咨询工具行业分析-retailco

1、 bcCompiler:Reviewer:Retail Co.Created: August 26, 1999Copyright 1998 Bain & Company, Inc. Seva RozanovThomas Shannon2RetailCo2BackgroundApproachConclusionImplementationResultsAgenda3RetailCo2 Retail Co is $10+B “speciality retail” conglomerate whose financial performance has deteriorated since 1990

2、Background4RetailCo2Achieve top quartile performancemarket/book value: 2.8xreturn on equity: 17-18%annual earnings growth: 10-12%Divest businesses that are poor fitsPrepare the company to weather challenging industry conditionsCreate a compelling vision and growth strategyFinancial ObjectivesStrateg

3、ic ObjectivesBackgroundRetail Co Objectives5RetailCo2AgendaBackgroundApproachConclusionImplementationResults6RetailCo2Define the characteristics of a successful strategy Develop a range of viable strategic alternativesAssess and prioritise the strategic alternativesBuild consensus around the preferr

4、ed strategyFully quantify the impact of appropriate action stepsGain final approvalLaunch implementationApproach7RetailCo2Components of Successful StrategyDoable:Evolves from current business mixFits Retail Cos core competenciesIs fundableDevelops significant competitive advantagesCapitalizes on the

5、 volatility of retail cyclesUnderstandable:Communicates a clear and compelling approach to the businessWill be fully valued by analysts and shareholdersDesirable:Creates clear economic value and top-quartile financial resultsbuilds a portfolio of high-potential businessesmakes business units more va

6、luable to Retail Co than to othersAvoid excessive layers, overheads, and decision processesIs attractive to key managers in targeted businesses and functionsApproach8RetailCo2 Market sizeMarket growthSegment returnsSegment profitability trendsCompetitive intensitySupplier powerSegment stabilityMarke

7、t AttractivenessMarket shareMarket share trendGeographic coverageCurrent profitability/EVAEarnings trendManagement teamRetail brand equityInfrastructure and systemsCustomer value propositionStrategic PositionCorporate experience, skills, and valuesCorporate functional supportCorporate portfolio deve

8、lopmentCross-divisional sharingFitRetail Co businesses were evaluated along three groups of criteriaApproachRevising the Mix of Businesses9RetailCo2Fact BaseHow structurally attractive is this market segment? (projected)industry sizeindustry growthindustry profitabilitycompetitive intensitybuyer con

9、centration/powersupplier concentration/powercommitted capital requirementsstage in market evolutionacquisition opportunitiesHow does the stock market value this segment?industry volatilitymarket valuation multiple and timingvalue transparency to stock marketDo we have a strong position today?market

10、share (local/regional)market share growth trendsprofitabilityrelative cost positionbrand equitycondition of assetsDo we have the key success factors to achieve a strong position tomorrow? (or can we acquire/build them)functional process capabilitiescost structurenew product/concept developmenthuman

11、resources/people skillscapital resourcesHow does this business fit with other Retail Co divisions and capabilities?cash flow generations/requirementscommon functional processescommon customer profileslinkage to central resourcesunique people skillsThe five questions approach was used to build fact b

12、ase on every business of Retail CoApproach10RetailCo2AgendaBackgroundApproachConclusionImplementationResults11RetailCo2Business Unit Evaluations (1 of 2) DivisionConclusionStrategic PositionMarket AttractivenessFitNorthLarge market ready for consolidation, good profitability, very strong positionHol

13、landLarge potential market with opportunity to boost growth and profitability through acquisitions and improved operating efficiencyItalyRapidly growing channel with high returns. Need to invest to capture market share and improve operating efficiencyHong KongLarge overall market with slow growth. C

14、ash provider capable of funding growth businessesLuxembourgReevaluate growth plans. Economies of scale not yet achieved but segment extremely profitableConclusion12RetailCo2Business Unit Evaluations (2 of 2) BritainModerate size segment with good profitability but strong competition; declining marke

15、t share, low relative operating marginsIrelandDeclining market segment, poor position, little opportunity for sale, potential for savings by folding into Hong KongFranceOvercapacity in segment, losing market share, below average profitabilitySwedenLarge overall market but requires substantial invest

