Roland Berger Practice Business Case Solution 20100201

Mock Business Case Solution Earnings improvements and strategy repositioning in the paper and stationery industry Bucharest, 2010 100121-Practice Business Case Solution_2010_AF.pptx

Contents 1

Analysis focus and additional information needed

2

Current status of the company

3

Operative actions to improve liquidity and profits

4

Approach to strategic repositioning

© 2009 Roland Berger Strategy Consultants GmbH

100121-Practice Business Case Solution_2010_AF.pptx

2

1

Your analysis should focus on a range of elements, pertaining both to the market and to the cost side Additional information needed – possible answers MARKET SIDE

COST SIDE

• Overall market size

• Profit and loss:

• Market segments by customer group and product

– By company (production/sales companies)

• Changes in pricing levels

– By location

• Retail and wholesale market analysis • Factors influencing the market (such as net household income, numbers of children starting school, etc.) • Competitor analysis • The company's market position: – Strengths/weaknesses

• Cost structure and changes over time:

ANALYSIS FOCUS

– By company – By location • Productivity benchmarks • Product profitability • Customer profitability

– Success factors • Product range analysis


3

1

Starting 2009, the company has seen its financial indicators deteriorating Status – Key financial indicators 2001

2005

2006

2007

2008

2009

2010 Q1

Sales per employee [EUR '000]

292.0

297.0

279.0

292.7

274.8

266.0

222.21)

Gross margin per employee [EUR '000]

160.2

178.6

140.2

150.3

144.3

126.8

114.71)

Return on sales [%]

8.0

5.3

3.9

1.8

2.1

-4.2

-5.4

Inventory Turnover [days]

76.5

84.3

85.2

73.3

60.5

71.4

99.02)

Collection period [days]

66.9

57.0

60.9

65.3

65.0

63.8

90.02)

Problematic 1) Annualized based on the Q1 sales figure

2) Annualized based on LTM (last twelve month) sales of EUR 2,000 m

Source: Paper & Stationery Inc.; Roland Berger analysis


4

2

The reasons behind the financial problems are linked with both the market and the company Status – Main problems faced by the company MARKET SIDE

COST SIDE

• Pressure on retailers to conform

• Complexity costs, due to diversity and structure of the product range

• Specialist retailers losing out • Reverse integration in retail • Concentration in food retail • Discounters and mega-markets growing • New players on the scene: – Putting pressure on prices – Diversity of product range – Decreasing negotiation power in dealings with suppliers • Sales focused on medium range quality and image position/no differentiation • Increasing competition

– Depth and width of the product range • Productivity falling (gross margin per employee down) • Structural costs too high – Large number of locations and depots – Overcapacity (production, logistics) – Disproportionate overheads/administrative costs, due to lack of integration • Cost structure has not been modified in response to falling prices • High proportion of in-house commodity production


5

3

The financial situation of the company can be improved through quick hits on liquidity Quick operative actions to improve liquidity PROPOSED ACTIONS • Cut stocks (internal best practice: 60.5 days): save EUR 214 m, through: – Merging warehouses – Downsizing logistics scheduling parameters – Indirect effects of reducing complexity • Reduce days receivable (internal best practice: 57 days): save EUR 184 million, through: – Successful debtor management – Increasing the number of reminders

PROPOSED TARGETS [EUR m]

> EUR 214 m cash generated




6

3

Profits can be enhanced by optimizing purchasing, production, product portfolio and administration Operative actions to improve profitability PROPOSED ACTIONS • Increase productivity through process improvement and job cuts • Adjust purchasing costs to selling prices (stable gross margins) • Reduce complexity and staff through: – Reducing the number of customers – Slimming down the product range • Centralize locations: – Saving on infrastructure costs – Making administration more efficient • Make-or-buy decisions for all products and support functions • Review all cost types thoroughly

PROPOSED TARGETS [EUR m] 20

45

25

-40 35 -100 2009 result

10

35

Restruc- Negotia- Reduction Centralizturing tion of of ing costs material headcount locations costs, by 700 changes of supplier

Savings on infrastructure costs

General Expected cost result savings/ 2010 budget reductions


7

4

Long term success can only be ensured through a proper strategic repositioning of the company Basic approach to strategic repositioning

1

2

3

4

Market segments

Market share

Strategy

Action plan

STEP 1

STEP 2

STEP 3

STEP 4

• Define market segments based on: – Production/sales companies – Services offered • Analyze and assess segments in terms of market and competition

• Work out what market share the company could achieve: – With its existing core competences – By meeting the relevant market requirements

• Identify possible • Draw up an action plan strategies to implement the • Formulate the optimum defined strategies strategy based on the • Define a clear results of the analysis timeframe for the action plan


8

We deliver results


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Roland Berger Practice Business Case Solution 20100201

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