2 students wanting to improve their understanding of business strategy. So we were pleased to spot this short video from the FT which evaluates the potential success of Sony's new smartphone - a so-called "super smartphone". Given that Sony only has a single digit market share in the smart phone market, can this new product provide Sony with something which will compete with Apple and Samsung?read more...»
This afternoon The High Court appointed PricewaterhouseCoopers as Administrators of Jessops the high street camera retailer. The company has debts of £80m.read more...»
You may have read about the company Teapigs, which presents itself as a quirky small upstart company, when it began its life under the close support of a much bigger business. Here’s another example: Harris and Hoole - a coffee shop that presents itself as an independent chain but is in fact 49% owned by…read more...»
A brief introduction here to the concept of delayering - which involves the removal of layers in the organisational hierarchy. Delayering is a key tool or approach in strategic HRM.
Ansoff's Matrix is a classic model of marketing and business strategy that business students can use very effectively in their exams. This revision presentation outlines the key features of the model.
This revision presentation explains how Michael Porter suggested four "generic" business strategies that could be followed in order to gain competitive advantage. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. By contrast, the differentiation focus and cost focus strategies are best used in a narrow market or industry.
The huge rise in online shopping brings opportunities for new businesses - but also the imperative need for efficient and low-cost operations. Profit margins are squeezed for all businesses, and retailing online, rather than through expensive high street shops, provides a valuable way of achieving that cost objective - but only if the orders can be supplied efficiently. As Net-a-Porter chief executive Mark Sebba says, "If we don't focus on the customer, then we're lost. So what does the
customer want? The customer wants an absolutely impeccable service and
she or he wants the product really as soon as she or he can possibly get
Looking ahead a little to teaching BUSS4 topics next term, the ongoing spats between BA and Virgin Atlantic provide a consistently rich seam of resources for exploring the themes of business culture and leadership. And in the last few weeks, they have done it again. Willie Walsh and Sir Richard Branson have been sniping at each other in an entertaining and characteristic manner.
It started with reports that Branson might sell some of his 51% share of Virgin Atlantic. Walsh suggested that Virgin would not be around as a brand in five years time. Branson was in conciliatory mood; he responded that he would not bother to sue Walsh for his comments on this occasion but instead he would put up £1m, to be distributed to BA staff should Virgin Atlantic cease to exist, if BA agreed to pay Virgin Atlantic staff the same amount should the brand still exist in five years. Rather more aggressively, Walsh's counter-offer is a knee in the groin, on the basis that he considered the loss of £1m would not hurt Branson's personal fortune, whereas the physical assault would be equally painful for either recipient.
Some more background to the altercation is needed for any student wanting to use this example as evidence in an essay; it will only count as anecdote without accompanying analysis. This article will offer that background, along with a brief history of previous bickering and legal challenges between the two airlines - essential detail to strengthen student analysis.
Tesco's decision to review the future of its US grocery supermarket chain Fresh and Easy will provide us all with some fantastic teaching material to use when looking at some core topics such as international expansion, product/market strategy (Ansoff), retrenchment and other elements of corporate strategy. Tesco have invested up to $1.6bn over five years in trying to establish the Fresh and Easy format in the US, facing fierce competition. The result? Heavy losses and no sign of achieving the break-even point, even after five years.read more...»
I’ve taken a lot of interest in Tesco’s overseas strategy, which took them to the United States in 2007 with their Fresh and Easy store chain. The set-up was bold; adding lots of capacity but high fixed costs, meaning the enterprise has consistently struggled to break even. Now Tesco have just confirmed that they are launching a strategic review that may lead to the sale or closure of its US operations. Dramatic news. What’s behind it?read more...»
HMV's previous attempt at a strategy of diversification has now ended after it agreed to dispose of its business units involved in live music and entertainment. Lots of evidence in this case study about how risky diversification can be. HMV paid £46m to acquire MAMA Group back in 2010:
Royal Mail has reported a huge increase in half-year profits as growth in parcel deliveries made up for a continued fall in the number of letters being sent. This is something of a surprise to many as the business had looked to be in long term decline. The chief executive has summed up the way in which the firm has found success: "Royal Mail has experienced the negative impact of e-substitution, which is driving the structural decline in the traditional letters market. Conversely, we are seeing the positive impact that online retailing is having on our parcel volumes”.
