There is also a lot of confidence in the Manager, he says ‘There are many fears that our sales will plummet during the recession, however our sales have increased since the recession began and we can only predict that they increase further, we have the rights to the Lord of the Rings range which i guess is our biggest unique selling point, that has helped our sales a lot in the past years’. The manager insisted to me that the USP of their lord of the rings sets may keep the sales of the shop up during the recession.
The final reason I feel games workshop might succeed is that they are prepared, since the beginning of the recession they have cut down on both staff and shops, in the last 2 years they have closed down 20% of their stores. I also saw that in the store they only have one person working, which means they are trying to limit their costs as much as possible. This shows that they have made two opportunity cost’s, whether to keep stores and hope for more revenue, or to close the stores and focus on the others, and whether to keep or get rid of staff. Both of these could prove successful or be a failure.
In the 2007 end of year accounts, Tom Kirby the chief executive and Chairman of Games Workshop stated that they have made 3 changes into reducing costs, ‘• Closing loss making stores
• Rationalisation of the manufacturing and supply chain
• Simplification of the support infrastructure’
They have closed 23 unprofitable stores, closed two of their production factories and have changed the management structure inside the business. Tom Kirby has also expressed the reasons that the business will succeed as:
‘1. The health of the Games Workshop Hobby
2. The long-term growth credentials of the business
3. The market opportunity for our existing sales businesses
4. The capital infrastructure
We have come to the end of our investment programme, which leaves the business seriously well invested.’
All these points show that the company as a whole are taking precautions and are sure that they will succeed.
Even with all of this there are many reasons why I believe the games workshop of st Albans will fail. For a start warhammer is very expensive, for what you get it is arguably greatly overpriced, in a recession people will not have as much money, and therefore will spend money on their needs instead of their luxuries, and people will also have to prioritise which luxuries and people may feel that warhammer is not as important as other things.
After talking to a family friend who has been playing for years he provided another piece of evidence which could have a massive impact on the revenue and sales of games workshop, more than ¾ of the £20,000 worth of warhammer has been bought on online auction houses. He say’s ‘the fact that games workshop is horribly overpriced is having a sincere effect on the success of the brand. Why would you pay £50 in the shop when you could get the same item for a tenner on eBay, I know a lot of friends who play the game in St Albans and have lost their loyalty purely because it is more economical to buy items on auction houses’. This shows that people are finding cheaper alternatives to play the game.
Harry Howells also added ‘a lot of people could not afford to play the game, even in a wealthy place like St Albans, unless they bought items from online auctions they simply did not have enough money to buy items regularly, this will prove an even bigger factor in the upcoming recession because with people having much less disposable income, unless you are very wealthy it will either be auction’s or stopping playing.’ This shows just how big an impact the recession will have on games workshop. In a period of time when money is scarce people will, just like in food shopping, opt for a cheaper alternative. The credit crunch will affect games workshop dearly because they may have to cut costs or borrow money if they wish to keep their st Albans branch open in the future.
Nationally it is clear that games workshop is struggling, by looking at the 2007 accounts report we can see this.
2007 2006
Revenue £111.5m £115.2m
Pre-exceptional operating profit £1.9m £4.2m
Exceptional items - cost reduction programme £(4.0)m -
Operating (loss)/profit £(2.1)m £4.2m
Pre-tax (loss)/profit £(2.9)m £3.7m
Year end net borrowings £10.2m £2.2m
(Loss)/earnings per share (11.2)p 6.5p
Dividend per share 4.95p 18.975p
This shows that from 2006 to 2007 games workshop have declined in performance, last year they actually made a loss. Their share prices are going down and this shows us that things are getting worse. With 2008 being the start of a recession it will be likely that their profit will decline further.
These graphs show just how the sales are decreasing, and it is very likely, considering the economic situation and by looking at the graph that the sales will decrease further.
I have looked at both possibilities, and have come to a conclusion as to which I feel will happen. There are many reasons why games workshop in st Albans might survive; it is a massive game with many loyal customers. The manager is convinced it will survive and games workshop owns 90% of all war games, however I believe that in the upcoming recession the shop will fail. The high cost of all the items will not be able to cope with the lack of disposable income of people. Even with the wealth of the area, people will have to prioritise their luxuries. Even if people still want to play warhammer they will look for cheaper alternatives. This is what I feel is the most important reason that games workshop will fail, people will not pay large amounts of money when they can get it cheaper online. This is why I believe games workshop will go into liquidation in the upcoming recession.
In conclusion I believe that it is obvious to see that the games workshop in st Albans will fail, and I have collected and analyzed enough data to prove it.
By Ashley Bryant
Word Count: 1,345
Questionnaire:
What year did games workshop open?
Approximately 1995
How many people work here
Only me, I am the manager
How has games workshop been performing since the start of the recession?
Very well actually our sales have been increasing
What is the average age of people who come into the store?
10-25
Why did you feel the need to get rid of the other staff?
Although I feel we are doing well, we were not getting enough sales in. We did not need that many people working for such a small shop. If we kept those staff we knew that our revenue might not outweigh the costs as greatly as we would like.
Ultimately how do you feel you will fare in the upcoming recession?
I like to think optimistically and I feel that we have enough loyal customers to get us through the tough times.
Bibliography: Manager of Games Workshop, Harry Howells, general public.
Webography: , , Warseer forums, , Games Workshop end of year report 2007, ,
