T4 Part B Case Study Exam March and May 2010

The Benefits of having a Personal Shopper. Personal shoppers help the money rich and time poor to select clothes they need quickly. The Case Study examination for March and May 2010 is based on the premium segment of the clothing industry. Whether you are money rich or not, you are probably time poor if you are taking this exam. Adrian Sims of BPP Professional Education helps you select some of the key things you need from the CeeCee Retail Fashion Case. One of the hazards of being asked to write an article to accompany the pre-seen material for CIMA case study exams is that I need first to understand something about the real-world industry context. For March and May 2010 the case is about retail clothing. Our firm, CeeCee, sits at the upper end of the High Street retailers of fashion clothing with its fast-fashion proposition. Not a market I knew much about when I first received the case. So, following an afternoon in my local shopping centre I feel able to pass the following insights on to you. How to spot one of the posh stores:          

staff near doors greet customers as they enter; stairs, not escalators prominent stock sparse and organised into combinations, for example shirts hanging next to jackets and colour co-ordinated; shelves half empty with only four or five of any given item and then only in small sizes. Sparing use of carousels and floor displays; staff well-dressed in items from the store and which are exclusive to the store and discreet in offering to advise customers and willing to fetch missing sizes etc.; a sense of space on the main shop floor due to lack of displays and less customers; stock limited to apparel with some small displays of accessories such as shoes, scarves, beads, bangles and headwear; customers generally well-dressed and purposeful in their shopping; customers and staff who take the view that a lone male shopper like me walking around the woman’s section of a clothing store is something to be viewed with suspicion; a plain white tee-shirt will cost you over £15/€20 and a pair of jeans about £40/€60

How to spot a ‘value store’:  staff near door often a member of store security ready to give chase to shoplifters;  escalators, not stairs prominent;  a wide variety of stock, grouped by item (skirts in one place and the blouses somewhere different) and with up to 20 of the less popular ranges still available in a wide choice of sizes and with significant discounts;  customers dressed with varying degrees of attention to fashion and in wide range of styles and with a tendency to roam the shop grasping blouses and in search of skirts to go with them;  stock displayed on rails against the walls and on carousals huddled together for protection across the floor, some featuring customers’ (rejected) blouse/skirt combinations;  displays of latest designer collections placed side-by-side with novelty items and cartoon nightware for contrast, to accommodate this store’s broader demographic, and to encourage spontaneous purchases from the spare bits of space;  staff wearing shop uniform or tee-shirts advertising special offers and store-cards (these teeshirts are an exclusive range not available at other stores).  staff seem harassed and many prefer to leave customers free to shop unaided having first quickly advised them of the store’s ‘no invisible inventory policy’. They spend available time pricing-up (or down) items and corralling stray stock back to where it belongs before gathering in packs to eye all customers alike with suspicion;

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T4 Part B Case Study Exam March and May 2010



a plain white tee-shirt will cost you less than £15/€20 for a pack of three, and for about £40/€60 you could get a pair of jeans for each of your three tee-shirts and a further 10% off if you sign-up for the store card today.

On the UK High Street the ‘fast fashion’ equivalents of CeeCee includes Zara and Top Shop although be warned CeeCee is neither of these exactly. In a similar segment but not using fast fashion are Next, Gap and River Island. The value segment begins at H&M and includes New Look and Primark (known as Penneys in Ireland). The department stores are M&S, Debenhams and BHS. The supermarkets are Asda, Tesco etc. The discount sales by many shops and the failures and falling profits of shops during 2008 and 2009 should alert you to the fact that the industry is still going through tough times. If you are taking the exam you need to know this stuff too because this exam requires you to assume the role of someone working for the firm in the case study, CeeCee. You will need to show some understanding of the competitors in the industry, the trends on the European High Street, and the nature of the customers. But this exam is not an excuse for a shopping trip and a dose of retail therapy (okay…maybe it is but you will also do some research whilst you are there. Agreed?). You are a management accountant at CeeCee so you need to understand how this all affects revenues, costs and future shareholder value. And as someone about to take your final CIMA exam, you need to know how to use your analysis of the pre-seen material, and the other things you have learned about the real-world industry, to help you pass your exam..

