Managerial Decision Making 2018-2019 Semester 1
Assignment Case Study: Unicorn Footwear and Accessories
Assignment Case Study: Unicorn Footwear and Accessories (UFA).
Unicorn Footwear and Accessories (UFA) is an online retailer based in the United Kingdom. It is an independent business which imports unique designs of shoes and bags for men and women from Europe. Some products are made in Spain and Portugal, the rest in Eastern Europe. The Accessory range includes handbags, purses, wallets, phone and tablet cases and laptop cases. The majority of shoes and accessories are made from a range of natural products including leather, cork and canvas, though there are also some synthetic materials used.
UFA was established on 1 May 2004 by Stephan, his wife Eliza, and their friend Jarek who has family and a good network of business contacts in Eastern Europe. They all still work in the business and form the senior management team.
The business is successful and has a head office, warehouse and call centre in Leeds; there are now 200 staff employed in these operations. UFA use agency staff as well as their own employees in the warehouse.
The senior management team all earn six figure salaries, though Stephan earns more than the other two; Stephan owns 50% of the shares, Eliza and Jarek each own 25%, and all three are on a performance related bonus scheme. No other employees in UFA are on such a bonus scheme.
Stephan Wallis’s personal vision for the business is to expand the range to include shoes for children as well as adults and to develop the range of bags and other accessories.
Although it is possible to buy ‘one off’ purchases at full price from the UFA website, most of the money is made from a ‘membership’ based business model. Customers are attracted to UFA by the offer of good quality products at low prices; once they ‘join’ by making their first discounted purchase, they pay £20 monthly by direct debit. This monthly membership fee entitles them to a 25% discount on any product in the UFA range each month. They must place their order by the 5th of the month in order to benefit from the discount. If they place no order in any month, they just pay the £20.
The UFA mission is to “To be a responsible and profitable business, providing affordable, comfortable and fashionable footwear and accessories and giving fantastic, personal service to all our customers.”
Stephan has set some challenging objectives for UFA:
· To at least double both turnover and profit from UK sales by the end of 2020,
· To increase EU sales and for the profit from these sales to equal current profits from UK sales by the end of 2021,
· To significantly increase the range, as described above,
· To develop and position the UFA brand so it is recognised as a ‘go to brand’ for shoe enthusiasts by the end of 2021.
The annual performance bonus for Stephan and his senior management team are dependent on achieving these objectives.
In order to expand the business according to Stephan’s vision, UFA has recently opened their call centre. Stephan has successfully resisted pressure from his senior management team to locate this call centre overseas and thus benefit from cheaper labour and overhead costs. He feels it important that all employees of the business are based at the same location and able to operate as a team. The UFA call centre is situated on the company Head Office site on the outskirts of Leeds, alongside the warehouse. It benefits from investment in the latest technology in order to provide fast and accurate services to clients, and also to monitor record and measure staff performance. The technology also allows call centre staff to access all customer information and to track orders and payments in real time. Within the next 12 months the call centre must function as a 16 hour a day, seven day a week operation as the business competes for more UK and European customers and for greater customer loyalty. The key management positions in the call centre have been filled with people known to the senior management team who have worked in other parts of the business so they know and understand UFA, but have no call centre experience. They are implementing policies and procedures based on those at Head Office, regardless of whether they are ideally suited for the high pressure environment of the call centre. The managers are doing the best they can. Due to the planned expansion of the product range, finances are tight and the budgets available for such things as training and development throughout the business (Head Office, warehouse and call centre) are limited. If managers were to submit a sound business case to the senior management team it would be considered, however, to date, no such bid has been made.
Working conditions and issues at the call centre are the subject of a separate report, and you are not required to consider this aspect of the business in detail, though you need to be aware that the call centre exists and is an important part of the business. Dealing with customers complaints takes a considerable amount of their time. Many customers seem to be attracted by the cheap initial offer, and do not realise that they are joining a membership scheme.