Now that operations are in profit, this might speed up the business’ move from the public sector and into the private sector – a move referred to as privatisation. A future for the Royal Mail in the private sector was referred to in a previous blog. Here’s an update, and a reminder of some of the strategic issues at stake.read more...»
This looks like a really useful series of short videos from the BBC which explore some of the challenges facing CEO's. The series covers:
Here at Eltham College, we are fortunate enough to have our
own art gallery on site. Part of its purpose is to enrich learning across the
curriculum. Opened just 6 months ago, I decided that the gallery was an ideal
start-up case study for my Year 12 Business students to get their teeth into,
so I set them to work on a market research group task with each group focusing
on one of the gallery's key functions: exhibitions, art classes, and a cafe.
Panasonic, like several other Japanese electronics firms (including our blog favourite Sony), appears to be in deep trouble. I hadn't quite appreciated the scale of the problems facing Panasonic until I came across this report on Reuters which describes how Panasonic plans to cut a further 10,000 jobs from its workforce, on top of the 36,000 jobs that it shed last through through business sales and closures.
By any measure that is a significant programme of retrenchment, although to put the number into some perspective, Panasonic still employs around 300,000 people.
Panasonic is a conglomerate with business interests in many consumer and industrial markets. However, it looks like its product portfolio is about to be further trimmed. The article describes a potential "garage sale'-style series of business disposals and closures as Panasonic aims to raise cash from non-core assets, extract itself from loss-making activities and focus on the remaining core markets.
One startling statistic from the article is packed with business studies value:
The future doesn't look too bright for those business units that are not achieving the required rate of return.
Around 20% of Panasonic's 88 business units are losing money and only half so far meet a target for at least 5 percent operating margin
Followers of the Business Blog and attendees at our BUSS4 revision workshops will know that we're big fans of Sony as a case study in business strategy. And this resource - an interview by BusinessWeek with Sony's CEO Kazou Hirai - provides another useful addition to the research resources which students ought to use if they want to develop their understanding of the strategic challenges facing Sony and the options Hirai is choosing.read more...»
It sounds like an odd combination - mixing Irn-Bru with Fruit Shoot. But you never know - it might work. Shareholders in the firms that make Irn-Bru (AG Barr) and Fruit Shoot (Britvic) will be hoping that the combination of their respective product portfolios will taste a little better after a £1.5bn merger which has been agreed today.
The merger will be bad news for some employees at the two businesses. As part of the merger plan up to 500 jobs are expected to be lost as the combined business aims to achieve £35m of annual cost-saving by cutting the combined headcount of 4,000 workers by 8-12%.
It is claimed that the aim of the merger is to "create a world-class soft drinks company" and, not surprisingly, the management who will lead the combined firm are pretty positive about the strategic rationale for the merger:
"AG Barr and Britvic are a fantastic fit with complementary strengths and we will benefit from very significant synergies," claims Gerald Corbett, the chairman of Britvic who will continue in the same role at the combined company.
You can't necessarily spend your way to success. That's one interpretation of the latest survey of global innovation. The top spenders on R&D don't feature as strongly as you might expect when it comes to a firm's reputation for innovation.
For the third year running, Apple has been named as the world's most innovative company, followed by Google, 3M and Samsung. However, when it comes to the highest spenders on R&D, the list is headed by Toyota, Novartis, Roche and Pfizer.
So consumer technology firms come highest in perception of innovation whereas automotive and health firms spend most on R&D. Of course, the two measures are somewhat different. You might reasonably expect firms like Apple, Google & Samsung to have very high awareness of their record on innovation given the nature of their new product development - they're hardly ever off our screens! The business and consumer media are less interested (I suspect) in the day-to-day innovations of drugs companies.read more...»
It's always worth following the news releases of the CEOs of major businesses to see what they are up to and what they are saying. I spotted this press release from the office of Philip Clarke, the (relatively new) CEO of Tesco in which he outlines his observations on the role of the CEO in fostering innovation in a large, complex business. The press release is actually a transcript of a speech given at the recent FT conference on innovation in business.read more...»
