GLOBAL BUSINESS CHALLENGE

TEAM EVOLVE FROM NEPAL

Institute of Professional Accountancy and Management
Angel Sharma
Roshan Raj Mehta
Sneha Amatya
Sophia Pradhan


Introduction to the Case
Luxury boat industry is growing with wealthy customer base in Europe and
USA.
New markets in Australia and some parts of Asia

Merbatty is a northern European company.


It specializes in developing luxury boats and was formed 33 years ago.


Gained sales in other countries by using local sales agents.


Listed on European Stock Exchange in 2012 with Alberto Blanc as Chairman.

Alberto Blanc
Chairman
6 Non Executive
Directors

Henry Gaston
CEO

Executive
Directors
Stefan Gil
Sales
Director
Andreas Acosta
Finance Director
Jesper Blanc
Marketing Director
Tobias Houllier
Operations
Director
Marie Lopp
HR Director
Paul Lavie
Procurement
Director
Bernie Ritzol
Global Market
Development
Director
Alain Mina
Technical
Director Systems
and IT
Lukas Dian
Technical
Director Design
ORGANIZATIONAL HIERARCHY

78% 9%







No. of boats sold Sales Revenue

Merbattys share in the industry (2012)
Merbatty
Others
The Luxury Boat Industry
WHAT SO-WHAT ANALYSIS


WHAT SO-WHAT
Customers in USA are paying in US
dollars.
Fluctuations in Euros against dollars
Alberto Blanc and his previous role
until 2011
Poor Governance (Cadbury Report, 1992).
Acquisition by executive directors during
flotation
Increase in share prices
Proposal by Jesper Blanc
Recruitment of fresh graduates
Alain Mina and issues at the Director
Level
Possible window dressing.
Increase in confidence of stakeholders.
Lack of marketing expertise / Favoritism issue
Fresh graduates could bring in new ideas to
revolutionize the business
NEW HRM THEORY


Prioritization of Key Issues
Late delivery of Hull from TopCrest resulting in potential
reputational damage as well as unsatisfied customers.

Conflict of interest with JKLs involvement in management
board.

Focus on quality especially with the new Suranian supplier. Loss
of quality will mean loss in future sales.

Appointing sales agents could mean reduced control. The
quicker the company looks to appoint its own sales staff, the
better.











Brand Reputation

Customer Dissatisfaction

Bargaining Power of suppliers

Alternative Solutions

Accept Topcrest offer

Rescheduling tasks for efficiency

Replacement hull order













Continue working with Topcrest

Negotiate for overtime wages with
Topcrest

Sign a Memorandum with Topcrest
asking them to stick to future times

See if rescheduling can be done .

Inform customer and send an
apology letter also informing them
about possible compensations.

Issue 1: Late delivery of a hull from Topcrest


Impact of the problem


Alternatives


Recommendations






Conflict of interest

Loss of control

Bargaining Power of JKL




Protecting key ideas

Tight management control

Negotiating to create win-win situation














Copyright Ideas and Intellectual
Properties

Strong IT systems with access
controls

Negotiate with JKL to remove
Simone Lellet from the executive
board

Issue 2: JKL as the second largest share holder


Impact of the problem


Alternatives


Recommendations

Impact of the problem


Quality design and flexibility

Design, Design and Design













Reject Cooper Designs for Surania.

Working with Seikh could be beneficial.

10K advantage if Arabian Interiors is chosen.

Meeting needs and demands of the customers is the perfect marketing concept.

Cooper Designs should not be selected and should be informed in a polite way.





Issue 3: Suranian Supplier

Impact of the problem


Recommendations



Confidentiality

Commission driven



Selling strategies cannot be implemented through sales agents.

Sales agents can be used to sell boats that are highly priced.

It is easier to gives sales staffs targets rather than sales agents.

Risky to use sales staffs but commission v wages almost equal themselves.

It is recommended that Merbatty use sales agents for higher priced boats
and sales staffs for lower and mid range boats.


Issue 4: Use of sales agents


Impact of the problem


Recommendations


Evaluating Jespers Proposal
Jesper suggests that Merbatty build and race a speedboat in the global speedboat
competition.

