Company case by Stern Stewart & Co.

Stern Stewart Case: Sports Growth

Stern Stewart Case: Sports Growth Stern Stewart Case: Sports Growth
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11.6k
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Problem Definition

The sporting goods manufacturer TIGER SE which is broadly positioned in Germany wants to increase its sales.

The company is fully integrated along its value chain which means that the sporting goods are manufactured in-house and then sold to end consumers through its own distribution channels. In addition, TIGER SE is globally active.

To increase sales, you were hired as a consultant to develop a growth strategy and quantify it.

Comments

A good candidate should structure this case into 3 phases.

The aim of the first phase is to identify an attractive growth field and relevant factors for a successful growth strategy. Structurally, it is advisable to separate these into qualitative and quantitative types as well as internal and external factors. If the candidate states the essential points, the necessary data will be provided.

The second phase focuses on the analysis of the data and subsequent quantification of the earnings potential. The candidate is told that the strategy's target is to expand online trading in only one country for the time being. The candidate is then asked to identify the country he/she thinks is the most attractive for this project and to determine the additional revenue potential.

Finally, in the third phase, the candidate is asked to estimate the impact of the developed strategy on different departments of the company and to define measures for the successful implementation.

Following the solution of the case the candidate is asked to communicate his/her recommendation
in three sentences
to the CEO - whom he happens to meet in the elevator.

Short Solution

Solution

Paragraphs highlighted in green indicate charts/tables that can be shared with the interviewee. You can find them under "Case Exhibits".

Passages highlighted in blue indicate information that can be communicated verbally to the interviewee.

Paragraphs highlighted in orange indicate references that will help you guide the interviewee through the Case.

The candidate could proceed according to the following solution scheme:

Phase 1: Identification of Potential Growth Areas

The candidate should first consider what opportunities exist generally to increase sales and apply these to the case in a structured way. A good candidate will first explain their general framework and then apply it specifically to the solution of the case.

The candidate could choose the following structure for this:

Once the candidate has explained the main opportunities, he/she will be informed that the management of Tiger SE has decided to focus the eCommerce business more strongly in the future (existing market/existing product). The candidate should now explain essential success factors of such a growth strategy.

It makes sense to separate the factors into qualitative and quantitative factors and also to distinguish between the dimensions internal and external. A 2x2 matrix is suitable for this purpose.

If the candidate has named significant factors and confirmed a tendency towards the attractiveness of eCommerce, Diagrams 2 and 3 can be shared with them. The data should then be analyzed in phase 2.

As a first step, ask the candidate to assess the market attractiveness of the different countries.

Phase 2: Analysis and Quantification

The candidate should take the market size as the main decision criterion when choosing a country, as the purchasing power does not differ greatly even in the strongest countries.

Step 1: High-level assessment of market size

The estimate is based on the market size and the market share of Tiger SE within each country.

  • The average expenditure in the sporting goods segment differs only slightly in the strongest countries and therefore, does not serve as a sufficient indicator for the evaluation of a specific country.
  • Regarding the number of inhabitants, Germany and France differentiate themselves above all.

Thus, the first rough estimate concerns Germany and France. A good candidate argues at this point that a growth rate would have to be assumed for the estimation of the future market size.

Step 2: Calculation of the earnings potential through expansion of the online business

In the second step, the candidate receives an overview of the online business of Tiger SE (Table 3). The values for 2019 correspond to the expected values that can be achieved by focusing on the eCommerce business in the individual countries.

Ask the candidate to identify the country where sales will grow the most in absolute terms compared to 2018 by focusing on the eCommerce business.

First, the candidate should describe the table and compare the actual values with the targets. In addition, the candidate is asked to name some concrete measures per key figure with which the targets can be achieved.

Examples of useful measures would be:

  • Increase of the conversion rate through active marketing of the online shop
  • Optimization of the consumer experience of online shopping to increase the number of orders/year
  • Discount codes for online shop to increase conversion rate

A good candidate already notes here that the measures are associated with costs and thus the margin of the company decreases. However, since the primary goal of the company is sales growth, the critical note of the cost side is sufficient.

Calculation for France and Germany:

Following the calculation, a good candidate should want to rank the results.

On request, you can provide the company's total sales (€ 21 billion) and sales for France (€ 6.5 billion).

In relation to total sales, a growth rate of 0.08% can be achieved and in terms of sales generated in France, a realistic growth rate of 2.6% can be achieved.

Phase 3: Implementation

After the expansion of eCommerce on the French market has been evaluated as attractive, the candidate should now work out which areas of the company have to be adapted due to the new strategy. The following areas should be mentioned and their contribution to the success of the implementation explained:

  • Marketing/Sales: Focus of advertising campaigns on eCommerce business
  • IT: Expansion of the online shop (security, stability, functions) and data collection
  • Logistics: Adjust capacity of logistics centres to increased demand (alternative: outsourcing)
  • Operations: Expansion of production volume to meet increased demand

A very good candidate will also bring one of the following areas to the table:

  • Product management: Analysis of the collected customer data and development of specialized offers
  • Controlling: Risks of non-payment (e.g. payment on Invoice) taken into account
  • Management: Closure of shops due to decline in demand in traditional shops

The applicant should be aware of the risks, such as congestion of production sites.

After the implementation plan could be outlined, it comes to the final recommendation of solving the case study. For this, the candidate should convince the CEO, whom he meets in the elevator, of his results in three sentences.

Above all, make sure that the applicant presents their results in short, concise sentences. The applicant should first recommend expanding the eCommerce business in France, as this is where the greatest additional earnings potential is available at around 168 million Euro. He should then back up his statement with further arguments. The relatively low conversion rate in 2018 and the market size can be cited here. Finally, he should point out that a rough implementation plan has already been drawn up with the departments concerned.

Exhibits

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11.6k
Times solved
Intermediate
Difficulty
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Exhibits