Three hundred staff are now based at the Leeds site, 200 at Head Office and in the warehouse and an additional 100 in the call centre. About one third of the staff in the business are full-time, permanent staff; one third are part time, permanent staff with the biggest percentage of part-timers working in the call centre. The remainder of the staff are from an Agency, and most of these work in the warehouse. Unite, the UK’s largest union is the recognised trade union in UFA; membership for the business as a whole is about 20% of staff (those on permanent full or part-time contracts only), but the figure is much less than this in the call centre. Most of the UNITE members work in Head Office, with a small number in the warehouse. At the moment, there is no other formal (or informal) channel for communication or consultation with staff.
Rates of pay are relatively low compared to the local labour market, with many warehouse staff on the minimum wage. The warehouse is operational between 6am and 10pm Monday to Friday and 8am to 6pm Saturday and Sunday. The call centre currently operates between 9am and 5pm Monday to Friday, and 8am to 12pm on Saturday. Fringe benefits for permanent staff are relatively good; there is an excellent staff canteen and a ‘cycle to work’ scheme, whereby staff are encouraged to cycle rather than drive to work. There are plenty of bicycle racks in the car park, many unused, since staff seem to prefer driving to cycling, and drivers struggle to find space to park. There is also a staff discount on products; all staff have a 20% discount on everything they buy up to a fixed upper limit depending on seniority. This upper limit ranges from £200.00 a year for the lowest paid to £2000.00 per year for senior managers. Senior managers can select from the full product range; other staff are limited to products that need a quick sale, either because they are last season’s or because there are too many in the warehouse; these products are usually those that are least popular with customers. Agency staff have no access to staff discounts. Part time staff have a pro rata upper limit according their hours.
The Head Office building is well appointed, and the senior managers have comfortable individual offices with good quality furniture and carpeting, and the latest version of relevant IT including smartphones, tablets and computers. They also have a meeting area where they can take visitors which is equipped with comfortable seating, a coffee machine, wifi access, and a quality snack bar which is kept fully supplied by the canteen staff. All senior managers have company cars and personal parking spaces.
Average prices for some key products in the current range are as follows:
|
Item |
Average price range (£) Without discount |
|
Men’s brogues |
210.00 |
|
Men’s boots |
350.00 |
|
Ladies classic lace up |
95.00 |
|
Ladies ankle boot |
110.00 |
|
Ladies knee length boot |
350.00 |
|
Ladies evening sandal |
65.00 |
|
Men’s slipper (leather) |
45.00 |
|
Ladies slipper (sheepskin) |
40.00 |
|
Clutch bag |
45.00 |
|
Handbag |
125.00 |
Postage and Packaging are free for all orders over £50.00. Below that, there is a standard price of £5.50 per delivery anywhere in the UK; £12.00 per delivery outside the UK.
UFA has a dedicated team in Head Office, looking at future fashion trends and colours and planning what new products they think will sell.
All their sales are via the website which is well presented, (one of the senior management team specialised in website design during their time as an undergraduate) they have no shops or physical outlets for their brand, and have no plans to introduce any. They have developed working relationships with a number of footwear and accessory manufacturers, and negotiate prices based on batch quantities. The more they buy from any individual supplier, the better the price they can negotiate and agree. No single supplier makes everything that UFA want to sell, and they therefore currently work with three main suppliers, and a number of smaller suppliers for some accessories. The smaller suppliers are all in Poland. The purchasing team have been investigating suppliers of accessories and some shoes in China.
UFA market their products as exclusive, good quality and handmade; they feel they can do this as they are, to their knowledge, the only retailers in the UK selling the products. The quality is reasonably good, and at least some of the work on each shoe, boot or bag is by hand. No products are designed exclusively for UFA, and only the packaging carries the distinctive Unicorn logo; the shoes, boots and bags themselves are all unbranded. All product designs are sold locally in the country of manufacture.
Prior to the beginning of each season, the buyers from UFA place orders for what they think will sell; they buy as cheap as they can, and therefore sometimes find that they have been sent slightly substandard goods. At times they also purchase end of line products, knowing that they can sell it in the UK as unique stock.
