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Business and Financial Analysis - Case Study of Sa Sa International Holdings Limited

Business and Financial Analysis - Case Study of Sa Sa International Holdings Limited. Wan Shiu Kee Convener of HKIAAT Accounting and Business Management Case Competition/ Vice Principal – CCC Kei Heep Secondary School. Agenda. The HKIAAT Accounting and Business Management Case Competition

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Business and Financial Analysis - Case Study of Sa Sa International Holdings Limited

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  1. Business and Financial Analysis - Case Study of Sa Sa International Holdings Limited Wan Shiu Kee Convener of HKIAAT Accounting and Business Management Case Competition/ Vice Principal – CCC Kei Heep Secondary School

  2. Agenda • The HKIAAT Accounting and Business Management Case Competition • The Case – Sa Sa International Holdings Ltd. • Business performance evaluation • Sustainable development plan • Q&As

  3. HKIAAT Accounting and Business Management Case Competition • Aims to enhance students’ ability in using accounting information for business development and their generic skills, such asresearch, analysis, team-building, communication, critical thinking, creativity and problem-solvingas required by today’s business world. • Provides students with fundamental accounting and business management knowledge and skills, andto develop their positive values and attitudes. • Comprises two rounds: written report and oral presentation. • Written report based on Annual Report of a listed company • Six teams will be shortlisted to enter the final competition – oral presentation, to present the key points of their reports.

  4. The Case – Sa Sa International Holdings Limited • Sa Sa International Holdings (Sa Sa) is the selected company for case study in Competition 2009-2010. • A leading cosmetics retailing group operating in Asia. • Two scope of business areas: • Cosmetic retail – selling over 400 brands, including its own-brands and exclusive products • Brand management – being sole agent for many international cosmetic brands in Asia. It accounts for 38% of its total retail turnover. • In 2008/09, the turnover from the continuing retail and wholesale business rise 12% to HK$3,609 while profit from the continuing operations increased by 14% to HK$316 million.

  5. The Case – Sa Sa International Holdings Limited (cont'd) • Requirements for written report: • Evaluate the business performance of Sa Sa in the following aspects • financial position • Relevant to BAFS Compulsory Part – Basic Ratio Analysis and Accounting Module - Financial Analysis • marketing management • Relevant to BAFS Business Management Model – Marketing Management • Operation management • Relevant to BAFS Business Management Model – Human Resources Management • Develop a sustainable development plan for next three years

  6. Evaluation of Business Performance – Financial Position • Study of different financial ratios to analyze the following aspects:- • Profitability • Liquidity • Asset management • Investment appraisal • Types of financial ratios to be analyzed may vary from industry to industry • e.g. "Book value per share" is only required for retail, banking, and property industries • Compared with its competitors when necessary

  7. Evaluation of Business Performance – Financial Position • Profitability • (a i) Net profit margin = Profit for the year/ Turnover *100%

  8. Evaluation of Business Performance – Financial Position • Profitability (cont'd)

  9. Evaluation of Business Performance – Financial Position • Profitability (cont'd)

  10. Evaluation of Business Performance – Financial Position (2) Liquidity

  11. Evaluation of Business Performance – Financial Position (3) Asset Management

  12. Evaluation of Business Performance – Financial Position (4) Investment Appraisal

  13. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  14. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  15. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  16. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  17. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  18. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  19. Evaluation of Business Performance – Financial Position (5) Other Important Ratios

  20. Evaluation of Business Performance – Marketing Management Market Environment • Key competitors: • Bonjour (卓悅), Angel (天使化), Sephora • Market opportunities • Huge potential in Mainland China market • The inflow of Mainland visitors in domestic market

  21. Evaluation of Business Performance – Marketing Management Target markets • Geographic • Core markets: • Hong Kong, Macau and Mainland China -> representing 84% of total turnover • Regional markets: • Taiwan, Singapore and Malaysia -> accounted for 11% of turnover • Target customers • Customers who are seeking value-for-money

  22. Evaluation of Business Performance – Marketing Management Marketing strategies • Positioning • A one-stop cosmetics specialty store offering a broad product range with a full price spectrum • Place/ Distribution • Diversification of distribution network -> a total of 152 "Sasa" stores and 25 specialty stores/ counters in various markets • Store locations are prime • Offer trendy and comfortable shopping environment -> customers can choose different products at ease • Planning to appoint local distributers for the wholesale business -> can help sharpen the market penetration • Online portal – Sasa.com -> reach worldwide customers

