In this scenario, you will fulfil the role of Financial Manager at a fictional toy retailer known as 'Happy Playz'. The organisation sells its products from a chain of leased retail stores, as well as online. Happy Playz was founded about 30 years ago in Westaria, a developed country with a strong economy and a high standard of living.
There are 5 categories of toy retailers in Westaria. Happy Playz falls under the 'Toyshop chains' category, together with their direct competitor 'Gleetill'. This category has a 25% share of the market, which is the largest. Happy Playz currently holds 40% of this share. Happy Playz uses a centralised structure, with key decisions being made at their head office, which is divided into five departments.
Understanding the Pre-seen Material
- To build your understanding of the pre-seen material, you need to follow a methodical approach. Among other things, it may be helpful to;
- Review Happy Playz Value Chain and establish how value can be enhanced and where costs may be reduced.
- Employ models such as Porter’s Five Forces & PESTLE analysis to establish the operating environment for Happy Playz.
- Establish the current positioning of Happy Playz through SWOT analysis.
- Use Mendelow’s matrix to categorise the key stakeholders for Happy Playz and think about how they can be managed.
- Absorb as much business news as you can and gather information about the challenges facing the Toy Industry and how these are being addressed.
- Perform financial analysis (figures may tell a different story from the narrative given). You will conclude that overall, Happy Playz is lagging behind its direct competitor, Gleetill, in terms of revenues and profits despite improving. If Happy Playz is to overtake Gleetill, there may be need for it to capture other markets.
- Develop an understanding of Happy Playz business model.
Having built a thorough understanding of the pre-seen content, several concepts should spring to mind;
- Responsibility centres and performance measurement. Is Happy Playz following a centralised or decentralised structure? •Accounting for leases, intangibles assets, foreign transactions, provisions, etc.
- HR processes and policies that could be in place. Happy Playz has close to 7,000 employees. Think about the management style of the company.
- Cost management.
- Sources of finance available to Happy Playz – debt vs equity.
- Think about how the dividend policy for Happy Playz is affecting it’s Gearing Ratio.
- Business intelligence systems and the use of Big Data (digital disruption), protection of clients’ private information, etc.
- Risk management.
- Investment appraisal as there may be triggers on new market development or an acquisition.
Keys to Exam Success
- The key to scoring well is to read and then answer the questions that are asked. Avoid making assumptions or imagining your own question. Relevance and correctness are frequently judged in the context of the scenario, taking into account the nature of the business and the specific issues raised by the trigger.
- The examiner expects you to be able to perform the 5 core activities as indicated in the exam blueprint. These are expressed in the form of “I Can” statements, which you need to be familiar with and be able to apply them to Happy Playz. Ensure that you close all the knowledge gaps.
- During this preparation period, adapt yourself to the position of the Financial Manager at Happy Play, and aim to understand the business that is portrayed therein. Connect this with the “I Can” statements. As you synthesize the pre-seen, identify possible triggers and ensure that you have sufficient knowledge to address any question around that.
- Even though the pre-seen setting aims to reflect real life, the context is that of a business operating in an environment where current and ongoing global issues have not had an impact. Therefore, for clarity and fairness, candidates are not expected to factor in these changes when responding to tasks even though marks will be awarded for relevant arguments.
The secret is in studying consistently. Case study exam skills can only be mastered through practice, and these skills require practice to maintain them. Create a workable study plan and steadily practice lots of questions under exam conditions.