The products are sent to the warehouse in Leeds, packed in large crates. Staff in Leeds put the product into the branded packaging, and sort it so that it is stacked correctly in the warehouse. When orders are placed for product, there are ‘pickers’ and ‘packers’ in the warehouse who find and pack the product ready for delivery to the customer. UFA does not have any vehicles of its own; they use a logistics company to arrange all their incoming transport. They also have a contract with a courier business to deliver parcels to customers in UK and Europe. The procurement department which is responsible for agreeing contracts with all suppliers are very good at negotiating and have driven down transport costs. The courier company currently contracted uses zero hour contracts for their own warehouse staff and drivers to keep costs down; they have a 53% staff turnover rate.
The warehouse is currently very full, and in order to store all of the stock, especially during the period immediately after an order has arrived from a manufacturer, pallets are stacked on the floor at the end of the storage racks. Warehouse staff have complained that this blocks visibility when using the fork lift trucks. However these complaints are never formally recorded, agency staff who do not like working in the warehouse just ask their agency to place them elsewhere. It is easy for the agency to find alternative placements for their staff, so none of them have passed on their concerns about health and safety and working conditions at UFA – it is easier to move on elsewhere. As there is no consistent voice raising concerns about health and safety, addressing this issue has not yet been a priority.
All staff have access to the canteen during the hours 8.00am – 5.00pm. There is an area of the canteen where the seating can be reserved by management when they have meetings or visitors. When they do this, they can also ask for waitress service at the tables. The canteen seats a maximum of 85 people. When the canteen is closed, staff can still use the seating area, and have access to vending machines (for hot drinks and snacks such as crisps and chocolate) and one microwave oven.
As footwear and accessories are pre-ordered in bulk from the manufacturers, once the stock has been sold, it cannot easily be replaced, and is therefore shown as ‘out of stock’ on the website. Any product or shoe size that does not sell is offered at the staff discount price in the staff shop and promoted at sale price on the website. Generally the buyers judge quantities reasonably accurately, but there seems to be at least one misjudgement each season with a popular item or shoe size selling out too fast and there is always some over buying of stock due to the policy of buying cheap offers from the manufacturers. There are a few product lines that are considered to be classic styles which are sold all year round, however most products are seasonal. Any of this seasonal stock that is left at the end of the season and after the sales is given to a charity. Currently the preferred charity is one led by a friend of Stephan’s, their children go to the same school, and they have been on a few family holidays together. This makes life easy for the business, though Stephan has never really asked his friend about who benefits from the charity, and where the products go, he merely feels that it is important for a business to be seen to be doing some good and charity ticks this box for him.
UFA aim to buy and operate responsibly and this is a part of their mission statement; though there is no clear organisational definition of ‘responsible’ and therefore managers have to interpret this in their own, individual ways.
The procurement team have decided that presentation of their products on their website is an important factor in selling their brand; all products are photographed to make them look very appealing and of perfect quality. Customers are buying from pictures on the website and receiving their footwear and accessories through the post; therefore the product should look amazing in the photo, and reach the customer in good condition and attractive packaging. UFA has a very good photographer, and the pictures present the product very favourably. To ensure they arrive with the customer looking good, all items are wrapped in tissue paper then placed in plastic bags, before being packed in a branded cardboard box and a strong plastic postage bag. All orders over £100.00 also include a unicorn key ring which is packed in a plastic bag containing rainbow coloured glitter, and then placed in the cardboard box. The company is keen to develop and maintain a reputation for quality, and they feel that this extravagant packing will help.
UFA offer loyalty points to customers based on their total spend. £10.00 gains 1 point, and once the customer has gained 100 points, they get an extra 10% discount on their next order. Customers can also gain 10 loyalty points for every friend they introduce to the brand, who joins the membership scheme and buys or pays monthly for a minimum of six months.
If UFA meets the objectives that Stephan has agreed with his senior managers, and they continue with the same business model, they will need more warehousing space. There is limited scope for expansion at the current site as it is on the edge of the green belt. However two of the senior managers are members of the local golf club and are very friendly with the chief planning officer who plays there regularly. They are quietly confident that they will be able to get some inside information on how to put together a persuasive bid for expansion, and increase the capacity of the warehouse by lifting the height of the roof to create a second floor and adding an extension to the existing building for more offices. This is the cheapest option for the business, and they are keen to make it happen whatever it takes. They would be happy to paint the exterior of the extended warehouse green and plant a few trees to make it all blend in; after all, most of the neighbourhood is affluent and the immediate neighbourhood is residential, they might appreciate it looking ‘pretty’ and this might stop any ‘not in my back yard’ objections. The office and storage extension would make a small reduction to the size of the existing staff car park and no more car parking could be created; access to the warehouse loading bays and the senior manager parking bays would not be affected.
