Company Profiles Report
MANAGEMENT REPORT FOR CAIFU INVESTMENTS LTD.
Management Report for Caifu Investments, Ltd
The purpose of this report is to offer information and recommendation to the Board of Directors of Caifu Investment Ltd. to use in making a decision concerning placement of capital. The two companies reviewed are Next and New Look corporations.
The garment industry is facing numerous challenges to operations today including trade union actions and pressure groups on the part of employees, rising costs of production based on oil prices, patents and trade regulations, and a constant demand to catch the eye of the fashion consumer. Competition is no longer just on a state or regional basis – global expansion is necessary in order to place in the upper ranks of the fashion industry. With global operations come additional requirements for adhering to various trade and union regulations, different cultures, and changing management styles.
Headquarters : Enderby, Leicestershire, England, United Kingdom
Annual Revenue: Annual Sales for 2014: £3999.8 million (Otp.investis.com,
Joseph Hepworth started the company in 1982 selling women’s clothing and accessories; it is public limited. Next later added clothing for children, men’s clothing, flower delivery, services for gift lists, baby clothing, and home décor items (Nextplc.co.uk, 2015).
In 1988, following a period of aggressive expansion, Next was on the verge of bankruptcy (Hosking, 1995). The company was able to forestall court proceedings by selling 433 jewelry stores owned and firing the Chief Executive. Next expanded again when it bought the Lipsy Company in 2008.
The company financial report revealed retail sales increased by 5 percent in 2015 and catalogue and online sales rose by 14 percent. The price of stock increased 14 percent and the company returned £572 million to stockholders that year.
Next Board of Directors
The corporate website for Next states the primary financial strategies include expanding the range of products, adding to retail selling space, increasing the number of online customers, generating larger buybacks and dividends to investors, and operating under general good business practices (Nextplcs,co.uk, 2015).
There were no listings of awards of recognition presented to the Next Corporation.
New Look Group
Headguarters: Weymouth, Dorset, United Kingdom (NewLookGroup, 2015)
Annual Revenue: £1528.8 million/£805.9 million gross profit
Tom Singh started the company in 1969 and it is privately owned. It is a fashion clothing leaders. With around 1160 locations around the world, the company merged with the MIM fashion store in 2000, although the store was later sold to Main Asia. New Look was ranked the United Kingdom’s top footware store in 2007. Online purchasing opportunities were made available in 2007, also. Further expansion took place when New Look purchased the Lyndale Distribution Centre in order to conduct product distribution activities within the company.
The strategic goals for New Look focus on constant improvement of products, people, international, brand, and multichannel. Plans for store refurbishment resulted in the granting of the World Retail Awards Store Design of the Year for the location in White City. There are 305 stores in the format of the Group in Concept. Locations in China, Poland, and Germany are progressing as planned, but the stores in Russia and the Ukraine have been cancelled due to political turmoil.
New Look Group Board of Directors
The company underwent restructuring and the present New Look Retail Group became the ultimate holding company in 2006. Apax Funds controls 27.2 percent of the company stock and Permiria Funds holds 27.6 percent. The financial report for New Look in 2014 showed a loss of £53.6 million that was attributed to the company owners.
The New Look Groups has garnered numerous awards from the fashion industry over the years in recognition of innovation response to trends. In 2014 alone, they received Best Maternity Brand from the Mother and Baby Awards, Special Jury Award Retailer from Mapic Awards, Best Footwear Range from British Plus Size Award 2014, Best Footwear from Fabulous Magazine High Street Fashion Awards, New Look, White City - Winner of the Store design of the year from World Retail Awards, Best Hot for Heels from Cosmopolitan #fashfest awards, Best Shoes from Lorraine High Street Fashion Awards, and Best Shoes / Best Accessories from Reveal Magazine Online Fashion Awards (NewLook Group.com). In other categories, New Look received the RoSPA Award Silver from Health & Safety Management Systems in recognition of employee safety, the Best Corporate Treasury from Portfolio Institutional Awards 2014 for recognition of sound investment, and Most Stylish Women’s High Heels from PETA Vegan Fashion Awards for designing footwear for women believing in the preservation of animals.
