the realm of BVG’s expertise making the transition to also selling sunglasses an easy one

Evaluation SchemePresentationDIMENSIONCOMMENTSTechnique/Mechanics5ClaritySupportPOINTS5Provide an appendix. Use a SWOT and visual aids.Appearance23Executive SummaryDIMENSION15COMMENTSPOINTSContent5Succinctness5Independence5Impact/Authority5IntroductionDIMENSIONDescription/History20COMMENTSExpand on the overview of the company.4Rationale/ContextLimitations/Foreshadowing5What other resources should be considered?Organization45Mandate18DIMENSIONCOMMENTSDescriptionAnalysisPOINTSPOINTS5Provide more analysis and discussion.4Use of Concepts5Conclusions5External AnalysisDIMENSION19COMMENTSPOINTSDescription5Analysis5Use of Concepts5Conclusions5Internal AnalysisDIMENSION20COMMENTSPOINTSDescription5Analysis5Use of Concepts5Conclusions5Strategic Options20DIMENSIONPOINTSCOMMENTSDescription5Analysis5Use of Concepts5Conclusions5Recommendations & ImplementationDIMENSIONDescription20POINTSCOMMENTSDevelop this section. Provide more commentary on milestones, risks and deliverables.4Analysis4Use of Concepts4Conclusions416Grade Calculation – Assignment 3SECTIONPresentationExecutive SummaryIntroductionMandateExternal AnalysisInternal AnalysisStrategic OptionsRecommendationsOverall MarkPOINTS / 107.5010.009.009.5010.0010.0010.008.00WEIGHTMARK10%7.50%5%5.00%5%4.50%10%9.50%15%15.00%15%15.00%20%20.00%20%16.00%100%92.50%Groupe Bikini VillageGroupe Bikini VillageADMN 404: Assignment 3Tom W1Groupe Bikini VillageExecutive SummaryGroupe Bikini Village is a leader in swimsuit and beach accessory retailing in Eastern Canada. Thecompany was founded in 1978 and has 57 stores that are mostly situated throughout Quebec andOntario. The stores are located in convenient mall locations and they sell swimwear all year round. Thecompany has made some much needed improvements lately to overall company efficiency and hasupgraded their inventory system but still has a long way to go before they reach profitability and stockprice levels of 5 years ago.The analysis of the external environment reveals that the highest competitive force in the industry isrivalry among competitors which then spawns high bargain power in consumer buying groups. Barriersto entry for new competitors are at a medium level and bargaining power of suppliers and threats ofsubstitutes are low. When analyzing the macro environment, several opportunities are available in theindustry. The most important ones include; growth in the Canadian economy, more discretionaryspending by men and the coming of age of the “echo boom” demographic. The major macro threat isthe ever changing trends in the fashion industry.The internal strengths of the company are offering superior quality product, superior service andefficient distribution and inventory systems. The company’s weaknesses are that they still have to finishrenovating the rest of their stores, a low current ratio and seasonality of their sales.The 3 strategic alternatives in this report are a geographical expansion strategy and 2 product expansionstrategies with one focusing on expanding the men’s line and bringing in a sunglasses line while theother will expand into winter accessories.The product expansion with focus on men’s line and sunglasses is the recommendation of this report.Implementation includes renovating all stores, finding suppliers, marketing the new products andfinding display areas.Introduction / Company OverviewGroupe Bikini Village is a leader in swimsuit and beach accessory retailing in Eastern Canada. Thecompany was founded in 1978 and has 57 stores that are mostly situated throughout Quebec andOntario. The company has three separate banners that its stores are branded under; Bikini Village,Ocean Bikini Village and Lanai. Since the overwhelming majority of its stores are under the Bikini Villagebrand, this report will focus on it. The company carries very popular swimsuit brands such as Roxy,Bodyglove and Quicksilver as well as its own line of products. The stores are located in convenient malllocations and they sell swimwear all year round. The company is currently listed on the TSX and as of thetime of this report it is trading at $5.36 per share. GBV has made some much needed improvementslately to overall company efficiency and upgraded inventory system which has shown favourably on thecompany’s most recent income statement. The company still has a long way to go to get back to thedays that its stock traded at around $20 dollars a share. The industry is very competitive with numerousindependent stores, chains and department stores all selling swimwear. The company must keep2Groupe Bikini Villageinnovating its strategy to stay on top of the industry and return to the days of significantly higherprofitability.This report will analyze the internal and external environments of the swim suit and accessoriesindustry. It will also propose several viable options for the company to consider. It will conclude with thebest possible strategic recommendation as well as thorough implementation plan.The financial statements for the year ending Jan. 31, 2011 were used exclusively in this report becausethe current financial statements for GBV have not yet been released.MandateAfter thoroughly looking through the financial reports and the company’s website (Website), this reporthas come to the conclusion that BVG does not have a published mission statement. The company’smission statement should be to provide a convenient place to purchase swimsuits and accessories thatare fashionable and of superior quality. The company’s focus on service and differentiation will helpmaintain its status as a leader in the industry.BVG lists the following as its future goals:•••To continue building perception of our stores as shopping destinations.To maintain our strategy to reduce the size of our stores: smaller stores reinforce the“destination” status, and we can immediately re-invest occupancy cost savings in valuecreating initiatives. To choose only those suppliers/brand owners who proactivelymanage their brands’ distribution, and are firmly committed to