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SUPERGROUP-SUPEDRY CASE ANALYSIS
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Business Overview
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SuperGroup is the company which owns the SuperDry business – a UK
manufacturer of American and Japanese-inspired clothing catering primarily to
the 15-25 age groups, although the brand has become increasingly
appealing to a much broader group. Superdry targets the young fashion market
with affordable, premium quality clothing and accessories for both men and women
in the 15 to 25 age bracket,
After beginning life on a market stall in 1985, the SuperDry label has
expanded rapidly. The group now has more than 200 stores across 40 countries
worldwide as well as a thriving online business, with revenues totalling £313
million in the most recent financial year. The group went public with a share
issue in 2010 and in February 2011 saw further expansion with the acquisition
of its distribution partner CNC Collections BVBA.
Recently SuperGroup paid £0.5m in shares to Chris Griffin, the owner of eBay business outlet,888 Clothing, to terminate an agreement under which 888 can sell garments bearing the Superdry brand that are considered by SuperGroup to be seconds. This comes after lossws arising from the knock down prices at the eBay
SuperGroup said it would be
taking the online outlet in-house, and announced that Griffin would be head
of E-commerce at the firm. Griffin has entered into lock-in arrangements with
the company in respect of the shares he will receive from SuperGroup.
“Chris Griffin's appointment represents a huge
step for us as we move towards creating a dynamic, fully integrated
e-commerce capability,” said Julian Dunkerton, chief executive of SuperGroup.
Superdry focuses on high quality fashionable products fusing vintage
Americana and Japanese inspired graphics with a
British style. Superdry clothes are characterised by:
· Super
soft hand feel cotton with authentic vintage washes;
· Premium
fabric with vintage detailing;
· World
leading hand-drawn graphics; and
· Tailored
fits with diverse styling.
· The
Group operates from owned stores in the UK and Europe and through franchised
and licensed stores around the world.
Superdry’s
presence around the world:
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Groups Business
Model
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The Group’s business model is to establish a presence in a wide range
of geographical territories through a combination of owned stores, franchises, concessions, licences and the internet.
This model is flexed, based upon the profiles and risks of each territory
and, over time, depending on the success of the Superdry brand, a blend of
these channels to market could be adopted.
However, some channels may be in conflict. E.g. online sales may be
cheaper thus driving away customers from agent retail stores thus more agents
may not be willing to stock Superdry for fear of losses.
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Superdry
Strategy
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Supergroup targets the youth fashion market with affordable, premium
quality clothing and accessories for both men and women. Their focus has been
on customers primarily in the 15 to 25 age bracket, but Superdry is
Increasingly appealing to a much broader group.
Over the coming years it intends to continue implementing its growth
strategy focused on five key ares:
1. Roll-out of standalone stores in the UK and Europe;
2. Developing the online offer;
3. Expanding the international
business;
4. Extending the product range;
and
5. Developing an infrastructure
that delivers profitable
growth and operational efficiency.
1) continuing the roll-out of standalone stores in the UK at a rate of
approximately 20 per year;
2) extending the product range from 1,000 pieces in Spring / Summer 2009
to over 2,000 in Autumn / Winter 2010 mainly through further developing
underwear and womens wear;
3) expanding the Wholesale Division both in the UK and internationally,
with particular emphasis on franchise operations in the Far East, Middle East
and South Africa;
4) developing the online offering, particularly targeting overseas
customers and launching a new website with multi-language and multi-currency
options internationally; Recently SuperGroup paid £0.5m
in shares to Chris Griffin, the owner of eBay business outlet,888 Clothing,
to terminate an agreement under which 888 can sell garments bearing the
Superdry brand that are considered by SuperGroup to be seconds. This comes
after losses arising from the knock down prices offered through eBay
5) Develop an infrastructure that delivers operational efficiency and a
platform for growth.
Through these
strategies, the Group aims to grow revenues and profits.