Many students and teachers will be familiar with the merger between British Airways and Iberia - which came together to form International Airlines Group ("IAG"). The merger was a pretty long drawn-out affair but the respective shareholders of the two airlines eventually agreed the deal. Over a year later, it looks as though BA may have taken on much more than they expected in Iberia. So the board of IAG has decided to implement a substantial cost reduction plan at Iberia which looks likely to strain industrial relations with the workforce in Spain.read more...»
This is a really important development for business students who need to appreciate the dynamics of the global economy to understand. The OECD has forecast that, within four years, China will overtake the USA to become the largest economy in the world. The value of China's GDP in 2013 alone is forecast by the OECD to be bigger than all the Eurozone economies put together. China has arrived - and it has hugely significant implications for business.read more...»
I like the short animation animation below by the team at dunhumby. Dun who? dunnhumby is a United Kingdom-based Retail media group, best known for being key to the creation of Tesco Clubcard. Currently a subsidiary of Tesco, the company employs approximately 2000 people in 30 countries. dunhumby runs a 40-terabyte database, selling information to companies including Procter & Gamble, Coca-Cola about consumer preferences. If you are reading this blog entry, it is highly likely that you are in that database somewhere!
The video describes how the use of Big Data analytics can potentially help businesses personalised the products and services offered. To be able to do that, a business needs to have insights into yout behaviour and preferences. Insights are created from the analysis of data - a great example of Big Data in action.read more...»
Big Data - remember that term because it is important. Big Data is the term that is used to describe the rapid growth of data from our movements, choices, activities and transactions.
According to estimates provided by IBM, every day, we create 2.5 quintillion bytes of data — so much that 90% of the data in the world today has been created in the last two years alone. This data comes from everywhere: sensors used to gather climate information, posts to social media sites, digital pictures and videos, purchase transaction records, and cell phone GPS signals to name a few. This data is big data.
If Big Data is so important in the world of business, how come you may not have heard about it?
To you and I, big data is probably best understood as the enormous datasets held by businesses, governments and other large organisations whose activities affect millions of us. Big data is used to determine your recommended friends on Facebook, suggested purchases on Amazon and the point at which your mobile phone network offers you a freebie to keep you on side.
A key question is, how can Big Data be used by businesses to make decisions?read more...»
Angus Thirwell the co-founder and CEO of Hotel Chocolat is immensely grateful to Joanne Harris and Juliet Binoche. respectively the author and star of the hit film Hotel Chocolat. The movie educated a generation of aspirational chocolate lovers in how to pronounce Hotel Chocolat and has helped millions of consumers in Britain and around the world advocate the hit chocolate retail brand without committing a pronunication faux-pas! I wonder how many satisfied customers realise that Hotel Chocolat does not exist? Perhaps they have typed the name into Trip Advisor hoping for a review of a retreat flowing with rather wonderful chocolate made from a St Lucian plantation?
Retailer Argos has announced a 5 year "transformational plan" which is ideal case study material for A2 business students and I would suggest is essential reading for students taking more specialist units in retailing.read more...»
There aren't many conglomerates around these days - certainly not many quoted companies - where shareholders are effectively investing in a portfolio of distinct businesses. And one of the last remaining quoted UK conglomerates - Cookson Group - has decided to split itself in two in order to achieve more shareholder value.read more...»
Last night DigitalDonut hosted a debate in London discussing the view of Kevin Roberts, CEO of Saatchi and Saatchi, that Marketing is Dead. He has said that "Creative leaders should go for getting lots and lots of small ideas out there. Stop beating yourself up searching for the one big idea. Get lots of ideas out there and then let the people you interact with feed those ideas and they will make it big.”
Roberts' view was contrasted with the belief of David Ogilvy, hailed as the 'father of advertising', that "You will never win fame and fortune unless you invent big ideas. It takes a big idea to attract the attention of consumers and get them to buy your product. Unless your advertising contains a big idea, it will pass like a ship in the night."
The football business has a history of helping investors to lose money. And now it seems that the shareholders in Nike have been hit hard by an investment that simply hasn't paid off.read more...»