16、ment to develop new products and achieve scale to improve cost position; business has poor fit with Retail Co skillsSpainSmall segment, low growth, high volatility, and seasonalityDivisionConclusionStrategic PositionMarket AttractivenessFitConclusion13RetailCo2Business Unit mendations DivisionStrate

17、gic PositionMarket AttractivenessFitGrow(Spin Off)North*HollandItalyHong KongLuxembourgHold Britain Divest Ireland France Sweden Spain *SpinOffConclusion14RetailCo2Strategic Alternatives Long-term vision:Corporate profile:The leader in selected business lineschain drugapparelfootwearhometoysBusiness

18、 line competenciesCost and experience sharing in the groupsAcquisitions to achieve business line dominanceGroup-based organisationA balanced portfolio of speciality retailersResource allocation competenciesLean corporate structureDecentralised managementGrow and keep successful businesses. Divest th

19、e unsuccessfulA leading developer of targeted growth-stage retailersSelection and expansion competenciesCorporate expertise in critical growth functionsbusiness development (R&D and research)real estatesystemslogisticsCost and experience sharing in key activities across all businessesAcquire and gro

20、w promising concepts. Divest when value-added peaksConclusionGroup SpecialistRetail ConglomeratesGrowth-stage greenhouse (Retail Co. “Classic”)15RetailCo2Revise the mix of businesses in the portfolioallow North to pursue an independent strategysell France, Spain and Sweden at the right price and tim

21、eEnsure remaining businesses address the most important strategic issuesestablish clear strategies for growth businesses (Holland, Luxembourg, Hong Kong, Italy)finalise turnaround plans for businesses which cant be sold at reasonable pricestake write-offs as requiredConsider acquisitionsReduce corpo

22、rate expensesAdd value to the businesses in the portfoliobuild R&D capabilitiesleverage costsupgrade the organisationConclusionAction mendations16RetailCo2Chain drug industry is consolidatingeconomies of scale in systems investmentsrelationships with third-party payersAn independent North generates

23、significantly more shareholder value as it participates in the evolution of the industryNorth makes minimal use of corporate functions; there is little cost-sharing among North and the other divisionsMarket timing is attractiveNorths value is not being fully recognized in the marketplaceConclusionEx

24、ample: Rationale For an Independent North17RetailCo2Planned capacity additions will result in industry-wide negative comp store sales through 1998Consolidation is essential to eliminate excess capacitylowers costsallows comp store sales growthRetail Co is better suited to be a seller than a buyersyn

25、ergy is equal whether France chooses to acquire or be acquiredleading competitors market value is highermanagement group at France has several significant holesConclusionExample: Rationale for the Sale of France18RetailCo2Continue to pursue opportunities to consolidate and reduce over-capacityFill k

26、ey executive openingsRestore the historical bargain edge with core customersincrease the mix of opportunistically-purchased goodsdeliver values averaging 20% below department store sale pricesReduce costs to support price reductionsreduce overhead costs by approximately $60MMreduce investment cost f

27、or new stores and remodelsClose unprofitable locations and exit several markets which France cannot dominateIf the sale of France takes longer than anticipated, several actions will be taken to improve Frances performance:ConclusionExample: France - Strategic Imperatives19RetailCo2Vision:To consolid

28、ate our position as the leading widget retailer to our target customers (high-volume purchasers of trendy widgets in their 20s and 30s) To be recognized by our target customers as the leader in product assortment and customer service for widget retail (our unique positioning)To reach a 10% share of

29、the national widget retail market by the year 2000Financial Goals:To reach and maintain ROIC levels of 20%To grow sales by 5% per year and net earnings by 10% per year1998 sales objective: $1,225MM1998 net earnings objective: $47MMStrategy Summary (1 of 2)Conclusion20RetailCo2Key ImperativesInitiati

30、vesDevelop our new concept, Widget Factory, into the second-largest non-mall based widget retailerRetail Co Real Estate audit of potential new sitesWidget Factory rapid deployment initiative (opening of 30 new stores per yearClose non-performing storesClosing of the 10 worst performing mature stores

31、 (both XYZ and Widget Factory) each yearImprove margins by changing mix and reducing costsMix change based on GMROI approachImplementation of 4-Walls systemRedesign of logistics flow based on Retail Co studyImprove density of markets by backfillling five marketsModify our image in the eyes of the cu

