Amarantus Consulting
Strategic Report
Into
CeeCee
An action plan and strategic
analysis of the fast fashion
company CeeCee
Amarantus Consulting
I STRUCTURE OF THE REPORT
1. Prioritisation
The first section of the report will concern itself with the scenario. It will
prioritise according to a ‘scale of impact’ matrix and provide
recommendations.
2. Strategic Analysis
The second section of the report will conduct a strategic analysis to see if
problems not mentioned in the scenario can come to light. It will develop,
discuss and provide recommendations for these problems.
3. Appendices
The final section of the report will contain detailed graphs and tables that
have informed our judgements throughout the report. Regular reference
will be made to them throughout the report,
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II PRIORITISATION
•Most pressing issue because financial costs of lost sales and damage to reputation of partially
stocked shops
Distributor’s •Immediate action necessary to minimise losses
Strike
•Serious problem that need to be avoided in the future and thus action is needed to prevent it happening
again
•Not as pressing because problem has already been solved and financial losses have already occurred
IT Failure •Action possible to recover a part of these losses
•Expansion into jewellery range considered a profitable and strong strategic move so should be
carried out in the near to medium term.
Jewellery •Further increase diversification and competitive advantage
Range
•CeeCee is doing well and word of mouth strategy has been working well so marketing strategy is the
least pressing issue
Marketing •Avoid celebrity endorsement
Strategy •Increase marketing budget to a minimum of 2% of sales revenue
1. Distributor’s Strike
1.1 Situation
The union has held a legal ballot of its members and ordered a ‘work to rule’.
A work to rule is a situation whereby employees work but only in strict
accordance to the terms and conditions of employment agreed. This means
that no union driver will drive a vehicle until it has been fully serviced and
repaired. The work to rule is to begin immediately. The union is demanding a
full service and repair for all of EITs 5,000 vehicles. The union has agreed that
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as each vehicle is given a clean bill of health then it can be driven by a union
driver and deliveries can recommence using that particular vehicle only.
The work to rule would cost CeeCee £200,913 in lost sales and £120,749
[see appendix] in lost profit assuming that the strike would last ten weeks.
1.2 Recommendations
2.1 Situation
The local Asian agent has informed CeeCee that a substantial number of the
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Asian suppliers have been using child labour. It has not been made public and
the agent thinks it is not an important issue as newspapers have grown bored of
the story
2.2 Recommendations
Our recommendations are based on the premise that child labour is unethical
and that businesses should behave ethically regardless of business
consequences. We know that CeeCee takes its CSR responsibilities seriously
and will provide a comprehensive response to these accusations to ensure that
unethical acts are minimised. These accusations should therefore be made
public. However, a rapid improvement of the working conditions of the Asian
employees coupled with a strong PR campaign could mitigate backlash and turn
this misfortune into a marketing coup.
In addition to the ethical reasons for not employing child labour, we find there is
clear business sense in reducing or eliminating the amount of unethical labour.
Long-term effects of positive Consumer Perceived Ethicality (CPE) means a
willingness to pay higher prices for clothing. This is important for CeeCee if it
desires to remain premium brand amongst high street clothing retailers.
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3. End contracts with suppliers that breached rules or where working
conditions were especially bad.
3. I.T. Failure
3.1 Situation
At the end of 2009, CeeCee invested €10 million in a new online sales
system. The system was designed and developed by an outsourced IT
company (ProveIT) with support from seconded staff from CeeCee’s own IT
department.
Diane Innes has discovered that when customers had attempted but failed to
pay for ordered goods the system still processed the order. This issue went on
for three months before detection. Diane thinks that 50,000 orders have been
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processed without payment at an average transaction value of €120. Potential
loss of up to €6,000,000 of revenue - total maximum cost to CeeCee is
€2,394,000 [see appendix].
3.2 Recommendations
1. First and foremost, the payment processing system must be fully audited after
any change before going online to prevent this from happening again.
3. We have mapped a range of scenarios [see appendix] and in almost all cases
the outside agency would recover more money, though not by much. In the
most likely scenario, using figures given by Dianne Innes, the outside agency
will recover €20,000 more than the in-house agency [see appendix].
4.1 Situation
Carla believes that clientele might be interested in buying better quality pieces
of jewellery when buying clothing. The jewellery market has proved
remarkably recession resistant and potential competitors have become
complacent. CeeCee could provide more fashionable and exciting jewellery
than retail jewellery stores to compete with them.
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4.2 Recommendations
The Net Present Value (NPV) of profits from starting a jewellery range is
positive and very high (€7.937.000). Additionally, the Internal Rate of Return
on Investment even after taking into account the foregone profits from lost
sales of other products is excellent at 32%. Given the very high margin and
recession resistance of jewellery products and a high NPV, our opinion is that
CeeCee should proceed in developing a jewellery range.
5.Celebrity Marketing
5.1 Situation
Juliette Lespere wants to initiate a contract with Kool, a well known and
popular European singer of rock music. She thinks CeeCee is doing well on
the back of good quality products and service but it could do much better with
a more visible marketing presence. Carla is not impressed, she thinks word of
mouth is all that counts.
