Case Studies

Poundland (US business) - economy & globalisation & management vision

Background

• in 2007, the financial crisis began
• economy slipped into recession in late 2008 following the collapse of the Lehman Brothers; which provided Poundland with several opportunities

• there was a high demand for cheap products (unemployment, lower confidence, sustained inflation)
• cheaper to expand; high street vacancy rates rose to 15%, cheaper to buy new shops
• cheaper stock; liquidation at othe rhigh street stores ment cheap available stock

• company increasse no. of stores from 150-400 between 2007 - 2012

Analysis

• downturn in the economy increased demand for Poundland products
• however company had to maintain a single pricing point of £1 to sustain this demand
• extreme focus on COST MINIMISATION:
• 30-40% of products sourced from Far East, where goods are cheaper
• increasing buyer power as sales have doubled allows 5-10% bulk buying discounts
• reducing the size of products to combat inflation- e.g. 800g Muesli vs 1kg standard
• as a result sales revenue went up from £300mil 2007 to £800mil in 2012
• gross profit margin maintained at 35% despite prices being held at £1
• net profit margin maintained at 4-5%
• ROCE at 30%
• gearing kept low at 10% as all new expansion was funded through retained profits

• as there is a fixed price, there is a high percentage of impulse purchases; in 2009, reported that 40% of purchases were impulse buys
• the more uppermarket shopper became attracted to Poundland during the recession; new markets

Summary

• used the recession as an opportunity
• required management commitment and vision

Korean Air- cultural values & organisational failure

Background

• had more plane crashes than almost any other ailine in the world for a period at the end of 1990's
• what they were struggling with was a cultural legacy, that Korean culture is hierachical
• you are obliged to be deferntial towards your elders and superiors 

• factors influencing the culture:
• hierachy, age, social position within society, history, autonomy (single leader), respect
• impact on organisational culture:
• breakdown of communication, crash record very bad, poor reputation
• reasons for change:
• out of business, crashes
• ways of change:
• outside help and consultants, new training programmes

HBOS- economy & leadership & culture

Background

• in 2001, Halifax and Bank of Scotlant entered into a 'merger of equals' and became the 5th largest bank in UK
• Bank of Scotland = rapid growth corporate leader
• Halifax = fairly sleepy mortgage lenderr
• as part of a business with huge distribution, was able to expnd rapidly

Analysis

• culture in the division was flawed- huge derision towards risk
• those that spoke out against risks were irgnored or fired
• Paul Moore, previously head of risk was sacked in 2005, he described it as a 'them and us' culture and a 'threatening culture'
• with a 'dysfunctional' reporting structure where risk function reported to the division rather than the non-executives on…