Because the senior management team are all friends and have worked together since the company was founded, they don’t do performance appraisals for each other; although they are on performance related bonuses, none of them have ever missed a bonus payment, regardless of the business performance. What kind of friend would question an annual bonus? Some of the middle managers in the business have questioned why the senior managers get a bonus and no one else does. However they never really feel that they are listened to.
Reference this case study as follows:
Trem, K.R. (2018) Unicorn Footwear and Accessories (Managerial Decision Making), Leeds Beckett University
If you quote from the case study, then reference in text as follows:
Trem (2018 pX) where X is the page number from this document.
See next pages for some additional reading relating to context.
H5 Managerial Decision Making 2018 – 2019 S1
Some articles that you might find interesting
Remember as you read through these articles that there is always more than one side to an argument. As managers, you have to balance a range of issues and consider issues such as those raised in the articles below as well as fulfilling your responsibilities as a manager, working to your own performance targets at work, and meeting organisational strategic objectives which will almost certainly include financial/profit related targets. There is never just one right answer or just one perspective to consider. Therefore read these articles, but also look for others which give you an understanding of issues from the perspectives of a range of stakeholders.
Business examples relating to the environment and recycling
http://www.independent.co.uk/life-style/food-and-drink/bulk-makert-recycling-zero-waste-first-plastic-free-market-london-hackney-a7924781.html
https://www.unilever.com/sustainable-living/reducing-environmental-impact/waste-and-packaging/
http://corporate.marksandspencer.com/plan-a/our-approach
http://www.bbc.co.uk/news/uk-41397345
The environment
http://uk.businessinsider.com/ocean-cleanup-great-pacific-garbage-patch-launch-2018-9?r=US&IR=T
http://news.nationalgeographic.com/news/2015/02/150212-ocean-debris-plastic-garbage-patches-science/
http://www.bbc.co.uk/news/science-environment-41945650
Employing people
http://www.bbc.co.uk/newsbeat/article/37908263/deliveroo-and-uber-what-is-the-gig-economy
https://www.gov.uk/take-on-an-apprentice
http://www.twinemployment.com/news/why-hire-an-apprentice
https://www.ft.com/content/28a858cc-b5bf-11e8-bbc3-ccd7de085ffe
Other perspectives
https://www.yournextshoes.com/fabletics-awesome-scam/
https://www.compactlaw.co.uk/free-legal-articles/consumer-protection-regs-2008.html
http://www.telegraph.co.uk/business/2017/06/28/burberry-comes-pay-pressure-investors/
https://hbr.org/2012/07/what-good-are-shareholders
http://www.huffingtonpost.com/bill-george/are-companies-succumbing_b_8177976.html
8
Guidance on Part 2 of the Assessment – Unicorn Footwear and Accessories
Part 2 is worth 70% of the final mark.
The following MUST be included at the start of your report,
Cover Page (including: name, student number, hand in date, word count, title of the module, title of the report, tutor name and the time/date of your seminar group)
Contents Page – including the headings and sub headings from your text, with page numbers, also a list of figures/tables, with figure/table number, title and page number, and a list of appendices with number, title and page number.
You MAY include an executive summary, if you do this, then it should be after the cover page and before the contents page. This is an overview of all that is in the report, including your key decisions and recommendations. Write it last, but put it in at the beginning of the report.
The following MUST be included at the end of your report,
Immediately after the end of your report, include your bibliography. This should include references from books, journals and from current affairs. As a guide, aim for approximately 30 references in your list.
You should also have a number of Appendices. These may relate to each of the models that you have used in your analysis of the problem/issues. Appendices should always be referred to in the main text of your report.
None of the above count in your word count.
