Carphone Warehouse

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Table of Contents

Executive Summary3
Introduction4
1. Company Overview4
2. Marketing5
2.1 Introduction5
2.2 Strategic Business Units in Carphone Warehouse5
2.3 SBUs and Their Orientation5
2.4 SBUs and the BCG Model6
2.4.1 BCG Model’s Recommendations7
2.4.2 Product life cycle of the ‘cash cow’ and the ‘question mark’7 2.5 PEST Analysis8
2.6 Carphone Warehouse SBUs and “Five Forces”8
2.6.1 Industry Competitors8
2.6.2 Substitutes9
2.6.3 New Entrants9
2.6.4 Buyers (Customers)9
2.6.5 Suppliers9
2.7 Current Strategies10
2.8 Recommendations11
2.8.1 Short-term Recommendations12
2.8.2 Telecoms Marketing Mix In The Short-Term12
2.8.3 Long-term Recommendations13
2.8.4 Sell Distribution (retail business)13
2.8.4 Invest in Telecoms and re-brand as TalkTalk (use for operations)14 2.8.5 Establish effective relationships with the consumer by delivering value14 2.9 Conclusion14
3. Finance16
3.1 Financial Analysis Précis16
3.2 CPW Overall Performance17
3.3 Group Operating Profit Margin17
3.4 Return on Capital Employed (ROCE)18
3.5 Gearing19
3.6 Interest Cover Ratio20
3.7 Earning Per Share21
3.8 Current Ratio22
3.9 Management Ratios (Including Stock, Debtor & Creditor Days)23 3.10 Divisional Contribution Margin24
Divisional Contribution Margin – Segmental24
3.11 Operating Profit Margin25
3.12 Recommendations26
4. Operations27
4.1 Operations Analysis Précis27
4.2 The Transformation Model27
4.3 Operations Characteristics29
4.3.1 ‘Four Vs’ Model29
4.3.2 Implications of ’Four Vs’31
4.4 Polar Representation33
4.4.1 Analysis of Polar Representation33
4.5 Recommendations33
Conclusion35
References36
Appendices37
Marketing:37
Finance40
Executive Summary

THIS REPORT PROVIDES AN INSIGHT INTO THE MAIN STRATEGIC PROCESSES AND METHODS OF CARPHONE WAREHOUSE (CPW), EUROPE’S BIGGEST INDEPENDENT MOBILE RETAILER. IT AIMS TO PROPOSE VIABLE FUTURE STRATEGIES FOR THE BUSINESS BASED ON THE CRITICAL REVIEW OF ITS MARKETING, FINANCE AND OPERATIONS. CPW IS SPLIT INTO TWO MAIN STRATEGIC BUSINESS UNITS (SBUS): DISTRIBUTION AND TELECOMS. EACH SBU IS ASSESSED INDIVIDUALLY. METHODS OF ANALYSIS INCLUDE PEST, ‘5 FORCES’, RATIO AND COST ANALYSIS. ALL CALCULATIONS CAN BE FOUND IN THE APPENDICES.

The results of our assessment show that CPW has been growing at a fast rate, with Distribution being the main source of revenue in the earlier years. However, Telecoms SBU, having started at a much lower point than Distribution, is catching up very fast and may soon overtake Distribution in its growth. Furthermore, we discover that a number of strong forces, such as suppliers’ bargaining power could potentially undermine the future of the Distribution unit. Vodafone’s exclusive contract with Phones4U, combined with the possibility of consolidation among CPW’s main suppliers make the Distribution unit vulnerable to factors outside its control.

We propose shot-term and long-term objectives for CPW. These include developing the Telecoms brand via CPW’s current distribution channels and selling off of the Distribution business to reinvest in Telecoms and reinforce its growth. Our analysis of CPW’s financial ratios and operations shows that the margins for the Distribution division have remained flat over the years whilst the Telecoms division has seen growth in its contribution margins. With everything taken into consideration, we believe that the Telecoms division could potentially become a solid business through a number of cost-saving infrastructural investments, which would improve its profit margins and make it less dependent on its supplier, BT.

Introduction

THE PURPOSE OF THE CASE ANALYSIS IS TO GAIN BROAD INSIGHT INTO THE DIFFERENT STRATEGIES EMPLOYED BY THE CARPHONE WAREHOUSE PLC. THIS WILL AID IN DEVELOPING RECOMMENDATIONS FOR MAJOR ASPECTS OF ITS FUTURE STRATEGIES. THE REPORT WILL BE DISSECTED INTO THREE SECTIONS: MARKETING, FINANCE, AND OPERATIONS. EACH...
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