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Product Portfolio: Classification by Markets
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RETAIL DIVISION
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The Retail Division comprises Cult and Superdry branded retail outlets
in the UK and Republic of Ireland, as well as concessions and an internet
sales channel. The Group is fortunate that it will add retail
space at a time when the retail property market is flat.
The Board is taking full advantage of this opportunity and is able to
find new prime sites while at the same time being able to access landlords’
incentives.
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Wholesale division is that which servers the international market.
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Evidence
A:provides an introduction to the Supergroup
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Key facts
Has always proved an indestructible superhero high street fashion retailer- reasons
i.
this year it posted high
sales up by 48%
ii.
profits up at £50.2M
iii.
its share price went up
and a hot cake in the market during the year
iv.
The company founded by
two well experienced managers James Holder and Julien Dunkerton who have been
in this business for a number of years.
v.
The brand has
consistently enjoyed a competitive advantage over their rivals since 2003.Evidenced
by the number of store opened the year 2010 in the UK (18) and 44 franchises
abroad in just a year.
vi.
Among its rivals, it is
the label that enjoys a high free celebrity endorsement from sports and music
celebrities, whose following is mostly youthful- their main target market.
vii.
Even though it is such a
modern sartorial (tailoring) phenomenon, competitors seem not to have noticed
this. (Superdry is a modern sartorial phenomenon. And yet it still flies
under the radar).
Key issues for
analysis
1. celebrity
endorsements is a key influence to
Supergroup’s growth strategy
2. the Supergroup rapid expansion is not sustainable 18 uk
stores and 44 franchise
3. Examine extent to which Superdry enjoys a competitive
advantage in the fashion industry (hint:you may use the porter’s theory in
your analysis where appropriate).
4.
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EVIDENCE B: MISSION STATEMENT
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A mission statement is statement of purpose of being to any company.
Its main aim is to communicate to its stakeholders what it is established to
do. The mission statement provides the companies strategies, objectives and
how to deal with the various stakeholder groups
Supergroup’s mission is to grow in the UK and internationally by
serving the youth fashion industry with affordable premium quality clothing
and accessories, designed inhouse and produced by a limited number of suppliers with
expertise in their product category
The core brand for superdy is the supedry brand, but the other minor
brand –cult.
The group has three divisions: Retail, wholesale and online divisions
Issues for
analysis
1. What is the value of a mission
statement to Supergroup.
2. Analyse the strategy to outsource the
production of Superdry to a limited supplier by Supergroup.
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Evidence C: UK
& Ireland Expansion Strategy
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Retail
expansion:
The group retail expansion strategy in the UK market is by use of :
a)
standalone stores- own
retail stores owned by Supergroup
b)
Concessions: securing Superdry
licensed distribution partners in major retail stores locally e.g in the
major fashion retail stores
From the evidence it is very clear that the group expands more through
concessions locally than by putting up their own retail stores.
In 2008 there were 30 concession stores compared to 18 own retail
stores, in 2009 there were 51 concessions against 25 own stores, in 2010 and
2011 there were more concessions than own stores.
This strategy is cheap as it doesn’t require a lot of cash to expand
like it would be the case with own stores. The fixed costs that comes with
own retail stores such as rent, will not be incurred and thus the Group can
earn more sales and can even reduce their prices without making losses thus
attracting more customers.
The standalone sizes and provided by the square footage is very
minimal. In the year 2010 only 2.3% of the total store size represents stand
alone store, the rest is concessional.
However, the success of this strategy in the long-term depends on the
success of the brand, retailers may only sign concession agreements with
popular brands to boost their revenues
so if their comes a better brand, then Super group may lose
competitive advantage and lose some
of their distribution partners
Online
division:
The online division is like their new baby division.
This division has had a 50% increase in their revenue from the year
2010 to 2011; recording a 4% in 2010 and 8% in 2011.
Objectives for
this division:
·
The division to
represent 20% of the total group’s revenues.
·
In the UK: To maximise
revenue that supports UK retail roll-out without compromising brand equity.