All of what follows counts in your word count (3000 words +/- 10%):
In structuring the report, consider the following
Please note that what follows is a suggestion, you may choose to structure your report differently. If you do, please make sure that your work is logical and that you include all the required content and meet the assessment criteria:
Introduction – in this section you need to be brief (but write in full, concise sentences)
Introduce the company, briefly; the context (key issues from part 1 which you may choose to summarise in an appendix),
· Summarise all the issues you have identified in the business
· State the objectives of the report.
Introduction to problem solving and decision making
· Introduce and define your chosen the problem/issue you will cover in the report, justify your choice and state why this is a problem/issue for the business;
· Analyse the approaches that can be taken in problem solving, for example: rational or bounded rationality approach; BRIDGE; 6 step decision making etc). (See table in lecture 4)
· Select and justify which approach you will use in your report
Main body of the report:
Use the approach you have selected above and use whatever models and techniques you feel are appropriate at each stage… whichever you use, the key stages you will work through are as follows, (the models/techniques you might consider are listed at each stage, you do not need to apply all of these, but you MUST use some and show that you understand and can apply them):
· Understanding the problem: mindmapping/brainstorming/6 hats/ imaginary mentor/politics/ethics; are there any cost vs ethics challenges etc
· Identifying the Root Cause of the problem: Fishbone/mindmap/imaginary mentor
· Generating solution options: brainstorm/mindmap/imaginary mentor/Green Hat
· Selecting your solution – this final stage follows the John Adair Lobster Pot framework
· Reduce your options from many to feasible: decision grid/paired comparison;
· Reduce from feasible to a shortlist of possible: decision grid;
· Analyse your shortlisted options: decision tree/pros and cons/ cost benefit analysis/risk analysis/legal ethical financially viable etc;
· Select your final option(s).
Conclusion
Justify your final solution option, and show that it meets the solution criteria, ie:
· It is legal, ethical, practical, financially viable etc;
· Does it add value to People Profit Planet;
· Does it resolve any cost vs ethics challenges identified at the start
· Will it work in the context of external issues/stakeholder interest/organisational culture/Balanced Score Card etc and
· Check that it will solve the problem without creating more.
Recommendations – Is there anything that needs to be taken into account when you implement the solution in order to ensure that risks are mitigated, budgets are met, stakeholders are satisfied etc.
We need to be persuaded by the end that your solution option is the right one for the business, and we need to understand why it is the right option.
Please write in 3rd person throughout.
Please also remember that you MUST use Harvard Referencing throughout, in your text and in your appendices and bibliography. Reference all sources of information and models/figures/theory/ current affairs/news articles etc.
Any questions – please ask
Kind regards
Karen Trem and the teaching team
Steeple
Socio cultural
1. Aimed at young adults to adults. This is a good market as they are the market most concerned with fashion, however it limits the amount of people they can target this is especially a problem with the UK as it has an ageing population meaning most of its population is over the age of 40
2. Targeted at both male and Female with it leaning more towards females this allows them to target a larger market which is needing to help them increase their profits so that they can achieve their growth targets.
3. Bringing out a children’s shoe range to allow them to further increase their range and help them with their targets
Technological
1. New call centre located in Leeds opened however the poor management leads to it being not fully effective and not working at the full efficiency that it can
2. All the company based online meaning there is no real physical entity for the business, this could be a problem as is not seen as a physical entity which may negatively affect the business image
3. Modern innovative idea of subscription however this is ethically questionable for the company and may lead it to trouble due to it not being Cleary stated
4. Access to all the customers details online this good for the company as it will allow it to target specific customers with ads tailored to them
Environmental
1. There are plans to expand the warehouse however there is a problem with this as they would have to be built on green belt sites which would be difficult to get planning permission.