supporting their brands’value and prolonging their life cycles.To raise brand owners’ awareness of the importance of a targeted distribution, in termsof both strengthening their own brands and preparing for increasing competition fromvertically integrated challengers promoting their own brands. (Financial Statements)It is evident by the company’s goals that maintaining the best possible overall experience for thecustomer is the key to their success. The stores have to be conveniently located, have the best brandsand have excellent customer service.The company doesn’t publish any core values or guiding principles but essential core values wouldintegrity, quality, teamwork, responsibility and community. To have loyal consumers you need todevelop integrity and trust. A passionate and responsible team that works in harmony is essential to anybusiness. Since it’s the community that buys the products in order for the company to stay in business itis very important that all companies do their part and give back to their communities.As with any company listed on the TSX or any stock exchange for that matter, the most importantstakeholders are the shareholders. They are technically the owners of the company and the companywould not exist without their investment. In order for the shareholders to receive maximum return ontheir investment, it is important other stakeholders such as customers, suppliers, creditors, employees3Groupe Bikini Villageand communities are being properly valued. All the stakeholders are in an integrated web and it onlytakes one group to be mistreated in order to start a domino effect that will end with reduced profits.External AnalysisCompetitive ForcesThe swimsuit and beach accessory segment of the clothing industry is very competitive. There arenumerous competitors that include independent stores, chains and department stores. GBV currentlysees themselves in as a leader amongst its competition because of their specific strategy of only focusingon this segment.The barriers to entry can be categorized as medium into the swimsuit and beach accessory segment.Opening a single location can still take a large sum of capital but may not be as much as average personwould think. BVG spent 1.7M last year on renovating its distribution centre and opening 4 new stores.Even if the renovations were not considered, that leaves costs of around 400 thousand to open a BVGstyle store. Of course, this does not include investments made into marketing, distribution andinventory but it places the capital intensity in the medium category. Also any current functioning storecan add a swim suit and beach accessory line for a relatively medium cost. Obviously it is much easier toopen one independent store rather than opening a whole chain that could directly compete against asegment leader such as BVG.As mentioned in the opening of this section, competition among the rivaling companies is very high inthis industry. BVG’s main competitors are chain companies such as Sports Check, Boathouse and West49 but they also face competition from independent stores and department stores like Sears, Bay, etc.There is also the rising trend of outlet malls uprising in Quebec and Ontario (Outlet Malls) wherecustomers can buy directly from name brand manufacturers such as Nike, Adidas or Nautica. There isalso more competition from a new online trend, where people can go to websites such ashttp://www.chynnadolls.com and design their own swimsuits. With all the options available to aconsumer to buy a swimsuit, it is clear the rivalry among competitors is extremely high.One person doesn’t have a lot of buying power individually but as seen in the above section they dohave a lot options. As is the case the consumer goods industry, as a group, consumers have very largebuying power. This buying power makes the industry very susceptible to changing fashion trends,perceived quality and price. If any three of those factors are not on point, a company can lose a lot ofsales in this industry very quickly. Therefore when buying power is viewed in segments of consumers, itcan be considered very high in the swimsuit and beach accessories segment.The threats of substitutes and bargaining power of suppliers are both quite low. There really isn’t asubstitute for swimwear; therefore it can’t be anything but low. The suppliers on the other hand want tosell their products in stores such as BVG because the store solely focuses on selling swimwear and rarelysells of inventory at discount prices. This allows the suppliers products to maintain high brand qualityperception and they get full price for their merchandise.4Groupe Bikini VillageThe relatively highest force in the industry is rivalry among competitors which then spawns high bargainpower of consumer buying groups. Barriers to entry for new competitors are at a medium level andbargaining power of suppliers and threats of substitutes are low.Macro EnvironmentThere are numerous macro environmental forces that are affecting the swimsuit / accessories segment.The most important ones are macroeconomic factors such as consumer discretionary spending andsocial forces which factor in new styles and trends. Demographic forces are also important because thebaby boomer’s children are at an age where they are doing a lot of discretionary spending.Just recently Canada overcame an economic recession but even know conditions are improving thecountry isn’t back to growing at its optimal rate just yet. Discretionary spending on such things asswimsuits is usually one of the segments to rebound last after recession. However companies such asGBV have shown growth in sales in 2010 compared to the recessionary year of 2009.Social forces are very important especially in a segment of the fashion industry. Trends and styles areconstantly changing and companies that want to be successful have to react quickly to these changes.Another changing social trend is that men are caring more and more about their appearance (Men care).It only makes sense that this trend which is already evident in hygienic goods and clothing will trickle itsway