The benefits of organizing the competition:
Extra Sales from brand marketing
Potential racing boat builder

Merbatty is not a family business so Alberto has to make sure his decision is not biased.

Financial Risks:
12m in design and development
8m in travel, accommodation and direct engineer costs

Deviation from the core activity is not regarded good.

Proposal made by Jesper is extremely risky and it is recommended that Merbatty do not
continue with Jespers proposal.

Alberto keen about sales to make for breakeven over 2 years.


Racing Boat BEP
Contribution per boat
1.8m
Fixed Costs 28m
BEP Sales (per boat) = 15.6
Ethics





Work place safety should be top
priority for any employer.

Companies are required to have
Health & Safety procedures.

Merbatty has failed by allowing
Paulo to come in to work.

Jesper should have reported it but
let it go.

Disciplinary proceedings against
Paulo is highly recommended.



There should be a balance
between EDs and NEDs. Majority
of the members should be NEDs.




Principle of Objectivity

Jesper Blanc and Alberto Blanc
issues





Accident at Work Balance in board

Objectivity

FINANCIAL ANALYSIS
PROFITABILITY
LIQUIDITY RISK
INVESTORS
RATIO
Return on Capital Employed (ROCE)=


* 100%


PROFITABILITY:
ROCE has gone down because equity and non-current liabilities have
increased in 2012.

Merbatty has taken a bank loan of 200m at interest of 10%.

It has failed to earn the return on its capital employed.
FINANCIAL ANALYSIS
Year 2012:

76
828
* 100 = 9.2%
Year 2011:

65
307
* 100 = 21.2%


Ope :


* 100%




PROFITABILITY :
Operating profit margin has slightly increased

It shows that operating costs are under control.

Which means that there is increase in revenue.
BACK
FINANCIAL ANALYSIS
Year 2012:

76
502
* 100 = 15.14%
Year 2011:

65
445
* 100 = 14.6%





LIQUIDITY :
Increase in debt collection period (receivable days).

Decrease in payable period (payable days).

Poor management of working capital.

De Loff(2003) and his findings.
BACK
FINANCIAL ANALYSIS
Cash operating

2012 2011
Inventory Days 141 121
Receivable Days 67 62
Payable Days (87) (108)
________ ________
121 75

Gearing Ratio=

* 100%



RISK :
Gearing ratio looks at risk exposure by comparing debt to equity.

Gearing ratio has halved from 2011 to 2012.

Company has minimized its risk exposure.
BACK
FINANCIAL ANALYSIS
Year 2012:

207
621
* 100 = 33.3%
Year 2011:

122
185
* 100 = 66%

Price earning ratio (PE ratio) =





INVESTORS RATIO :
Year 2011 figures are not given.

Market sector average at 30 June 2013 is 15.

From 2.3 to 15 is a big jump.

A higher PE ratio shows that investors are expecting a higher growth.


FINANCIAL ANALYSIS
Year 2012:


0.50
0.22
= 2.3
CONCLUSION
All four issues should be addressed by Merbatty as soon as possible.

Jespers proposal should be evaluated with a proper succession planning should
Jesper leave.

Ethical issues should be addressed to establish Merbatty as an ethical
organization.

Profitability and liquidity have to be maintained.

Merbatty should continue to minimize its risks.

Investors ratio has to be improved.


REFERENCES
DELOOF, M. (2003). Does working capital management affect profitability of Belgian
firms? Journal of Business Finance & Accounting, 30,pp. 573-588.

KOTLER, P. R., ARMSTRONG, G., CUNNINGHAM, P. H. AND TRIFTS, V. (2013).
Principles of Marketing, Pearson Education Canada.

SHORT, H. (1996). NonExecutive Directors, Corporate Governance and the Cadbury
Report: A Review of the Issues and Evidence. Corporate Governance: An International
Review, 4, pp. 123-131.
SMART, V., BARMAN, T. AND GUNASEKERA, N. (2010). Incorporating Ethics into
Strategy: Developing sustainable business models, CIMA.
THANK YOU FOR
LISTENING !!!