2. To counter this the company is looking to plant trees outside the new building to hide an make the building fit in however this will be costly and won’t cure the main problem which is the destruction of habitats
3. All materials that are used are natural this negatively effects the environment as it uses natural products which may not be sustainable
4. Cycle to work scheme available at the company however they have little take up which shows the companies poor environmental record
Economic
1. Brexit -pound will weaken when the Uk leaves this will have a big impact on the workings of the business imports will become more expensive and exports less profitable this will negatively affect the business ability to reach its targets
2. Brexit- re negotiation of trading laws and taxes when trading with Europe may include tariffs and quotas
3. Looking to invest in Chinese suppliers this should help reduce cost but may have unseen consequences with things like the quality of the products
Political
1. Brexit-regulations + quotas for imported and exported goods
2. Brexit re negotiate trade deals with suppliers
3. Potential ban on zero hours contract labour costs
Legal
1. Minimum wage increase labour costs up
2. Trading standards act the company says it is selling a product that it isn’t – the descriptions act
3. Health and safety regulations this can negatively effect the company especially in the warehouse with the forklift trucks
Ethical
1. Zero hour contracts are ethically bad and frowned upon this is due to the fact that work isn’t guaranteed which may effect people who rely on the income to survive
2. Subscription policy is not clear to the customer this means that the customer may sign up for something that they do not know about this could have a bad effect on the companies image and may even cause legal action to be take i.e. amazon prime
3. Products are not like they are described this goes against the trading standards act and can cause the business to suffer legal repercussions
4. There are long working hours at the call centre this may seem to be unethical due to the high stress that it will put upon the individual
5. Safety issues in the warehouse shows that the company does not care about the safety of its employees
6. The company has access to all of a customers information this can be seen as ethically bad especially after all the stuff that happened with companies like Facebook
Balance Scorecard
The companies mission is to be a responsible and profitable business providing affordable comfortable and fashionable footwear and accessories and giving fantastic personal service to all our customers
Financial
Double uk turnover and profits by 2020
Increase eu sales with profit equalling current uk by 2021
Customer
Affordable but fashionable clothing company
Develop the brand to move its position to attract shoe enthusiasts
Learning and growth
Look to expand warehouse to accommodate more stock
Dedicated team looking for new designs to help the compete in a challenging market
Looking to invest in Chinese suppliers
Internal business process
Look to improve customer service and relations
Discounts of 20% for all staff up to 200
Senior managers can select from the full range
Employees can only choose from unsold stock
Schein culture
Artifacts and symbols:
Focused on the visible aspect of the company
Also refers to the values of the company which for UFA is high quality products
Values:
Open communication between managers and staff – however this does not occur as the only way for the staff to communicate is through work unions which only 20% of the staff are signed up to
Shown as employee complaints aren’t logged
This has resulted in issues surrounding the warehouse being over crowded with stock due to overbuying which results in dangerous working conditions to operate forklift trucks in
Basic assumptions:
Managers all friends and not driven to increase their performance due to the fact that they do not under go performance reviews.
Managers get all the credit as in bonuses while no other staff get any
Stakeholder analysis
3 owners have high influence and interest due to having full ownership of the business. The priority of the owners for the business is to increase their wealth to do this thye want the business to increase in profit
Employees have low influence and high interest in the business. They want to increase the profit of the business as if they do this then there job security is more likely to increase and they may see the trickle down effect in terms of their wage. Full time employees are more likely to have a larger interest in the business due to them most likely relying on the business for financial safety
Agency staff- have low influence and low interest in the business this is due to the fact that no matter how the business performs they can easily be transferred to a different job. Issues with health and safety
Suppliers high influence and medium interest in the business. They want the business to survive as that keeps the as a customer they influence the company by controlling the price
Customers have high influence and medium intrest The customers care that the business provides good value for money high quality and good customer service. If this is not achieved the customer can choose to spend the money elsewhere negatively affecting the company’s performance
Community have low influence and medium interest in the business due to it providing local jobs and how it effects the local environment this relates to the company with the planned expansion of the warehouse
Can negatively impact the business by protesting and vetoing planning permission
Government medium influence and interest the government wants to make sure that the business is operating legally and paying the correct amount of tax and providing jobs for the local community they can influence the business with laws and subsidies
SWOT
Strengths
They provide things to charity, they have a stable senior management team
They provide good quality goods they have a good brand image
Weakness
Stock rotation is very poor, they sometimes over order leading to too much stock
The senior management team’s friendship is negatively affecting the business
Opportunities
Investigating suppliers in china to allow them to lower costs
Threats
Brexit will have a impact an the business ability to trade internationally
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