MAT010&Business&&&Risk&Strategy&–&Class&Test&&&Assignment&2020& Background&Information&on&Morgans&
Morgans!is!an!independent!coffee!company!that!imports!and!roasts!coffee!beans.!It’s!based!in! Cardiff,!established!nearly!twenty!years!ago!by!John!Morgans!and!Philip!Turner.!!John!and!Philip! each!own!40%!of!the!company’s!shares,!with!the!remaining!20%!being!owned!by!John’s!wife!Alice! (Alice!is!also!Philip’s!sister).!The!company!owns!the!building!in!which!it’s!based!and!paid!off!the!loan! it!had!to!purchase!it!many!years!ago.!
John!is!Chief!Executive!Officer!and!Philip,!a!chartered!accountant,!the!Chief!Financial!Officer.!They,! together!with!David!(the!Chief!Operating!Officer),!Jenny!(the!Chief!Communications!Officer),!and! Helen!(Chief!Human!Resources!Officer)!run!the!company!on!a!daily!basis.!All!five!(John,!Philip,!David,! Jenny!and!Helen)!form!the!Board!of!Directors!of!Morgans;!John!is!also!Chairman!of!the!Board!of! Directors.!!
Morgans!has!always!been!proud!of!its!core!value!–!treating!people!with!respect!–!and!its!business! has!been!driven!through!that,!whether!it’s!in!recruitment!and!management!of!the!staff,!or!in!the! way!in!which!relationships!are!built!and!managed!with!coffee!growers!in!countries!around!the!world.! Helen!(Chief!Human!Resources!Officer)!regularly!meets!with!staff!representatives!to!gauge!how!they! feel!about!Morgans,!while!Jenny!(the!Chief!Communications!Officer)!works!closely!with! organisations!representing!coffee!growers!to!ensure,!as!best!as!can!be!expected,!Morgans!is! adopting!best!practice!in!its!sourcing!of!coffee!beans.!
Morgans!sells!its!coffee!across!the!UK!through!a!range!of!retail!outlets!–!mainly!supermarkets,!but! some!independent!coffee!shops!stock!their!coffee!too.!Coffee!can!also!be!purchased!online,!direct! from!Morgans.!John!Morgans!says!around!80%!of!its!sales!by!value!are!through!stores!with!the! remaining!20%!from!online!sales;!online!sales!are!growing,!and!he!expects!the!split!between!stores! and!online!to!move!to!75%!/!25%!in!the!year!ahead.!He!anticipates!further!growth!in!the!years! following!that.!!
Helen!and!Jenny!met!recently,!and!both!commented!how!the!environment!in!which!Morgans! operates!is!changing.!Staff!are!now!beginning!to!ask!about!greenhouse!gas!emissions!resulting!from! coffee!sourcing,!and!also!those!through!shipping!coffee!to!customers!(the!likes!of!you!and!me,!and! also!companies!that!buy!Morgan’s!coffee).!The!extent!of!deforestation!around!the!world!to!support! coffee!production!is!also!of!concern!to!staff,!as!is!the!degree!to!which!Morgans!is!using!renewable! energy!sources!–!some!staff!feel!that!Morgans!could!be!doing!a!lot!more!to!ensure!its!energy! sources!are!green.!
Jenny!(the!Chief!Communications!Officer)!talked!of!how!she!noticed!an!increase!in!discussions!on! social!media!among!people!about!the!carbon!cost!of!coffee!production.!Many!are!tagging!Morgans! in!posts!and!some!are!asking!searching!questions!when!Morgans!makes!statements!about!its!core! value!–!treating!people!with!respect!–!when!various!media!articles!have!pointed!to!worker! exploitation!in!the!farms!where!coffee!beans!are!grown.!!
She!also!noted!that!increased!activism!around!climate!change!is!increasing!awareness!about!the! food!supply!chain,!and!that!included!attributes!of!coffee!production.!
!
Both!Jenny!and!Helen!brought!these!matters!to!the!attention!of!the!Board,!and!a!meeting!was!called! to!discuss!the!impact.!The!meeting!showed!that!the!Board!members!have!differing!views!on!how! these!issues!should!be!approached.!
John!Morgans,!as!coZfounder!of!the!company,!wants!to!engage!as!best!as!possible!with!the! environmental!concerns!of!staff!and!customers.!He!also!knows!that!the!coffee!market!is!becoming! increasingly!competitive,!and!that!scrutiny!all!coffee!companies’!operations!is!increasing!at!the!same! time.!He!also!recognises!there!is!potential!for!Morgans!to!use!its!success!to!date,!and!the!money!it! has,!to!establish!Morgans!as!being!a!‘better’!company!than!others!in!the!environmental!arena!–! although!he!is!not!clear!on!what!that!may!mean,!and!needs!advice.!He!notes!that,!with!an!excellent! trading!history,!the!company!could!obtain!a!loan!to!support!any!significant!investment!it!needed!to! make!–!he!wonders!if,!to!compete!with!some!of!the!larger!coffee!companies,!Morgans!has!to!grow! significantly.!!
Philip!(the!Chief!Financial!Officer),!meanwhile,!is!conscious!of!growing!geoZpolitical!risk!and!wants!to! avoid!any!substantial!investments,!preferring!Morgans!to!hold!on!to!the!money!in!the!bank!so!it!can! deal!with!any!problems!that!could!arise!from!any!number!of!sources,!including!major!moves!in! foreign!exchange!rates!and!supply!chain!disruption.!!