to down into the swimsuit segment.A very important demographic is coming of age, the “echo boom” generation. The demographic is madeup of the children of the baby boomers and they already make up a third of the US population (Leung,2011). This group spends around a 170 billion in the US and its mostly on discretionary items (Leung,2011). Canada is demographically very comparable to the US; therefore the aforementioned datacreates huge opportunities for companies in the swimsuit segment.By analyzing the macro environmental forces, numerous opportunities for companies in the industryhave been unveiled. This includes growth in the Canadian economy, more discretionary spending bymen and the coming of age of the “echo boom” demographic. A definite threat in the industry ischanging of fashion trends; if companies don’t stay on top of these changes they can lose a lot of salesvery quickly.Internal AnalysisGBV’s main competitive advantage is one of differentiation rather than low cost. There products aren’tcheap, they can actually be classified as expensive in the swimsuit / accessories segment. The companyis able to sell their products at a higher price because they build around the blocks of superior quality,efficiency, innovation and customer responsiveness.The purchase experience of that perfect swimsuit can be one of frustration. Customers look forsomething that is fashionable but also high in quality and most importantly it needs to fit perfectly. GBVoffers convenient mall locations that have friendly atmospheres and are very well lit. The company only5Groupe Bikini Villagechooses suppliers / brands that proactively manage their brand distribution and fully support theirbrands value (Financial Statement). This means you won’t find discount brands on display at GBV butrather brands such as Roxy, Body Glove and Quicksilver which are known to closely follow fashion trendswhile keeping quality high on items at the same time. The service received from the staff is another veryimportant element in this industry. If customers are going to spend more money on a certain product,they definitely expect a higher level service. GBV does not disappoint by having informed customerservice representatives who can give personalized care to each customer, this personalized service is abi-product of having smaller stores that specifically focus on a small industry segment. There is also anexpectation when walking into a specialty store that they will have all sizes available. GBV has beenfocusing a superior inventory system that allows them to keep up with all trendy sales and have a verywide range of sizes of their entire product on hand. The company is also doing a good job renovatingexisting stores and opening new ones with a strategy of focusing on smaller locations that are brightly litand inviting. But 33% of the company’s stores still haven’t undergone these renovations and thecompany needs to finish them so that a concise brand image can be maintained throughout all of itslocations.Superior efficiency is another very important building block for any company in the retail industry. GBVhas made it a strategic goal to become more efficient by applying tighter controls on direct and indirectexpenses by investing money into better inventory control management (Financial Statement). Thesestrategies seem be working as net earnings as a percentage of sales of have drastically increase from 3.6% in 2009 to 0.9% in 2010 (Financial Statement). The improved inventory control system whichbenefited from a needed renovation to the distribution centre has substantially increased the full pricesales and company takes in the biggest profit margin on these products. These efficiency improvementsalso go hand in hand with the superior quality building block as the improved inventory system hasallowed all products and sizes to be available to customers. GBV also closed 4 underperforming stores inthe fiscal year ending Jan 21, 11, by closing underperforming locations this not only improves the overallefficiency of the company but also allows the company to reinvest that money into superior performinglocations.Companies that are in the fashion retail industry have to be always concerned about innovation. Alwaysinnovating ones product is a necessary building block or a company won’t last, especially if they are inthe business of selling differentiated products. GBV has good buyers and good working relationshipswith its suppliers to buy whatever is fashionable at the time. The company has also invested money intoimproving their distribution centre and inventory management systems.The superior customer service responsiveness building block has pretty much been covered in theanalysis of the 3 aforementioned blocks. Customers in this industry mostly respond to trends in superiorservice. Customer satisfaction is closely monitored by BGV and the company is constantly working onupgrading its customized service.Clearly BVG has numerous strengths, a lot them have been analyzed in the building blocks analysis doneup above. The most vital ones for the company to be able to sustain and thrive in this industry are tooffer superior quality and trendy products, offer superior overall service that consists of having friendly6Groupe Bikini Villagestaff to having inviting store fronts, having an efficient distribution and inventory systems and to keepinnovating and pay attention to new fashion trends. The company has to maintain and build on thesestrengths, if it wants to maintain its differentiation strategy.BVG has been working hard as of late to try to fix some its weakness. As mentioned in the analysis thecompany has taken some significant strides but it still has some ways to go. Currently the company’sstock is trading at $5.36 this is an improvement from last year when it trade at around $4.50 but still it isfar removed from the $20.00 range it traded at 5 years ago. As mentioned in the analysis above, 33% ofstores still haven’t been renovated; this is definitely a weakness for the company. Also looking at thebalance sheet, the company has some significant current