·
Overseas:
§ To launch local language/currency websites to build brand awareness and
Complement franchise store roll-out abroad.
§ Participation from overseas websites increasing.
Key issues for
analysis:
1. Assess Supegroup’s international growth strategy
2. Asses supergroup’s UK and Ireland growth strategy
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EVIDENCE D
& E: European Expansion
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Superdry has presence in 70 countries across Europe, Asia, Australia
and America.
The groups international expansion strategy is through:
1. franchise and
2. Own stores run by their new acquisition of franchise distribution partners.
In this respect the group acquired CNC to spearhead it European expansion in
Benelux and France.
CNC and its subsidiaries Snow & Surf, CNC France and CNC Retail
Netherlands was the leading global franchisee for the group currently
managing 29 owned and sub-franchised store with more others on the way.
The main
objective of this deal is to
§ Grow the profit margins by taking advantage of increased sales in
Belgium, Netherlands, Luxemburg & France
§ Accelerate international franchise roll out
§ Make it possible to create own large format stores in key locations
across Europe.
The CNC deal
§ CNC owner Luc Clement to join the group as head of European franchising
§ Clement to be to be paid partly cash and a share consideration in
Supergroup
§ Senior managers (operating team) at CNC to play a key role in the new
set-up.
Key issues for
analysis
1.
To what extent is the acquisition of CNC a major step in European
growth strategy
2. With reference to Super group,
assess the likely effects of taking over CNC on its growth.
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EVIDENCE F:Brand evolution
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Brand evolution is the gradual development of the brand to better form.
Branding has been at the heart of the group’s success. A failure in branding
may lead to the end of the success of Superdry brand.
The company uses a mix of American Japanese graphics.
IN 2003 the T-shirt graphics were only 6 but in 20011 were over 400.
The product
portfolio
The group has a range of products from development to mature products.
Core
range(cash cows/stars)
These are the product that are currently on offer and are well
established in the market. These are like the cash cows and the stars for
Supergroup. These are:
§ T-shirts
§ Polo
§ Hoodies
§ Outwear
Immediate
opportunities
These are the product under development and are to be introduced in the
market soon as problems children/question marks. These are:
§ Women’s wear
§ Denim
Category
development(future opportunities)
These are the products that are considered profitable and the business
may consider diversifying into this business though some may not in their
core business. These are
§ Luggage
§ Fragrance
§ Underwear
Issues for
analysis
1.
Examine the extent to which Brand evolution has
contributed to the success of Superdry brand
2. Assess how the Boston Matrix may influence
Supegroup’s growth strategy
3.
Essess the possible areas for product development and how
this may affect may affect the Supergroup’s corporate strategy
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EVIDENCE G:
Corporate Social Responsibility
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The group main CSR focus is on
High standards of Integrity and honesty in carrying out its business.
To achieve this, the group expects the support of its key stakeholder’s
vis-Ã -vis the managers, employees, suppliers and associate partners that help
in the distribution of the brand.
In view of this the group
ensures it suppliers and manufacturers comply with the local and
international legislation and adhere to the best practice in ethical trading.
Because of meeting the ethical standards the group has been accepted as
a member of the SEDEX-Supplier Data Exchange; whose membership entails
members who are committed to continuous improvement of their supply chains.
AREAS OF FOCUS FOR SEDEX:
§
§ Health and
safety enforce fundamental rights of employees (no forced labour, freedom of
association
Health & Safe working environment, no child labour, fair wages,
reasonable working
Hours, no discrimination and
physical maltreatment)
§ Environment
and
§ business integrity
The group plans to engage its suppliers in formal assessment and where
necessary, improve operations to meet the minimum acceptable standards.
Note
·
That Supergroup has no power
over the suppliers of its garments with regard to labour standard as it
depends on the strength of labour laws in those countries. China for example
is known for its sweat shops
·
That Super group has no power over suppliers
of raw materials to its manufacturers and thus may not be in a position to
insist on certain issues that affects its CSR.
