Extract from Kaplan’s

T4 Case Study

Case Analysis Workbook

Papy Supermarkets

Sept / Nov 2011

CIMA T4 Part B: Case Study Examination PAPY SUPERMARKETS CASE ANALYSIS WORKBOOK

CIMA Publishing is an imprint of ElsevierThe Boulevard, Langford Lane, Kidlington, Oxford, OX5 1GB, UK225 Wyman Street, Waltham, MA 02451, USAKaplan Publishing UK, Unit 2 The Business Centre, Molly Millars Lane, Wokingham, Berkshire RG41 2QZ

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British Library Cataloguing in Publication DataA catalogue record for this book is available from the British Library

ISBN 978­0­85732­485­6

Printed and bound in Great Britain.

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Acknowledgements

We are grateful to the Chartered Institute of Management Accountants for permisssion to reproduce the pre­seen material and matrix for the Papy case study. The copyright remains with the examining body.

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Contents

Page

Chapter 1 Introduction 1

Chapter 2 Papy Pre­seen material 19

Chapter 3 Strategic analysis of the case material 41

Chapter 4 CSR and sustainable trading 93

Chapter 5 Sustainability and other ethical considerations 115

Chapter 6 Summary of the case 125

Chapter 7 Prioritising issues 129

Chapter 8 Planning your answer: Mini­case scenarios 143

Chapter 9 Requirement 1(b) 199

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Strategic analysis of the case materialChapter learning objectives

By the end of this chapter you will:

• Have applied some key technical models from the strategic level to the current case material

• Know how to best utilise these models in the exam to gain marks

• Be aware of the most useful models to use in the exam given the current pre­seen material

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chapter

3

1 SWOTUsefulness in the exam

Your SWOT analysis should drive your prioritisations and as such, it is a key model.

How to ensure you capture the marks

You should always have a SWOT analysis as the first appendix of your report. You must make sure that it contains all of the issues that appear in the unseen (in many cases this can be achieved by ensuring all of the bold headings from the unseen are in your SWOT). It is also good if you include a couple of issues from the pre­seen. The examiner is often very critical if students don't fully update their SWOT analysis for the new information presented on the day.

Don't go over the top. You haven't got time to give lots of background information on each of the points you make. Neither have you got time to list 10 strengths, weaknesses etc. Try to aim for 3 or 4 points under each heading (although be prepared to be flexible where necessary)

Finally, after investing all the hard work preparing the appendix, you must remember to refer to it in the body of your report. The easiest place to do this is in your prioritisation section. As an opening sentence you can say:

"The following issues have been prioritised based on the SWOT analysis contained in appendix A".

Another excellent place to refer to your SWOT analysis is in your recommendations section. A sign of a good candidate is one who is able to link the four quadrants as part of their recommendations. For example, you may suggest a company could utilise a strength to take advantage of an opportunity or to overcome a weakness.

Strategic analysis of the case material

4242

Strengths Weaknesses

Opportunities Threats

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Test your understanding 1 ­ SWOT

Test your understanding answers

Strengths Weaknesses

• Improving revenue, margins and ROCE. However, the increases are slight and may be simply due to the impact of inflation (i.e. no "real" growth) and the ability of Papy to pass cost increases on to customers.

• (Note: you could argue that in a competitive industry the lack of leadership should have resulted in a fall in financial performance. The fact that this has not happened means that financial results have been classified as a strength here)

• Presence of separate chairman and NEDs indicates compliance with governance best practice

• Should be relatively easy to raise finance ­ quoted company with low gearing and improving performance.

• IT systems have the capacity to cope with growth forecasts

• Share scheme for employees should motivate staff, depending on who is eligible for the scheme and the precise targets set and their controllability.

• Established and efficient supply chain

• No internet strategy

• Papy still lags behind some competitors in the area of CSR and sustainable trading (e.g. worst score for carbon emissions when compared to 3 major competitors), although improvements have been made over the last year.

• Lack of clear leadership over the last two years, resulting in a lack of real investment. This could also indicate a fairly conservative Board.

• Worsening cash operating cycle, although like many supermarkets Papy receives cash from customers before it has to pay suppliers.

• Suzanna Nec may lack motivation having been overlooked for promotion to the new role of a Corporate Affairs Director

• Could question the independence of the Chairman, Dmitry Balaudia, given he used to be an executive director and would presumably have built up strong relationships with the other directors.

• Does Rafael have too much to do as his role involves operations, which presumably includes procurement and supply chain management, and logistics. Maybe these roles should be split?

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Test your understanding 1 ­ SWOT

Strengths Weaknesses

• You could argue that many of the board have not been with Papy long, indicating a possible lack of experience.

• Closure of some small convenience stores (appendix 2) could indicate problems in planning where such stores should be opened.

• Karen Wagnes has tried many different roles. This might indicate a tendency to want to try something new and given she switched from a rival before joining Papy, could indicate a potential danger that she could be tempted to leave.

• Only 70% (or slightly more) of suppliers are linked into Papy's IT procurement system

• No coherent strategy on how to achieve CSR targets

Strategic analysis of the case material

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Opportunities Threats

• Improve sustainability credentials as this will improve brand strength and hence competitive advantage. It will also satisfy increasing demands from institutional shareholders.

• Internet shopping

• Move into new European countries

• Expand outside Europe, although this would probably involve acquisitions to gain the necessary outlets, contacts and supply chain

• Put more emphasis on using smaller, regional suppliers for foods

• Develop more non­food lines such as clothing, household items, CDs, DVDs, financial services and pharmacy services.

• Open dedicated "cash and carry" operations aimed at small businesses such as restaurant owners

• Leverage the information gained through loyalty cards to better target new marketing initiatives

• Intense competitive rivalry

• Government investigations and intervention in the supermarket industry due to fears over abuses of market power

• The new CEO may face resistance from more conservative board members when trying to implement change

• Possible threats to brand and reputation should suppliers be found to have poor records re animal welfare and /or sustainability

• Any issues that could disrupt the supply chain should be taken seriously

• Three of Papy's competitors have gained market share. We are not told whether this was at Papy's expense but if it is, then such gains may continue.

• Threat of takeover bid from larger competitors

• Confidentiality / data protection issues re use of information gained from loyalty cards

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