  23. Evaluation of Business Performance – Marketing Management Marketing strategies • Product • Offers a comprehensive product range of 200 brands targeted at diversified customer base • Also develops its own-brands • Product selections tailored to Chinese and Asians • Also offers value-added services, such as free skin analysis, free make-up and beauty treatments • Price • A broad price range to entertain a wide customer base • Diversification of pricing strategy also help to reduce the impact of economic environment • Can offer competitive prices due to • Strong bargaining power with bulk purchase • Long-term relationships with vendors

  24. Evaluation of Business Performance – Marketing Management Marketing strategies • Promotion • Aggressive promotion efforts, including print advertisements, public relations activities and online advertising (Sa Sa is a top 10 of online advertisers in 2009) • Customer loyalty programme • Regular production promotions and free product samples • People (i.e. Service) • Professionally trained staff with good product knowledge, selling skills, customer service skills, and general management skills • External monitoring scheme e.g. Mystery shoppers

  25. Evaluation of Business Performance – Marketing Management Marketing strategies • Brand Management • 400 famous brands among which 100 are exclusive brands • In 2008/09, more than 1,600 new exclusive products were added to its portfolio • Having its own brands or exclusive brands can build strong customer loyalty • However, the promotion of these exclusive brands tend to be not enough and mainly focus on a very few selected brands -> affecting the sales of niche brands and new brands

  26. Evaluation of Business Performance – Operation Management • Manpower development • Staff motivation strategies • Bonus system • Let staff understand the corporate goals and the ways they can contribute • Enhance communications with staff and nourish a caring culture of the company • Review remuneration on regular basis • Staff trainings • 150-hour training for new frontline staff • Management Trainee Programme for up-and-coming leaders • Product, language, attitude, selling skills trainings • Leadership Management Skills training for shop supervisors

  27. Evaluation of Business Performance – Operation Management • Inventory Management • Investment in IT infrastructure and logistic systems -> enhance stock taking • Implementation of Just-in-time system to reduce cost • Resources Management • Settlement of purchases is made by HK or US dollars -> minimize price fluctuation due to currencies exchange difference • Keep minimal idle assets through careful asset planning

  28. Evaluation of Business Performance • Key success factors of Sa Sa • Enjoy economy of scale and has strong bargaining power with vendors • Extensive industry experience (over 32 years) • Clear business focus • Having a wide spectrum of products and many of them are exclusive brands • Focus on product development • Developed an on-line shopping platform and extend its market reach (66% increase in turnover when compared with previous year) • Established excellent relationship with vendors • Quality services • Strong distribution network • Dedicated to staff training and development

  29. Sustainable Development Plan Suggestions for product offerings and marketing strategies • Continue to focus on the two existing core businesses – cosmetic retail and brand management • Increase market penetration in these businesses, with focus on Mainland market • Adopt different marketing strategies in different markets • Differentiated marketing strategies with different pricing, promotion strategies to target distinctive market segments (e.g. offer exclusive brands for high to middle-class segments) -> can prolong product life cycle and high profit margin • Undifferentiated marketing strategies in identical markets e.g. in 2nd tier cities e.g. Wuhan, Suzhou

  30. Sustainable Development Plan Suggestions for product offerings and marketing strategies (cont'd) • Develop flagship stores • Further strengthen its on-line business and support with good customer service e.g. delivery and after-sale service • Enhance the corporate image e.g. reinforce its commitment to social responsibilities and environmental protection

  31. Sustainable Development Plan Some suggestions for operation management a) Supply chain management • Exert higher influence in purchase terms with her strong bargaining power • Improve logistics flow through organization reengineering • Quality management • Enhance quality assurance through the development of quality engineering mechanism

  32. Sustainable Development Plan Financial management • Suggested financial strategies should match with its product offering, marketing strategies and operation management • Take into consideration of external factors and challenges e.g. economy, growing competitors • Unless with justifiable reasons, financial strategies should be in line with the past practice of Sa Sa, e.g. • Not to engage in any highly leveraged or speculative derivative products • Conservative approach to financial risk management with no significant borrowing • Implement a general freeze on wages • Review and increase the cost effectiveness of the overhead expenses and their marketing initiatives • Tighten inventory management • Take further measures to manage the rental pressure • Maintain excellent long-term relationship with its suppliers

  33. This powerpoint will be available for download at HKIAAT Website www.hkiaat.org

  34. Q & A Session

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