____________________________________________________________________________________
Issue for
analysis:
§
Discuss
the group’s CRS policy with regard to
its corporate strategy
§ Analyse three stakeholder groups that
may be affected by the CRS policy of Supergroup
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Evidence H:
Balance Sheet
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LIQUIDITY RATIOS
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2011
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2010
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a)
CURRENT/WORKING CAPITAL RATIO
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Current assets : current
liabilities
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b)
ACID TEST/QUICK RATIO
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Current assets-stock:
current liabilities
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Generally Supergroup’s
liquidity position is very strong. This is because the working capital ratio
in the year 2011(2.81:1) and 2010 (2.79:1) exceeds the ideal of 2:1.
Therefore, Supergroup will be able to pay its shorter obligations as and when
they mature.
However this
ratio, suggest that the company has tied so much cash in their stocks and
other current assets which could be invested elsewhere in the short-term to
generate more cash.
The fact that
the company deals in the fashion industry that keeps changing from time to
time, it would be advisable to reduce cash pumped into the stock or even move
to a just in time system to reduce obsolescence of stocks. This is given the
fact that they can comfortably pay of suppliers and other short term debts
without relying on stocks as given by the quick ratio of 1.59:1 in 2011 and
1.91:1 in 2010; a ratio above the ideal of 1:1.
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Issues
for analysis:
§
Calculate
and interpret two liquidity ratios for Supergroup
§
How
might the liquidity position of super group influenced their ambitious
expansion
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EVIDENCE
I: Austin Reed Store Deal
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·
The Austin Reed is a
fashion business that deals in women and men’s wear.having operated at the
Regent Street’s Austin Reed-(its flagship store) for 100 years, have to
vacate to make way for Superdry
·
The company paid £12M to
take over the lease from Austin Reed, a 5% of their annual revenue for the
year 2011.
·
This shows how well the
group is in a strong market position to influence the landlords to offer it
key stores previously owned by competitors-Read porter’s five forces.
·
Bubbery a key competitor
of superdry brand is making a similar move by taking over Habitat and LK
Bennet outlets on the same street to create global flagship store.
Therefore,there is threat for subbvstitution and entry for rivals for the
same market-porters five forces.
·
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Issues
For Analysis
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Assess the value of
Austin Reed deal to Super group’s corporate strategy.
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SUMMARY OF ISSUES FOR ANALYSIS
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Evidence
A
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1. celebrity endorsements is a key influence to Supergroup’s growth strategy
2. the Supergroup
rapid expansion is not sustainable 18 uk stores and 44 franchise
3. Examine
extent to which Superdry enjoys a competitive advantage in the fashion
industry (hint:you may use the porter’s theory in your analysis where
appropriate).
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EVIDENCE
B
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4. What is the
value of a mission statement to Supergroup.
5. Analyse the
strategy to outsource the production of Superdry to a limited supplier by
Supergroup.
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EVIDENCE
C
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6. Assess
Supegroup’s international growth strategy
7. Asses
supergroup’s UK and Ireland growth strategy
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EVIDENCE
D & E
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8. To what
extent is the acquisition of CNC a major step in European growth strategy
9.
With reference to Super group, assess the likely
effects of taking over CNC on its growth.
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EVIDENCE
F
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10.
Examine the extent to which Brand evolution has
contributed to the success of Superdry brand
11. Assess how
the Boston Matrix may influence
Supegroup’s growth strategy
12.
Essess the possible areas for product development
and how this may affect may affect the Supergroup’s corporate strategy
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EVIDENCE
G
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13. Discuss the
group’s CRS policy with regard to its
corporate strategy
14.
Analyse three stakeholder groups that may be
affected by the CRS policy of Supergroup
EVIDENCE
H
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15.Calculate and interpret two liquidity
ratios for Supergroup
16. How might the liquidity position of
super group influenced their ambitious expansion
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EVIDENCE I
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17.
Assess
the value of Austin Reed deal to Super group’s corporate strategy.
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