32、stomerAssortment redesign based on demand and profitabilitySales force training initiative on customer serviceLaunch of a new advertising campaignFocus new stores in Southern geographiesAcquire and integrate Southern Widget by end of 1996Retail Co Real Estate audit of potential new sitesProposed par

33、tnership with Southern Malls, Inc.Strategy Summary (2 of 2)Conclusion21RetailCo2Fit with Retail Coclear opportunity for value creationpotential to maximize sharing with related divisionsMarket attractivenesssubstantial market potentialdominant market position opportunityconcept in early stages of a

34、long lifecycleFinancial opportunitiesaffordable within target capital structuremeets minimum return and growth hurdlesLimited risk factorsexisting management talent or supplementablelow to moderate volatilityConclusionCriteria for Acquisition22RetailCo2Corporate Cost Reduction Opportunities *Excludi

35、ng interestConclusion23RetailCo2 Primary Levers:Corporate Roles:Corporate portfolio developmentKeep aware of market and customer trends driving potential opportunitiesDevelop criteria for screening acquisitions and partnerships or alliancesIdentify and evaluate new concepts and consolidation opportu

36、nitiesDevelop a network of deal contactsStructure, negotiate and close dealsCoordinate effective integration planningEvaluate opportunities to spin-off/exit businessesFinancial controlsDefine primary measures of financial performanceSet specific financial return and earnings growth targetsDevelop fi

37、nancial planning and control systemsAllocate capital and other resourcesBusiness oversightDefine management decision-making processesCoach divisional managementfocus managers on measurable resultsquestion assumptions and challenge thinkingProvide leadership on critical issues (e.g., division strateg

38、y, value disciplines, and priority and resource conflicts)Identify opportunities to improve operations and set specific improvement goalsPrimary Levers Available to Add Value (1 of 2)Conclusion24RetailCo2 Primary Levers:Corporate Roles:Expertise sharing and operational improvementInstill company wid

39、e commitment to spreading best practicescoordinate regular experience sharing at all levelsfacilitate communication among divisions and functionsDrive value disciplines to improve operations across all processes, functions and divisionsProvide leadership and expertise to support improvements in perf

40、ormanceManagement allocation and developmentAttract, motivate and retain the best managementrecruit top tier candidatesreward based on performancepromote based on abilityProvide strong, profit- related incentives linked to corporate objectivesRotate managers across functions and divisionsDevelop for

41、mal training programsStrategydevelopmentPerform analysis to support strategic decision-making (corporate and divisional)Define corporate strategic directionAssess market attractiveness, performance, position and fit of divisionswork with divisions to build high-quality, fact-based strategic plansInt

42、egrate division plans with corporate strategyCentralservices and infrastructure sharingProvide scale services and functions to achieve lower cost and higher qualityLeverage infrastructure across businessesPrimary Levers Available to Add Value (2 of 2)Conclusion25RetailCo2Projected Earnings NorthNew

43、Retail Co*From Monte Carlo analysisNote: Earnings equals net e after taxes and interestConclusion26RetailCo2*With $300MM share repurchaseGap vs. SBP ProjectionsGap vs. RealisticROE target:ROE*:(Gap)/surplus:11.1%12.0%$10.8MM15.9%19.2%$35.6MM17.0%21.6%$61.3MM11.1%9.4%($22.4MM)15.9%13.4%($28.6MM)17.0%

44、14.9%($30.2MM)ConclusionGap Analysis27RetailCo2AgendaBackgroundApproachConclusionImplementationResults28RetailCo2Corporate GovernanceThe decisions of the Board will be evaluated under the traditional business judgement rule standardThe distribution of North should not require shareholder approvalthe

45、 distribution is a dividend which requires only board approvalAT&T precedentThe potential divestitures should not be considered a sale of substantially all of Retail Co remaining assetsNew Retail Co will be a substantial entity with estimated sales of $4.2B, net e of approximately $119, and assets of $2.1BImplementation29RetailCo2Note: Distribute North stock dividend at appropriate time3Q954Q951Q962Q963Q964Q961997Approve all components of Strategic ReviewClose France transactionClose Spain transactionClose Sweden transactionReorganize Co