• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Laura Ashley Case Study - ROCE Ratio analysis and Laure Ashley's American market.

Extracts from this document...

Introduction

London based Laura Ashley proved to be a successful garment brand from her establishment in 50s till the end of 80s by means of her expert in the fast, flexible production of quality fabrics manufactured in small runs. However the expansion policies and acquisitions at the end of 80s have brought some emerging problems. Massive overproduction and delivery problems associated with sales and closure of non-core businesses and plants took the company away from an expansion path to a retrenchment period. Financial performance of the company starts to deteriorate during this period and hit the bottom in 1995. a. ROCE is a ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. 1999 1998 1997 1996 1995 1994 Operating Profit/Loss -16.6 -36 14.4 9.2 -29.3 2.3 Equity Shareholders' Funds 19.7 70.1 63 55.7 86.1 85.5 ROCE -0.84264 -0.51355 0.228571 0.165171 -0.3403 0.026901 1 Although some improvements are observed in ROCE in 1996 and 1997, so high negative ROCE in ...read more.

Middle

The decline in Laura Ashley sales in 1998 and negative profits in 1997 and 1998 show that this strategy was not able to bring operational profits in the North American market. Now that the recovery program would require �20million for store closes and �6.5million is needed to upgrade the logistics and information systems. The goal of the company is very simple "to survive". b. In order to survive, there is only one option in front of the company; leaving from the North America Market. The company cannot get any more loss in current situation. They have already tried two times in North America, and they collapsed in both of them. Also, the company does not have enough resource right now. As a result of this, MOI should invest �26.5 million to Laura Ashley. �20 million is for store closures, and �6.5 million is needed to upgrade its logistics and information systems. On the other hand, inventory turnover rate is the lowest one among the competitors, so the company can improve it by using the �6.5 million for it. ...read more.

Conclusion

Moreover, in last years, there is no detailed market research that the company conducted. The new market research can be conducted about preference of American consumers. If the company combines the data from past sales and market research, it can reach more reasonable demand forecast. As it is stated by Ann Iverson, there is a potential audience of over 19 million female shoppers in USA. Especially, there is a major opportunity in North America for lifestyle brands aim at 30-50 year old customers. In order to capture this opportunities, the company can turn back the North America market after a while. According to preference of those customers, products should be designed. For UK, Continental Europe and other areas, older strategies can remain same. In case of decrease in sales, new strategies (accurate response, market research) that are followed in North America can be applied in these areas. 1 http://www.valuebasedmanagement.net/methods_roce.html ?? ?? ?? ?? Laura Ashley Holdings plc: The Battle for Survival June 14, 2011 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Management Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Management Studies essays

  1. Strategic Management - CARREFOUR CASE ANALYSIS

    large global procurement centers, regional differences within countries, and the existence of the GNX online supply platform all serve to increase barriers to entry for new firms. * COST DISADVANTAGES INDEPENDENT OF SCALE o In order to increase its profitability, in 2000 Carrefour created the GNX online supply platform with

  2. Zara Case Analysis

    and keeping the labour in-house (for the most part). They still source the sewing of the garments to lower-cost facilities, so they are able to reduce costs while still keeping the lead times fairly short. The upstream and down stream logistics contributes to the value chain of the entire system; all activities add to the value of the output of the firm.

  1. Galvor Company - case study

    It was reflected on the business planning process. The completed business plan was submitted to headquarter and the meeting was held to review each company's business plan. Each plan had to be justified and defended at these meetings, which were attended by senior executives from both Universal's European and American

  2. CASE STUDY The Pay-for-Performance Program among Denver Teachers Hits a Roadblock

    Where motivation affects performance, those who are willing to go the extra mile to accomplish goals will be rewarded. However, what the school district failed to understand is that performance goes beyond motivation and a willingness to achieve. If performance is a function of role perceptions and resources those teachers

  1. Spectrum brands Case Study

    These costs are then reduced from the net sales. Spectrum also enters into promotional arrangements that target the ultimate consumer. For all types of promotional arrangements and programs Spectrum measures the effectiveness of the campaign using statistical measures and past experience to determine the amounts to be recorded for the estimate of the earned, but unpaid, promotional costs.

  2. Strategic Program Management Case Study.

    In this situation there are five projects with 6 members on the PSC board and of course therefore 4 of these 6 members need to strategically select the best project for Friar Tucker International to take one All of these members are pretty experienced in their field.

  1. Billabong Case Study. This report provides an analysis of Billabongs current situation and both ...

    Launa Inman is going to issue the new managerial strategies which will be announced on 27 August 2012. Therefore Billabong should hold out the offer from TPG and focus their resources and time towards the new strategy to truly make it a success and put Billabong back into positive gearing.

  2. Boeing 787 Dreamliner Case Study

    1982: Maiden voyage of 757 aircraft. Develops solar powered satellite system for powering homes. 1984: Earns contract for Space Shuttle software. 1989: Collaborative B-2 Bomber makes maiden voyage. 1987: Earns contract to develop living and working quarters for International Space Station. 1992: Boeing-Airbus agreement limiting subsidies.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work