The T4 Test of Professional Competence - Part B Case Study Examination Despite its new name everyone will still refer to this as the TOPCIMA exam I’m sure. Names linger on and frankly that describes what it is. It’s a Test of Professional Competence in Management Accounting. It’s just that you are asked to demonstrate your professional competence in two ways: in your work record and by passing this Case Study exam. T4 Part A is your logbook (sorry….Career Profile…) and although you are advised to get this sorted, signed off and approved before you take this exam there is nothing to prevent you from taking this exam before your Career Profile is accepted. The ‘T4’ bit of its new name may cause confusion because some candidates will be looking for a T1, T2 and T3 to go with it. Maybe they love taking exams. Well, CIMA doesn’t have an ‘invisible exams policy’ – you only have T4 left to go. The T stands for ‘Test of Professional Competence’ and the 4 is there because it is higher than 3, i.e. is a higher number than the top paper of each of the new pillars. You call these exams P3, P6 and P9 but in future candidates will come to know them by their new numbers, P3, E3 and F3. The subjects remain pretty much the same which is good news for you because it means your exam won’t be expecting you to show knowledge you haven’t covered under the old syllabus. If it isn’t broken why fix it eh? As in the past this is a case study in two parts. The pre-seen material you already have consists of 19 pages including Appendices up to 5. On exam day you will receive the second part of the case, the unseen material. This will be a further 3 or 4 pages and will include more information, especially on things that have happened since the pre-seen runs out, the end of December 2009 according to page 10 of the pre-seen. In the exam room you must assimilate this unseen material and answer the requirements set.

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T4 Part B Case Study Exam March and May 2010

The old TOPCIMA exam wasn’t broken and so T4 Part B is going to be very much the same with two very significant provisos: 1.

Your role will be internal not external.

In the past candidates have been given the role of an external independent strategic consultant advising the Board of the firm in the case. That gave examiners license to ask for reports on grand strategic matters such as changes to the Board, the suitability of strategic acquisitions, and dealing with corporate-wide risks. The new examination will be narrower and the examiner will tend to focus more on internal decisions, all-be-it that they will expect you to alert management to any widerranging implications of these. It may also be that you will be submitting your work to the Finance Director, presently Diane Innes, and not to the Board. This suggests that the technical knowledge you will need to display is likely to come from the fields of management accounting more than from management and business strategy as it has in past TOPCIMA exams. 2.

Two items to submit, not one.

The pass mark for this exam remains at 50 marks and you are still allowed 3 hours to write your response plus a further 20 minutes reading time before you write. In the past candidates were required to prepare a single report. You will be required to submit a report and in addition to submit a shorter item. In the specimen paper for T4- Part B (available as a free download from the Studying section of www.cimaglobal.com) this was the requirement for drafts of 2 slides of 5 bullet points each summarising the key points of the investment appraisals in the main report. CIMA wants to test your ability to communicate succinctly to management. It seems likely that you may be asked for slides in your exam, but don’t be surprised if instead you are asked to write a summary email, short letter, or key notes for a speech or presentation by Diane Innes. The final page of the March/May 2010 pre-seen shows the Case Study Assessment Criteria against which your submission(s) will be marked. My understanding at present is that the skills being assessed have not changed. In brief I understand these to be: Technical: invoke appropriate non-numerical knowledge from other CIMA papers to support your analysis of the situation in the pre-seen and unseen parts of the Case Study and also your arguments and recommendations; Application: relate the technical theory specifically to the situation of CeeCee in the Case and, especially, to carry out appropriate computations and use the results of these in analysing the issues in the case as well as in justifying your recommendations; Diversity: use relevant real-world industry examples to give weight to your analysis and recommendations; Focus: select from the issues or decisions in the Case Study materials those of greatest immediate importance to CeeCee and devote appropriate amounts of the report to these; Prioritisation: place issues and decisions facing CeeCee in a priority order in your submissions by taking into account the potential impact and the urgency of each (the number of marks available for demonstrating this skill has fallen from 10 to 5 which reflects the fact that it will be your line manager who will initially define priorities rather than you as an independent consultant deciding these for yourself); Judgement: in discussing issues and decisions you must demonstrate understanding of the potential impacts on CeeCee of each and also identify and assess different potential courses of action available to CeeCee and discuss your supporting financial analysis of the alternative actions;

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T4 Part B Case Study Exam March and May 2010

