Forum Replies Created
- Posts
Can you rephrase the question? As the figure is already given in the exam question. or do you mean what does market turnover mean? if so, then this is simply the amount of money the whole industry/market generates.
So for example, the whole market turnover of TV’s is 1000million, if Sony has a turnover of 100m, Sony has a 10% market share of TV’s sold.
Hope this helps
NCBT plc is a diversified business formed through a merger of Nairo Consumer Electronics and Birit Technology
in 1990. NCBT is the holding company for many subsidiaries in a variety of industry sectors including insurance,
financial services, clothing manufacture, farming and fertilisers.
The company is undertaking a strategic review of three of its subsidiaries: Swiftdale Farms, CCB Insurance and Pait
Technology. Data for the three companies has been provided for this review, as shown in Figure 1.
2014 2015 2016
$m $m $m
Swiftdale Farms
Turnover 102 97 90
Gross profit 12 7 4
Market turnover 550 530 512
CCB Insurance
Turnover 70 84 93
Gross profit 20 25 22
Market turnover 810 850 890
Pait Technology
Turnover 50 58 69
Gross profit 20 23 28
Market turnover 330 360 400
Figure 1 – Financial data for three subsidiaries 2014–2016
Swiftdale Farms – this was NCBT’s first acquisition in 1994. NCBT had been a success story in the 1990s technology
boom and had a surplus of cash and a number of shareholders looking for growth in the value of their shareholding.
In 1994, the farming industry was faced with a number of threats and Swiftdale Farms was opportunistically acquired
for what was considered to be a low price.
At the time of the acquisition, the board of NCBT was aware that they had little knowledge of the farming industry but
it felt that the managers of Swiftdale Farms were capable and just needed some encouragement. They offered financial
incentives for good performance, and provided financial resources to assist in the growth of the subsidiary. This
initially worked well, but the company performance started to decline in 2010 and NCBT stopped providing financial
resources, as they felt they were not being used to add value.
In 2016, Swiftdale Farms’ nearest competitor held 15·4% market share.
CCB Insurance – this was acquired in 2011 as NCBT recognised the rapid development of the insurance industry in its
home market and also the high margins being earned. CCB Insurance was a relatively new listing on the stock market
and the board of NCBT commissioned a broker to buy shares aggressively on its behalf, so that it acquired a controlling
stake. NCBT felt justified in its actions as the share price rose rapidly after acquisition.
CCB Insurance has continued to grow with little involvement from NCBT but is now struggling to manage its growth,
failing to recruit sufficient new staff or to provide enough office space to cope with its growing operations. It operates
in an industry where there are relatively few larger firms and hundreds of smaller companies and where the market
leader holds 12% of the market. The economy in which CCB Insurance operates is growing at a rate of approximately
2% every year.
Pait Technology – this is the most recent acquisition, having taken place in 2014. The company manufactures
consumer electronics, similar to both of the founding companies of NCBT. It operates in a different country where
the industry is just starting to develop and grow, the way it did for NCBT in the 1990s. NCBT has other subsidiaries
situated in this country. The management of Pait Technology are highly knowledgeable about their customers and
industry and the company has a good brand name with high recognition. Its nearest competitor has an 8% market
share.
7 [P.T.O.
Required:
(a) Analyse the financial position of each company (Swiftdale Farms, CCB Insurance and Pait Technology) in the
NCBT portfolio. Your analysis should include consideration of the position of each company within the BCG
and Ashridge matrices and should suggest an appropriate strategy for each subsidiary as a result of your
analysis. (18 marks)