debt of around 6 million, with cash and cashequivalents of around 6 million as well (Financial Statements); this only puts the company’s current ratioat around 1 which is risky territory as far liquidity ratios go. Another company weakness is theseasonality of their sales; lease payments have to be made on a consistent basis but most of thecompany’s revenue comes in the second and fourth quarters. This can create cash flow problems andliquidity issues in the future.Geographical ExpansionArenasReach more customers by opening more stores in theeastern Canadian MarketVehiclesBy leasing more store strategically located store frontsin mall locations.DifferentiatorsUse current strategy of differentiation, image andcustomization and apply it to more stores.StagingImmediately look for expansion locations with the goalof opening around 4 new stores per year.Economic LogicSales will increase if there are more locations sellingthe company’s current product.Pros- Distribution centre already in place.- Existing expertise in management of current stores.- Large economies of scale give higher bargainingpower against suppliers.Cons- Doesn’t eliminate the trend of seasonal sales- Not a lot money available for expansion purposesStrategic OptionsThere are 3 different strategic options that can bepursued by GBV. In all 3 options it isrecommended that the 33% of stores that are notcurrently renovated either be renovated withinthe next 2 years or chosen or be shut down. Alsoall stores should be evaluated on a year to yearbasis and those not performing up to a highefficient standard should be closed as well. The 3strategic options are a geographical expansionstrategy and 2 different product expansionstrategies with one focusing on expanding themen’s line and bringing in a sunglasses line whilethe other will expand into winter accessories.Geographical ExpansionThis strategy is based on the facts that BGV has astrong distribution centre, brand name andinventory system along with strong managerial expertise to make everything run smoothly.7Product Expansion – Men/SunglassesGroupe Bikini VillageThis takes BGV’s already successful formula andexpands its storefronts throughout EasternCanada. The more efficient income producingstores BGV has in its cavalry, the more profitthe company can expect to make. The companyshould immediately look for expansion storesand they should have similar convenient malllocations as their most profitable stores. Thegoal for this expansion strategy is to add 4 newstore fronts every year.ArenasReach more customers with the current store locations byexpanding product lines such as more men’s products andsunglasses.VehiclesWork with current suppliers to expand men’s product line.Develop new relationships with suppliers to bring in sunglasslines.DifferentiatorsUse current strategy of differentiation, image and customizationand apply it to expanded product line.StagingImmediately contact current and new suppliers and work onexpanding the line as soon as possible.Economic LogicSales will increase with more available product lines plus thesunglasses line will slightly lessen the seasonal impact of sales.Pros- Distribution centre already in place- The sunglasses line will bring in higher margin product into thestore- Leverage high end brand status to sell a wider variety ofproductCons- Not a lot room in the stores for more product- Not a lot money available for extra product line inventoryAs seen in the aforementioned internalanalysis, BGV is already very strong in sellingdifferentiated products. This strategy allows thecompany to continue with that strategy but at alarger scope. Customers are very familiar withBGV brand names and this strategy will makemore locations available for these customer’sconvenience and more successful stores equalsmore sales. This strategy will be easy to executebecause the distribution centre is already in place and freshly renovated. Management already has theexpertise to execute this strategy and the economies of scale will give management even higherbargaining power with their suppliers. However, there are two main issues with this strategy goingforward; the first being that the seasonality effect will not be eliminated. The second being thatcompany doesn’t have a lot of money available for expansion, as was mentioned in the internal analysisthe current ratio is already at a low figure of around 1.Product Expansion – Men / SunglassesThe second strategy entails keeping the current number of stores the same number for the time beingbut generating more sales on a per store basis.This product expansion strategy will have two separate steps; the first is to bring in more products thatappeal to men. Currently BVG stocks about 75% of women’s products comparing to only 25% men’s. Inthe external analysis it was revealed that men are starting to spend more money on appearance andBVG should take advantage of this trend and adjust their inventory accordingly. The second product linethe company would expand into is sunglasses. Sunglasses tie in nicely with the beach themedaccessories that the company already sells and there is a very high profit margin to be made. Thecompany should immediately start contacting its current and new suppliers to inquire about the newproducts and have them on the store shelves as soon possible.Costumers that buy higher end swimwear and accessories look for similar attributes when they buysunglasses. They want a differentiated product that is fashionable and high in quality. This already is in8Groupe Bikini Villagethe realm of BVG’s expertise making the transition to also selling sunglasses an easy one. With thisstrategy a story can increase its sales by having expanded merchandise which will equal to higherprofits.The main pro from this strategy is the company can leverage its existing strengths of distribution, brandimage and service expertise to expand an existing line and sell a new line. The negatives being that thecompany is already focused on using smaller store fronts, which may limit the amount of new inve…

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