Logic: provide clear recommendations to management on what CeeCee should do, justifying clearly how this recommendation comes from your earlier analysis, and indicating the steps to take to implement each recommendation (the number of marks for this skill has risen from 20 to 30 and it seems likely that the 10 marks available for slides or other short submission will be awarded exclusively against this criterion); Integration: the written-style and presentation of your submission should be business-like and succinct and as a whole the submission should be complete and demonstrate consistent arguments from beginning to end (the marks available for this criterion have fallen from 10 to 5 which is probably to provide some of the additional marks under Logic and in recognition that in the past this criterion overlapped a lot with some of the earlier criteria); Ethics: the recognition of the implications of issues for the moral behaviour of CeeCee or of its employees or its impacts on the social responsibilities of CeeCee. This criterion is broken down into analysis of issues and choices and the justification of why you consider each issue to have an ethical dimension (5 marks) and the recommendations on how management should deal with them (5 marks). Some candidates will be taking this exam on PC. There are no special criteria to award marks for PC skills. Although the specimen paper for T4 Part B required slides CIMA has made clear that candidates will not be permitted to use PowerPoint or similar packages. Examination submissions on PC will be restricted to Word and Excel documents whilst on conventional scripts text, calculations and slides will be rendered by hand. Before you take your T4 examination, or indeed your first practice exam, you should ensure you: (a) Understand these criteria fully. Do this by reviewing the CIMA website and download the specimen paper, solution and any other guidance such as the most recent Post-Exam Guide for the former TOPCIMA examination. (b) Review any technical theory from previous CIMA studies that may have relevance to CeeCee. When I read the pre-seen I found myself thinking of SWOT analysis, Porter’s 3 generic strategies, product life cycles and product portfolios, models of IT/IS impact such as value chains, IT/IS scaling frameworks such as Peppard/McFarlan’s Grid and the Porter/Miller Information Intensity matrix, and means of reducing risk from IT/IS. I resolved to brush up my knowledge of e-commerce and also of supply chain management and enterprise resource management and customer relationship management. The data on CeeCee’s competitors suggested ratios on contribution per square metre and per store as well as business valuations of rivals based on multiples of their earnings times CeeCee’s operating margins. I am aware from previous exams that questions frequently involve NPVs so practicing these would be a good idea. Furthermore I can see some potential for using Customer Account Profitability in this case too. (c) Get some industry knowledge about CeeCee’s industry. Visit some shopping centres but also visit the websites of apparel retailers. Try internet searches on ‘fast fashion industry’ and ‘supply-chain solutions for apparel industry’, but be selective, I got10.5million and 18,500 hits respectively. Try to take a look at the final accounts of some of the real-world firms (often available from their websites under ‘investor relations’) and assess their margins, use of working capital and growth rates. (d) Get some practice at timed mock exams. You have never taken an exam like this before and you will need to hone your technique (if you have taken an exam like this before you certainly do need to hone your technique!! Either that or get another hobby apart from sitting TOPCIMA exams). In 9 years of teaching CIMA case studies to hundreds of students I have never once heard a student leaving a mock exam complaining that they had learned nothing from it. I have 4

T4 Part B Case Study Exam March and May 2010

seen many of them looking stunned and humbled at the experience, wanting to know how badly they had done and asking for more mocks to practice on. The point is not to predict what is coming up and learning what to say because this exam can’t be predicted. The point is to learn how to cope when the examiner throws the unexpected at you and to produce a decent submission - that means a complete report with justified recommendations the other shorter item requested, within 3 hours 20 minutes. Mock exams can be obtained on courses or bought or downloaded from the same commercial publishers that produce material for other CIMA exams. In this exam there are absolutely no marks for writing-out bits of the pre-seen and unseen parts of the Case Study. What is important is to get the key business points sorted. Let’s have a look at a few key points from the pre-seen material on CeeCee to get on the right track.