This is more than just a question of business location. It’s well established that John Lewis think very carefully about their target market segment when deciding where to locate department stores or Waitrose outlets. Recent reports claim that the retailer is now ‘thinking small’ to beat the recession, with compact stores in smaller prosperous towns.read more...»
Reuters have uncovered some interesting figures relating to Starbuck's UK operation - is it making a profit or not?read more...»
I hope you’ve all taken the opportunity to watch Felix Baumgartner’s extraordinary stratospheric leap, which had millions glued to their screens a couple of days ago. His personal achievement is also something of a triumph for Red Bull, the scheme’s sponsor.read more...»
According to Robert Peston of the BBC the BAE EADS merger proposal has failed. Analysts, shareholders, staff and suppliers amongst others expect BAE's board to find a new strategy.read more...»
You might find this small and very simple website an interest if you are teaching about how the big software and e-business businesses make their money. If you or your students want to know how companies like Google or LinkedIn make their revenue (or in Instagram's case, don't make their money!) - try this intuitive and icon-based website which tells you which methods each uses to generate revenue.
This is particularly relevant if you are teaching unit 12 (Internet Marketing in Business) on the BTEC National in Business. Each individual 'pop-up' summary per company also gives you a link to sites containing further information. It's a bit US-centric but many of the firms are relevant to UK internet markets.
As the October 10th deadline approaches, the board of BAE face significant difficulties to
complete the proposed merger with EADS.
I wrote a couple of months ago that the tutor2u team had just begun the process of developing a new strategy for growth as part of the UK Government's GrowthAccelerator programme.
GrowthAccelerator provides specialist advice for high-growth businesses (defined as those growing at more than 20% p.a.) with the aim of helping them accelerate their growth through better strategic planning, access to finance and other resources. We started Phase One of the GrowthAccelerator process in August 2012 and we've just completed the process - with some pretty startling results!read more...»
This article from todays technology pages on the BBC make for excellent reading about leadership by looking at Apple a year on from Steve Jobs' death..
Rather than merge with a rival, car firms may form alliances in the development of new products.
Sustainability is a great business topic for discussion. It’s a notoriously slippery and difficult term to define, as the idea means different things to different people. It’s also a concept that has been much refined since it appeared on Business Studies specifications about 10 years ago. When firms talk about environmental sustainability today, they tend to be more focused than just pursuing a vague notion of being ‘environmentally friendly’. Business activity is rarely friendly to the environment. Instead, businesses now talk more about ‘reducing resource use’, from energy to packaging, and water to widgets.
This has really pushed the sustainability concept into the mainstream. Now being ‘Green’ doesn’t have to be purely seen as an ethical or marketing position. Firms increasingly sell it to their shareholders as a way of cutting costs, and therefore boosting profit margins. Justin King, the boss of Sainsbury's, is determined to make the company Britain's most sustainable grocer. This could be a good start point into finding where the debate stands today.read more...»
The BAE EADS merger proposal ought to help pupils attempt develop analytical skills using PESTLE, SWOT or stakeholder models. Can you use these management tools to develop your analysis and evaluation and go beyond application and understanding?
This concise case study looks at the growth strategy currently being pursued by one of Europe's largest brewers, Heineken International. It deals with many strategic issues relevant to the A2 syllabus and can be a useful case study or discussion topic.
It sounds very sinister (especially if you already have suspicions about Tesco) but it seems to be more about the firm’s response to booming internet orders.read more...»
Most businesses aim to grow - but not all succeed - and many are forced to reduce the scale and scope of their business activities as a deliberate act of strategy. This is known as “retrenchment” and A2 students should have an understanding of some examples of retrenchment in action. Which firms / brands were involved? What happened? And why? Here are some suggestions that students could add to their notes:read more...»
Ah! If you’re roughly my age you’ll remember brands like Mr Kipling cakes, Bird’s custard, Ambrosia creamed rice – even Smash (a bizarre powdered potato product that somehow offered futuristic promise). These products are still around, but their owner, Premier Foods, is struggling for survival and badly needs a plan to manage its portfolio of brands – and even to survive.read more...»