Following are graphs representing the Strengths, Weaknesses, Opportunities, and Threats to the New Look Group and the Next Corporation. There are some similarities in several categories, but the primary differences come from the location and numbers of stores, the diversity demonstrated by Next, the differences in the quality of employee relationships and corporate social responsibility, and financial constraints.
SWOT Analysis for Next Corporation
SWOT Analysis for New Look Group
Analysis of Organizational Culture
Economic drivers can be significantly influenced by a company’s style of management. The findings of a study recently conducted showed the decisions of managers were directly responsible for cost drivers, increases in productivity, and reductions in cost (Redlein, 2008). A corporation’s economic drivers are capable of measuring more than a company’s finances; other areas of evaluation include employee satisfaction, response speed, the management of ideas, customer satisfaction, the quality of the product, and brand preference.
The workplace relationships between employees and their managers define an organization’s culture; the relationships of employees with each other are also a component (Robbins and Coulter, 2005).
The Next Corporation appears to have detail-oriented focus combined with a stable operational base. However, there appears to be a poor relationship correlation between management and employees. The result can be lack of innovation and risk taking. This happens when employees are not allowed to work toward a goal as a team. If employees don’t feel a connection to Next Corporation, they have little concern about the success of the company. Weak organizational culture happens when management activities are uncoordinated. The retention level is poor at Next Corporation due to low pay standards that do not appear to be rising. In an organization such as this, communication function as a chain network as managers receive information from higher levels, send it to lower levels, and back (Carpenter et al., 2015).
The workers for the New Look Group probably have an organizational culture completely different from that of Next Corporation. Managers must have a degree of focus on details, but an innovative and creative company such as New Look provides an upbeat working environment, encouraging team efforts toward corporate goals. Employees are energized by this type of workplace and take risks that can lead to creative and successful ideas. A culture of this type has high employee retention and there are often referrals to friends and families for open positions. By building on these types of referrals, internal relationships are already in place with new arrivals. A flexible management style such as this shapes the organizational culture to address company needs.
Employees who feel their work impacts the success of their employer become interested in positive results. The communication style in an environment like this spreads out from employee to employee and from manager to employees. This wheel network allows for input from multiple sources as information makes its way around the workplace.
Managerial decisions are significantly influences by organizational culture (Robbins and Coulter, 2010). At Next Corporation, risk taking within the company is probably low although expansion efforts are high. Managers that plan strategies without the input of employee teams can miss insights that lead to success. If managers are using employee suggestions, the problems with near bankruptcy by Next Corporation may not have occurred. However, with employee/manager relationships ineffective, there is a lack of interest by the workers in the success of the company. Customer service suffers and job satisfaction is low. When employees receive poor reviews based on statistical performance, a constant employee turnover results.
In an organization environment that is detail-oriented, managers are often concerned about supervisors reprimanding overruns on budgets. The stress of trying to meet quotas and goals leads to managers giving poor reviews to employees in an attempt to bring up production, but the poor relationships often lead to resignations.
Decision-makers who are effective have a strong sense of responsibility for successful outcomes. By acquiring additional information from a multitude of sources, a manager can choose the best options for the situation. Organizations that are excessively focused on facts and figures cause their managers to become trapped in trivia that may not assist them to make informed decisions. Next Corporation may be expanding into numerous product lines because they lack the innovative culture internally that would improve on their present lines. The lack of creativity can be a reflection of an uninvolved employee culture. Analytical answers may not be the best ones in an industry based on fashion trends. When managers receive pressure for performance based solely on their own input, unethical behavior may occur.
At New Look group, the teams of employees compete for the most creative ideas. While risk is high in an organizational culture of this type, the results can be much higher than in a more conservative environment. When success is achieved, there is a high sense of job satisfaction for the workers and the result is high retention.