History and development of CeeCee CeeCee is a successful player in its market. You can see this from the fact that it has the highest gross margins amongst its competitors (page 8), the fact that its like-for-like sales revenue fell only 2% in 2009 against a other clothing retailers that suffered falls of up to 20% (page 9), that its total sales revenue grew, and the fact that investors are ‘generally pleased’ with its performance (page 11). The factors that have driven CeeCee’s success so far have been its harnessing of fashion sense and logistics management to create a ‘fast fashion’ business model and so a prime-mover advantage which rivals have yet to overtake. This model was ‘new’ in 1990 and seems to be credited to the founder of CeeCee and her early co-director, Paulo Badeo (in reality this accolade probably is shared between the founder of Spanish chain ‘Zara’ and US chain ‘Forever 21’ who laid the foundations in the mid 1980’s). The fashion-sense and design originates from Carla Celli herself and has been carried on by her successor in the top design role, Laura Russo, and depends on recruitment and motivation of talented young designers and a shift for copying (or re-interpreting) other designers to original designs and a house style of its own (in the real world this has been the approach of Forever 21). The logistics side relies on the modern paraphernalia of JIT systems outlined on page 5 such as supplier partnerships, lean manufacturing and low inventory, compressed times from design to shop floor (10 days for some items), and linked together by increasingly sophisticated IT/IS on which CeeCee spent at least €50m in the past year (€40m + €10m page 7) to further streamline inventory control and to launch e-commerce – equivalent to 3.5 times its marketing spend (€50m/€14m – page 9). It is noticeable that this side of the business model has been left with two maturing directors, Paulo Badeo and Jim Bold, whilst the IT/IS responsibility has passed to Roberta Downs who seems to lack long term commitment to CeeCee but we are not able to assess if and when her self-imposed 5 year tenure will come to an end (page 13). Store locations are critical to its present business model. CeeCee avoids high advertising costs by combining good locations, seemingly in city centres (page 4) with eye-catching window displays. This probably enables it to avoid expensive advertising and encourages the 17-times-a-year visits by its customers (page 5). Given that this implies a visit every 3 weeks (or once a month on payday plus 5 special visits to coincide with holidays and festive seasons) it seems reasonable to speculate that these locations are either in places where its target young professionals (page 4) work or/and where they shop as a leisure activity. CeeCee has moved into larger shops. The comparative data on page 8 shows that it has an average shop size of 1036 square metres (632,000/610) compared to 556 and 944 respectively for Competitors 1 and 2 and page 14 shows that it has not opened any further small shops in the last 3 years so that the proportion of large shops has risen from 14% in 2007 (80/570) to 17% in 2009 5

T4 Part B Case Study Exam March and May 2010

(110/630). Page 16 shows that average store size is forecast to rise from 1045 square metres in 2009 (648,000/620) to 1135 in 2014 (879,600/775). Presumably this enables the further extension of its product ranges beyond ladies fashion to include accessories, men’s clothing, children’s clothing and home furnishings which are presently restricted to locations with medium and larger stores (page 4). CeeCee remains a smaller player in the international market. Page 8 reveals that CeeCee is smaller than Competitors 1 and 2 and has less international coverage than any of its 3 rivals although it plans to expand outside Europe in the next 5 years (page 8).

Year ending 2008

CeeCee

Competitor 1

Competitor 2

Competitor 3

Revenue per square metre (€m)

4,272 (€2,700m/632,000)

4,393 (€9,400m/2,140,000)

4,353 (€3,700m/850,000)

3,846 (€2,500m/650,000)

Gross profit (€m)

1,623 (€2,700m @ 60.1%)

5,283 (€9,400m @ 56.2%)

2,183 (€3,700m @ 59.0%)

1,425 (€2,500m @ 55.7%)

Gross profit per square metre (€m)

€2,568 (€1,623m/632,000)

€2,469 (€5,283m/2,140,000)

€2,568 (€2,183m/850,000)

2,192 (€1,425m/650,000)

Average size of shop (square metres)

1,036 (632,000/610)

556 (2,140,000/3,850)

944 (850,000/900)

1,083 (650,000/600)

CeeCee has profitable customers as well as profitable stores. CeeCee would seem to make its profits using a differentiation focus strategy (Porter). That means it makes its money by selling a lot of value to a few customers rather than, say, huge amounts of low value to a lot of customers. Given that CeeCee targets ‘young professionals’ that visit 17 times a year instead of 4 this suggests a group who have discretionary income and a desire to look up-to-date and so to ‘top-up’ their wardrobes regularly. Like Carla herself, these same young professionals will age and there would be a temptation to retain them by offering different products for more mature customers. This approach was attempted by Burton Group in the UK in the 1980s as it created tiers of stores with Top Shop/Top Man at the bottom and aimed and young fashion, advanced through Dorothy Perkins, Burton and Principles for the young professionals, and culminated in the family store Debenhams (eventually the group began to fail and today some of these brands have perished whilst the remainder have been sold-off to different owners). Next plc seeks to cover all these segments from within the same stores. CeeCee has so far not done this and remains focused. It seeks to replace today’s maturing customers with fresh young professionals as the years go by. The age profile of its design studio suggests that CeeCee refreshes itself to attract each new generation. The danger for CeeCee will come if it fails to do this effectively as fashion or buying approaches change.

