Page 18 - OCS Workbook - Day 2 Suggested Solutions (May 2018)

CIMA MAY 2018 – OPERATIONAL CASE STUDY

EXERCISE TWO (NON-CURRENT ASSETS)

From: Finance Officer.
To: Jonathan Young, Operations Director.
Subject: Re: Streamline and refine operations

Hi.

Thank you for your email. I have considered your questions and have prepared the following
response.

Available options regarding streamlining of operations

As part of Mansako’s short to medium term operations I understand that there is a desire to refine
and enhance the store network.

I have looked at some of the most recently reported statistics and would recommend that if we are to
refine our store network by closing stores then we would have to look carefully at which stores where
to be closed.

Evidence suggest that 63% of sales in the luxury goods market still take place in a physical store,
particular focus being on the more mature markets. I think it would be short sighted to close too
many stores in favour of online sales which make up only 8% of the global sales in this market. This
said I understand that the market trends suggest that digital sales will continue to grow, particularly
amongst the millennials how make 42% of their purchases through a computer or mobile phone.

I would suggest that if we are to close stores there are some areas that we should leave untouched.
Statistics suggest that 47% of the purchases of luxury goods are made when consumers are travelling,
that figure rises to 60% for emerging markets. This would push me to suggest that airport stores
should stay open and perhaps we can looks at options to enhance these stores to welcome more
customers. I think its notable that the majority of our in store customers are either travellers or
mature market customers and so we should consider them, more so than the millennials when
looking at store attractiveness and in store marketing.

Also when analysing market trends we have saw a decline in the luxury goods market in America and
Asia by 3%, Europe by 1% while there was notable increase in China by 4%. I think we should take
advantage of this as part of our strategy to focus on the increasing Chinese middle class market at
look to open some stores in China. Melanie Zhang is keen to expand into new markets and has
significant experience in the Asian markets and would be a good person to lead this strategy. At
present we only have Mansako stores in Lowerland and Europe, none in China.

The stores that we do have are located only in Lowerland and Europe and are spread across city
centres, shopping malls and airports. I would suggest that we may have scope to close some of the
city centre stores and shopping malls in favour of more cost effective third party sellers such as
department stores which would likely already have a presence in the same city centre location and
shopping malls that we have been based in. The airport stores should stay open in line with evidence
above regarding purchases when travelling, as this is clearly a large market for us.

74 KAPLAN PUBLISHING