RiverRocks: is a fictitious company created for the purpose of this work, all the necessary information about the company is provided in the following pages and in the supplied financial spreadsheet (Excel file).
The Business plan report should be suitable for consideration by the management team of RiverRocks in the context of the strategic challenges facing the company.
This report should include:
- Five year business plan report designed to enhance shareholder value.
- You may use your own definition of shareholder value but must explain and justify it.
- The plan may identify a range of strategies for consideration but should ultimately put forward your recommendation with evidenced justification.
- Identify, explore and evaluate alternative strategies for developing the RiverRocks business.
- Research the relevant ‘real world’ industry, market and business environment for this case study RiverRocks is situated in.
- You should use a combination of relevant ‘real world’ primary and/or secondary research to provide the basis upon which your strategic choices are made.
- Identify specific KPIs to assist in measuring to what degree shareholder value is being enhanced.
- Review your proposed plan, and identify and assess the key risks within it.
About RiverRocks:
- RiverRocks is a national chain of bookstores with 47 branches across the UK and an active e commerce web site.
- RiverRocks is unsure of where it is heading strategically in the near future and has contracted a consultant to provide guidance through a five year business plan report.
- The company’s management team welcomes your identification of and insight into potential (and viable!) strategic options.
- The management team is open to considering a range of strategies that may strengthen their core activities, and/or diversify their product range, and/or enter overseas markets, or and/or perhaps consolidate the company’s activities.
In order to complete this project you will need to
- Analyse the competitive environment,
- Research market trends.
- Examine the company’s financial position.
- Explore alternative strategies.
- Assess risk, and then
- Build your business plan, and present your plan in a report.
The market
The period from 2005 to 2012 was a tough time for bookstores. The combination of the rise of on-line retailers, notably Amazon, and the arrival of the e-book and e-book readers such as the Kindle seriously affected traditional stores, the biggest of which, Borders, closed all its stores and filed for bankruptcy in 2011.
However, the bookshops who survived the initial market turmoil have recovered well. So much so that Amazon is reported to be planning to open as many as 400 physical bookstores, initially in the USA.
Although e-books initially benefitted from very fast growth when launched on the mass market and there were fears in the publishing industry that they would rapidly replace hard copy books, these fears have not been realised.
In the UK after the initial surge up to 2012, there has been no significant growth in sales of this format, and as e-book sales slow, reader enthusiasm for print books remains strong both here in the UK and in the USA, where sales of printed books actually rose by 3% in the first quarter of 2015 in all major categories and a recent study found Gen Y readers (people between the ages of 18 and 34) are almost twice as likely to read a print book as an e-book. Nearly half of UK consumers claim they still prefer to shop on the High Street.
One of the brightest spots in the market is in children and young adult readers. In the UK last year, while overall book sales were flat, children’s grew by over 7%.
Around 45% of all print book sales are now made on line with Amazon dominating the market. However, the rise of on-line book shopping has also flattened out in recent years and traditional specialist bookshops still account for around 45% of sales, with UK supermarkets taking most of the remaining 10%.
Background
RiverRocks is one of Britain’s largest book retailers, with a chain of 45 shops in large city centres and at major rail terminuses and airports. The company is on the path to recovery with its first rise in sales under new ownership achieved in 2015.
The company was part of a large publishing group until 2010 when it was sold back to the chain’s original founder Charles Riverrock, in a leveraged deal financed by a combination of long term loan notes and part private equity. The company now has £32m of debt, secured against their property estate.
Since the buy-out, the company has invested in a redesign of its shop environment and in IT infrastructure to support the growing online trade, while closing a number of smaller unprofitable retail outlets. This investment, along with an improved range of books, resulted in overall sales volume growth of 2.5% in the year ending December 2015.
RiverRocks was relatively late in establishing an on line bookshop presence to compete with the market leaders Amazon, and Barnes & Noble. However, on line sales have grown strongly and now stabilised at around 14% of total book sales, and the company sees this as a major potential source of future growth and profitability.
The bookshop chain is also luring in more customers with its in-store River Cafés, which are now in 12 shops, and are helping to encourage readers to browse and buy more books. The café is a franchise operation.
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