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T4 Part B Case Study Exam March and May 2010

Issues presently facing CeeCee The Examiner has the task of spinning two different exams from this pre-seen material. One is sat in March and the second is sat in May. Each develops independently from the pre-seen. That means that the things that happen in the unseen material introduced for the March exam have absolutely no bearing on the situation of CeeCee in May. The Examiner has left a number of threads dangling in the pre-seen which may become issues in the March or May exam. Exploring these now may help prepare you. 1. Future marketing approach of CeeCee. CeeCee has a new Sales and Marketing Director, Juliette Lespere appointed in 2008. She has helped CeeCee weather the storm of the credit crunch during her first year or so and also probably had her time taken up by the development of CeeCee’s e-commerce channel at the end of 2009 (page 7). But according to pages 9 & 10, Juliette wants to do things differently and is said to be ‘impatient for change’. This change seems to involve increasing the marketing budget to give store managers discretion for local events, re-locating some stores, and increase the marketing information gathered from on-line shoppers. In the exam you might receive her detailed proposals from Diane Innes and be asked to prepare a briefing for Diane that evaluates the costs and benefits of each proposals and the controls than might be needed to ensure they pay their way. They represent a change to the business model that has made CeeCee successful and they will cost money. Also do other retailers use these techniques and how successful have they been? What alternatives are available? Also be sensitive to the attitudes of Carla Celli and the shareholders who may take the view that CeeCee’s present approach is not broken, so why fix it? You should consider these issues before exam day and have some ideas ready in case this comes up. 2. Future of e-commerce at CeeCee Careful reading of page 7 reveals that CeeCee may not yet have an e-commerce channel. We are told simply that it spent €10m at the end on 2009 on the launch of its website. We have no evidence on whether it has been successful and certainly its financial impact is not visible in the 2009 draft accounts. However the growth in the 5 year plan on page 16 includes an amount of revenue from on-line trading as well as from the extension of its physical shops and presumably the improving operating margins (23% in 2009 up to 24% by 2014) will have been based in-part on assumptions about the costs of e-commerce compared to conventional shop retailing. Page 2 states that online shopping has not yet had a significant impact on the apparel sales industry and certainly it does seem at odds with CeeCee’s differentiated approach based on store locations, window displays and customer care. However CeeCee sells household furnishings too so perhaps it will use its on-line shopping to sell these? Business planning inevitably contains uncertainties like this and you could expect a request on exam day from Diane Innes to recast the 5 year plan to incorporate further information on the success/failure and costs of CeeCee’s e-commerce. You might be told in March that its launch has been a great success, but in May be told that its launch was a failure (this is an example of what I meant when I said the two unseens are independent of each-other) and asked to comment on investment proposals to extend CeeCee’s e-commerce strategy. You might also wish to question whether CeeCee still needs to open 20+ stores a year and expand internationally if online shopping for apparel has finally taken-off. 3. The locations of stores in future On page 10 we are told that Juliette Lespere has concerns over the location of ‘fewer than ten’ of CeeCee’s older stores and wants them to be relocated. This would involve costs not presently included in the 5 year plan. You may be asked by Diane Innes to prepare an investment report on whether to relocate these stores at an average cost of €5m each, depending on store size (page 10 tells us CeeCee spent €100m in 2009 on new stores and page 3 tells it opened 20 stores therefore 7