Managers at New Look Group probably make decisions based on information received from multiple sources. When employees can offer suggestions without fear of criticism, ideas flow more freely. Managers may not use all the ideas that come to them, but they have a wider selection of options to choose from than if they were to work alone. Managers and team members work together toward a successful goal and the decision-making process is more a group effort.
In this type of organizational culture, it is not unusual for managers to make decisions based on instinct. The innovative culture at New Look has resulted in awards for creativity and fashion. Conceptual results lend themselves to the current success of the company.
Concerning operational budgets, the managers at New Look understand that taking risks can result in running over projected costs. Supervisors may react toward the managers as the managers react toward the employees when stepping past traditional bounds such as expenses. Evaluations are based on results rather than methods and employees are empowered knowing their performance affects the success of the company.
Activities Related to Corporate Social Responsibility
Next Corporation belongs to the Ethical Trading Initiative; this is an alliance of businesses which work together to improve the quality as which is dedicated to promoting quality in the products in their supply chain. In terms of the environment, four percent less energy was used in 2014, 16 percent less fuel was used, and 93 percent of operations waste was diverted from landfills (Next, 2014). The warehouse division recorded an 18 percent reduction in accident in 2014. They have a recorded advance in decreased environmental emissions every year. However, there was an increase of 9 percent in the RIDDOR accident rates of employees in the retail division and an 11 percent increase in regional service centers in 2014. Next Corporation is also involved in the creation of a child care centre in New Dehli.
The Times Newspaper created a public backlash against Next Company when it revealed the company was paying a minimum wage to employees rather than providing a standard of living in comparison to their profit margin (Turner, 2014). When a reporter questioned a company representative, he stated there were 30 applications for every open position; the remark implied that there is no need to pay higher wages because the jobs were so scarce. Also, the Consumer Protection Regulations of 2000 found Next Company guilty of violations of standards in 2009 when it was revealed that the company was charging for distribution to consumers in Ireland when though the product was returned within the mandatory seven working day period (Irish Times, 2009).
Perhaps in response to the poor press concerning employee wages, CEO Lord Wolfson donated his $3.9 million annual bonus to the workforce at Next Corporation in 2013 Farner, 2013). While he is not the first corporate manager to do so, the amount donated is the largest to date. The result is approximately one percent of each employee’s annual wage. However, the president of the Retail, Wholesale and Department Store Union, Stuart Appelbaum, believes it is an attempt to curry favor with the public. He stated that it is more important for Next to raise the wages of the employees rather than toss them a one-time payment that is insignificant in increasing their standard of living.
The New Look Charity Foundation was founded by the New Look Group in 2009. Through fundraising efforts since then, it has contributed over￡850,000 to a number of charitable organizations (NewLookGroup.com, 2015). Included in the more than 30 charities associated with the New Look Charity Foundation are the Weldmar Hospicecare Trust, the Retail Trust, Children’s Hope, and the Prince’s Trust. Also, the New Look Group makes all product suppliers to sign the company’s formal Code of Ethics document.
Conclusion and Recommendations
After considering the information gathered and presented in the SWOT reviews, there are a number of factors to consider. While the Next Corporation has diversified their product line and branched into a large number of locations, the company always appears to be teetering on self-destruction. A press release by the company in January of 2015 announced they had combined locations with another fashion store near its Stafford location (expressandstar, 2012). There were no plans for the demolishment of the old location, although the newspaper stated over 50 new jobs will be created. The partnership may have been a move to consolidate costs when the other store was not able to meet expenditures, or it may have been a strategy for future partnerships to create opportunities for expansion without the cost of a completely new store. Either way, the dominant brand name of Next Corporation will either be buried in the combining of names, or emerge as the main name.
On the other hand, the New Look Group has experienced conservative growth and some financial setbacks of its own. Ultimately, the poor corporate social responsibility demonstrated by Next Corporation and negative publicity without apparent concerning the management at the company is disturbing. The innovative style of New Look results in industry notice and indicates future operational success. For that reason, the recommendation for investing capital by Caifu Investments is for the New Look Group.
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