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sales revenue.
If the probability that incremental sales reach €2 million is only 10%, the first
payment method would be the 90% more likely to be the cheaper one for
CeeCee. Both payments are equally costly at the breakeven sale value of
€1,000,000.
5.2 Recommendations
However, all things being equal, we would not recommend using Kool.
According to Juliette's calculations the promotion would only have a 10%
chance of increasing sales by €2 million, this represents an incremental sales
increase of only 2% in overall sales. However, the return on investment is very
high. Even if proceeds exceed €2,000,000 and payment to cool is €200,000
insures a return of twenty times the marketing investment. Taking profit
margins into account still insures a return on investment of 600%.
• Kool’s career could sour, or she could become involved in a scandal. This
could damage CeeCee’s brand
• Kool may not connect to CeeCee’s core market, they might become
disaffected and sales may in fact decrease
• Powerful marketing messages may decrease the efficacy and extent of word
of mouth marketing as CeeCee may become seen as more of a mainstream,
mass market brand.
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Because of the possible unintended consequences we recommended that
Juliette Lesperre conduct a full impact report before going ahead with an
endorsement campaign.
1. SWOT Analysis
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2. Porter’s Generic Strategy Analysis
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2. Ansoff Matrix
• CeeCee still has growth potential in its currently existing markets. Its recent
transition to online selling has enormous growth potential.
• Currently still focused on female clothing. CeeCee could achieve a larger
market share by increasing the prominence of male products.
• CeeCee knows its stock, but could enhance customer segmentation to
develop automated links, web tracking and a personalised shopping
experience that could increase customer usage.
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retailers and differentiate itself from its high street competitors with more
fashionable clothes.
• Commercial rents are down worldwide. CeeCee has prospered during the
recession and has a good cash flow. It is well placed to capture the uptick in
new regions, as it is in a position to buy up exclusive shopping areas.
• Decision to open shops beyond Europe will be even more profitable given
decreased consumption spending in Europe and growing middle-class in fast
developing countries like Brazil, India and China.
• CeeCee has slightly modified its target market and products as it now
provides a range of home furnishings and has switched from focusing solely
on clothing.
2.1 Recommendations
We have sketched out how loyalty cards in store and online could fulfil this
role. This could be used to create a personalised shopping fingerprint for the
customer. This fingerprint could be compared to other customers with a heavy
overlap. Non-overlapping products could be recommended to both customers.
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on accessories it is very profitable for CeeCee to keep selling these products.
Expanding into selling a jewellery range is in our opinion a great strategic
move because jewellery is still very close to CeeCee’s core business area and
has a very high margin. But it is also our opinion that new jewellery products
should be spend at the expense of home furnishing products rather than
clothing. Home furnishing products take more space and their sales have
decreased by 10% during recession but clothes by only 2%.
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III APPENDICES
Second
five Half capacity
weeks
6 60% 0.5 57,403.85 17,221.16
7 70% 0.5 57,403.85 20,091.35
8 80% 0.5 57,403.85 22,961.54
9 90% 0.5 57,403.85 25,831.73
10 100% 0.5 57,403.85 28,701.93
Table 2: IT Failure
Amount
Customers Average order Recovery rate Charge recovered Fee Total revenue recovered Loss
without fee
A - Recovery Agency
40000 € 120.00 50.00% € 14.00 € 2,400,000.00 0.95 € 1,720,000.00 € 3,080,000.00
40000 € 120.00 60.00% € 14.00 € 2,880,000.00 0.95 € 2,176,000.00 € 2,624,000.00
40000 € 120.00 70.00% € 14.00 € 3,360,000.00 0.95 € 2,632,000.00 € 2,168,000.00
B In-house
40000 € 120.00 35.00% € 1,680,000.00 € 1,680,000.00 € 3,120,000.00
40000 € 120.00 45.00% € 2,160,000.00 € 2,160,000.00 € 2,640,000.00
40000 € 120.00 55.00% € 2,640,000.00 € 2,640,000.00 € 2,160,000.00
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Table 3: Expansion into Jewellery Range
Payment Payment
Incremental Sales Method 1 Method 2
€50 000 + €150
000 if 5% of
incremental incremental
sales reach €2m sales
€ 1,000,000 € 50,000 € 50,000
€ 1,200,000 € 50,000 € 60,000
€ 1,400,000 € 50,000 € 70,000
€ 1,600,000 € 50,000 € 80,000
€ 1,800,000 € 50,000 € 90,000
€ 2,000,000 € 200,000 € 100,000
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Chart 1: Customer Segmentation
Customer A Customer B
Necklaces
Decorative
Flip flops Sarongs
dresses
Flat shoes
Halterneck
dresses
Loyalty Cards and internet purchase recording tracks customer habits and can
target marketing messages in a personal, intimate and helpful way
Halterneck
Dresses Pea coats
Scarves
Smart shirts Flip Flops
Coats Large
Home Earrings
furnishings Sally Socks
buys Dora
buys
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