T4 Part B Case Study Exam March and May 2010

€100m/20 = €5m per store) compared to the budgeted-for alternative of refurbishing them at a cost of €1.75m per store (we are told on page 3 that CeeCee usually buys 40 stores a year and page 10 tells us it refurbishes them every 7 years so €70m spent in 2009 on refurbishing the 40 stores bought 7 years earlier equals €1.75m per store). Would the present value of the additional contribution from a relocated store, and perhaps a wider stock range, be enough to justify the additional €3.25m (€5m - €1.75m) net additional capital expenditure each? Does this include termination costs on the present store such as staff redundancies, early terminations of leases etc? How might cannibalisation from online shopping affect this calculation? And could CeeCee afford up to €29m extra capital expenditure whilst still opening the new stores forecast in its 5 year plan (maximum 9 relocations at €3.25m additional expenditure each = €29.25m) 4. Affording growth A potential exam day requirement of your examiner is to expect you to comment on whether the firm can still afford its 5 year plan. Page 16 shows that CeeCee has an aggressive store-opening policy. In 2010 it intends to open 20 further stores as well as refurbishing 40 that are 7 years ago. Using the calculations above this requires €170m (20 stores @ €5m + 40 stores @ €1.75m) and by 2014 the forecast puts this at €412m (50 shops @ €5m each plus €162m refurbishment according to page 10). This should be compared to the actual cash CeeCee will be generating. Presumably, before approving the 5 year plan, the Board would have required forecasts showing this could be afforded. However if sales revenues don’t reach forecast, if costs rise, if store fitting costs rise due to using larger outlets, or if additional funds are demanded for marketing, IT/IS or Corporate Social Responsibility initiatives then this could all change and force hard choices on management. You could be instructed to prepare a set of calculations for Diane Innes and a briefing paper and slides on ways for CeeCee to achieve its targets. 5. Reconciling CSR with profits and growth CeeCee’s Head of Environmental Impact, Jeroen de Joost, is another catalyst for change that your Examiner may alight upon as an issue on exam day. We are not told when Jeroen joined CeeCee but by saying ‘the last 22 years’ page 13 implies that he joined sometime in 2009 and perhaps very recently indeed. Some of the things he is introducing may test to the limit the extent to which he has joined a firm that ‘takes its CSR responsibilities seriously’ (page 13). In excess of 15 CSR initiatives are to be commenced during 2010. These are listed on pages 17 and 18. They range from changes to packaging, through introducing energy efficiency measures, to instigating complex audits of CeeCee and of its suppliers. A potential issue here is whether attaining these is compatible with the corporate aims of CeeCee on page 11 which don’t seem to include CSR ‘in the current economic climate’. Having a ‘green footprint’ may boost revenues by enabling CeeCee to attract and retain customers, or to charge more differentiated prices. This is on the assumption that its target customers will value it for its CSR credentials. It may reduce some costs by reducing use of energy and consumables such as packaging and vehicle fuel. However some of these initiatives will increase costs, such as from paying ‘living wages’ or by excluding some suppliers on the grounds of poor working practices or physical distance. Some will require investment, such as installing smart meters, conducting audits, and giving first-aid training to staff. Furthermore it may not take Jeroen long to recognise the inconsistency between minimising miles and pollution and CeeCee’s present supply chain arrangements that bring stock in from Asia using air-freight (page 6), and employ a single central distribution hub in Northern Europe to supply shops in 18 countries (page 6). He might also take the view that having measures to track road vehicles but omitting to track use of aircraft (page 18) should be addressed if the Transport component of CeeCee’s CSR is to have any real meaning.

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T4 Part B Case Study Exam March and May 2010