David!(the!Chief!Operations!Officer)!says!that!Morgans!has!sufficient!stocks!to!be!able!to!handle!the! sort!of!disruption!to!raw!materials!that!may!arise!as!trading!arrangements!between!the!UK!and! other!countries!change!in!the!years!ahead.!He!also!says!that!investments!made!four!years!ago!in! machinery!mean!that!Morgans’!equipment!is!some!of!the!most!efficient!in!the!market!for!roasting! coffee!beans,!packaging,!and!handling!orders;!it’s!not!operating!at!capacity!either,!so!Morgans!could! currently!grow!without!having!to!invest!in!additional!equipment.!
Jenny!(Chief!Communications!Officer)!is!conscious!that!social!media!can!be!brutal!in!its!criticism!of! brands!that!fall!foul!of!expectations.!She!thinks!that!her!engagement!with!suppliers!could!be! enhanced!further!and!used!in!marketing!to!show!how!seriously!Morgans!takes!its!core!value!of! treating!people!with!respect,!something!that!would!be!viewed!positively!on!social!media!platforms.! She!believes!a!newer!vision!and!mission!may!need!to!be!established!for!Morgans!as!its!customer! base,!and!potential!customer!base,!has!greater!environmental!awareness.!
Helen!(Chief!Human!Resources!Officer)!believes!that!staff!should!not!be!forgotten:!engagement!with! the!outside!world!may!be!crucial!for!a!positive!company!identity,!but!the!staff!need!to!be!included!in! the!creation!of!any!strategy!to!similarly!show!that!Morgans!lives!up!to!its!core!value.!Many!of!the! staff!have!been!with!Morgans!over!ten!years!and!enjoy!working!for!what!they’ve!seen!to!be!a! sociallyZprogressive!company.!!
The!Board!of!Directors!agreed!around!three!months!ago!to!recruit!a!Strategy!Consultant!to!look!into! the!direction!and!future!of!the!company.!The!Strategy!Consultant!will!examine!the!impact!of!all!the! issues!noted!earlier!and!suggest!possible!strategies!that!could!be!adopted!to!mitigate!the!risk!to!the! company’s!reputation!and!profitability.!Each!member!of!the!Board!recognises!that!they!each!have! extensive!experience!in!different!commercial!environments!–!so!may!well!have!strongly!differing! views!on!a!‘best’!approach!Z!and!the!most!efficient!way!to!harmonize!those!was!through!this! appointment.!!
After!a!thorough!recruitment!process,!you!have!been!appointed!as!that!Strategy!Consultant.! Morgans!would!like!you!to!prepare!a!report,!answering!all!the!questions!below.!
The$first$two$questions$will$need$to$be$answered$in$the$Class$Test;$the$remainder$in$the$Assignment.$
!
&&
& &&&
!
PROFIT’AND’LOSS
Turnover
Cost.of.Sales
Gross’Profit
Administrative.Costs
Operating’Profit
Tax
Net’Profit
!!
2018 £’000
19,498 (11,152)
2019 £’000
20,427 (11,819)
8,608 (7,345)
1,263 (258)
1,005
8,347 (6,943)
1,403 (296)
1,107
2017 £’000
18,642 (11,447)
7,195 (6,049)
1,146 (293)
853
!
!
BALANCE’SHEET
Fixed’assets
Current’Assets
Stocks
Debtors Cash9at9bank9and9in9hand
Creditors:9amounts9falling9 due9within919year
Net’current’assets
Net’assets
Capital’and’reserves
Share9capital Profit9and9loss9reserves
!!
2018
2019
£’000 £’000
844
(2,600)
5,517
5,517
10 5,507
3,729 2,501 1,042 7,272
2017
£’000 £’000
701
(2,188)
5,377
5,377
10 5,367
3,761 2,268 835 6,864
£’000
£’000
852
3,786 2,398 967 7,151
(2,384)
5,619
5,619
10 5,609
!
MAT010&Business&&&Risk&Strategy& CLASS&TEST&–&FEBRUARY&24TH&2020&
&
Question&1&
Part!I:!Construct!a!stakeholder!mapping!for!Morgans,!using!Mendelow’s!approach.!!
Part!2:!Explain!the!benefits!of!this!stakeholder!mapping!for!Morgans.!
&
Question&2&
[50!marks]! [20!marks]!
You!note!that!there!are!no!nonZexecutive!directors!on!the!Board!of!Directors.!!What!value!would!
nonZexecutive!directors!add,!and!how!should!they!be!appointed?!
You!also!note!that!John!Morgans!is!both!Chief!Executive!Officer!and!Chairman.!Would!you! recommend!splitting!the!roles!(so!the!Chief!Executive!Officer!and!Chairman!are!different!people)! and,!if!so,!why?!
!!
[30!marks]!
MAT010&Business&&&Risk&Strategy& ASSIGNMENT&–&DUE&3pm&MARCH&13th&2020&
Present!a!report!that!answers!the!following!questions.!Note!that!20!marks!have!been!allocated!to! the!format!and!clarity!of!your!report.!Also!note!that!your!report!should!be!no!more!than!6,000! words!(the!word!count!does!not!include!any!bibliography).!
!
!!
Question&1&
Provide!SWOT!and!PESTEL!analyses!for!Morgans.!
Question&2&
Provide!a!financial!review!for!Morgans,!using!ratio!analysis!where!needed.!
Question&3&
[30!marks]!
[15!marks]!
Apply!Porter’s!Generic!Strategies!to!Morgans!and!detail!the!strategy!you!feel!most!appropriate.! [20!marks]!
Question&4&
Discuss!how!you!would!implement!the!strategy!detailed!in!your!answer!to!Question!3.!!
[15!marks]!
!! !