One of the skills being assessed in this exam is Prioritisation. You should be ready to express a reasoned view on the correct trade-off for CeeCee to achieve between the priorities of profit and the priorities of CSR. Jeroen might reflect that he lost his last job because devoting resources to CSR seemed to be an aim that oil firms could forgo when low commodity prices were affecting their profits. 6. Purchasing policy of CeeCee Page 6 tells us that between 2001 and 2009 CeeCee shifted from sourcing all its items from Europe to sourcing 30% from Asia. Of this a third is shipped by air to ensure it meets the 10 to 15 day lead times from design to shop floor needed in fast fashion. This means that procurement from Asia has gone beyond the standard products to include fashion products. In the search for better margins, and perhaps to win back the customers it is losing to the value retailers despite the latter not conventionally being direct competitors in the High Street (page 8) they may need to source even more from Asia. You may be called on to provide an analysis of the effects of sourcing even more products from Asia. You would need to consider the relative costs, including transport costs, but also the switching costs such as extending the CCIPL system to more suppliers, affording a greater number of inspection visits, and the potential loss of exclusive contracts with some of its existing 350 suppliers. There may be other issues too such as working conditions and environmental impact in the factories and possibly issues around protection of intellectual property rights. Some potential wild cards to consider The issues above are clearly signalled in the pre-seen. But it is not possible to predict the way the Examiner may decide to develop the case on exam day. The best we can do is to spend some time considering how we might respond if we are confronted with issues we were not expecting. Here are a few wild cards that the Examiner could deal you on exam day. I don’t have any ‘inside line’ on these so they are not tips. Rather they are based on what the same Examiner has introduced in the past. 1. Acquisition of a competitor Page 8 gives some vital statistics for three competitors. CeeCee wants more stores and to expand to more countries. One way to do this quickly would be to buy a rival. You should be prepared to express an opinion on the suitability and acceptability of each of its rivals, perhaps considering profit margins and returns per square metre as well as additional data that may be provided on geographical coverage, market position and current indebtedness. The managerial issues in rationalising stores with different names, cultures and staffing policies should not be ignored. Referring to the lessons to be taken from the experiences of banks caught up in the on-going consolidations in that sector could be a way to gain Diversity marks. Also how would this purchase be feasible? How can CeeCee afford to buy a rival? 2. Acquisition bid from a competitor According to page 8 Competitor 1 could swallow CeeCee. If a bid came in what defences could the Board of CeeCee use to convince shareholders not to sell out to the predator? What would a fair price be for CeeCee, taking into account the present depressed share price (page 11) but also the earnings growth in the 5 year plan (page 16)? 3. Major problems with IT/IS It is obvious that CeeCee cannot function without its various systems (page 7). These could mess 9

T4 Part B Case Study Exam March and May 2010

up for a variety of reasons including poor maintenance, the failure of the ‘leading global IT solutions specialist company’, the departure of Roberta Downs etc. These are the sorts of high urgency and high impact issues that the Examiner loves to throw in. 4. Ethical issues There are 10 marks available for proper analysis and recommendations around moral issues. In the past this Examiner has asked candidates to deal with the ethical issues of theft of stock, oppressive managers, victimisation of employees, unsafe products and working conditions, bribery and corruption between management and suppliers, misrepresentation of products, and granting compassionate leave-of-absence for personal problems. Consider how these might apply to CeeCee. The apparel industry walks a fine line on the wages and conditions of workers in factories, and not just in Asia given the media revelation in 2002 that several UK High Street retailers were sourcing clothing from East London sweatshops. The owner of Top Shop took a very strong ethical stance when he cancelled all future orders from the supplier and burned all affected inventory rather than profit from the sale of it. Would you be prepared to make such a recommendation to CeeCee? In 2009 a global premium brand apparel retailer hit the headlines around the world when it lost a case for wrongful dismissal brought by a disabled former shop assistant at its flagship London store over her alleged treatment by management. According to the girl, unfortunately for them also a law student, they had acted prejudicially towards the girl over her disability when a manager informed her that by wearing a cardigan in summer to cover the joints in her prosthetic arm she was breaching its ‘look policy’ of short-sleeve blouses. He transferred her to the stock room shifting boxes stating his intention that she remain working there until the winter uniform, including long sleeves, arrived. Unfortunately for her she brought the case in the UK and was awarded £10,000. This same store group in 2005 lost a class action brought by ethnic minority workers that complained that they had been denied sales jobs and recruited solely to work in the stockroom or on night shifts to keep them out of the sight of customers. Unfortunately for the store this case occurred in the USA and they had to pay $50m and to make undertakings to the court to change its ways. In September 2009 another case was brought against the store on behalf of a teenager denied a sales assistant job because the store claimed her religious headscarf broke its ‘look policy’. Getting ready for the exam I hope this article has given you a few pointers on where to start. You need to fully familiarise yourself with the pre-seen, the main facts and people in it. Try to spot potential issues. You need to get practice in answering full-length T4 Part B mock exams against the clock and, ideally, getting them marked with feedback on where you can improve. You also need to have a look at the real world of the apparel industry by reading articles on the web, keeping an eye on the media and visiting the shops themselves. I will be telling my students to spend time in Grafton Street and in The Centre at Milton Keynes. I just hope they don’t treat it as a glorified shopping trip. And I certainly hope they don’t buy me any novelty items or cartoon night-ware because I’d hate to appear ungrateful and I certainly don’t want to appear ‘down-market’! Good luck with your exam. Adrian Sims teaches the T4 Part B Case Study Examination for BPP Professional Education in Dublin and in Milton Keynes. He also contributes to the study materials developed for the coming exam by BPP Learning Media. 10