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Strategic Management Research Report

Contents

Introduction.

Current Covid Sales Situation.

Slow expenses to recover.

Overview of the firm's environment using Porter's Five Forces Model

Industry Revelry.

Threat of new entrant

Threat of Substitutes.

Supplier Power.

Buyer Power.

Covid 19 recovery plan.

Objectives.

Cost-volume-profit analysis tools.

References

Introduction to Lovisa

Lovisa was founded by Shane Fallscheer, its management director, and BB Retail Capital, a company founded by successful retail contractor Brett Blundy. In April 2010 it opened its first shop in Chermside, Queensland, and soon afterwards started to expand internationally. Lovisa is the leading luxury jewellery brand in Australia and New Zealand! It was born out of a desire to bring a new realm into the fashion accessory industry. Inspired by global fashion trends and design, declaration designs, inherent luxury and high quality. Lovisa has opened more than 400 shops in 15 countries in Europe, Asia and America since our first shop was launched in 2010. As we continue to expand, there will be exciting new opportunities, and we are now looking for enthusiastic and motivated people.

Current Covid Sales Situation

In addition, the strong revenue growth driven by the opening of the shops on new markets, which Lóvisa witnessed in the first half of FY20, did not suffice to compensate for supply chain disruptions and mass shop closures due to Covid-19 in the second half. Although Shane Fallscheer, Managing Director of Lovisa, admitted that the similar sales in the shop have recovered slower than he wished from reopening, the retailer adheres to its aggressive international expansion strategy (Lea, 2020). We are happy with the achievements of our team over the last six months as a result of market disruptions, and while they have had a temporary effect on revenue and profitability, we remain committed to our growth targets and have maintained their balance sheet power. This allows us to be really forward-looking," Fallscheer said in an ASX statement.

Revenues fell 3.2 percent to $242.2 million in 2014, while profit fell to $19.3 million, down 47.8 percent compared to 56 percent in the same time last year, because cost for doing business was up to 59 percent of revenue in the second half. In many of the countries where Lovisa works, despite government wage support and reduced rent.

Slow Expenses to Recover

The gross margin fell to 77.3 percent in FY20, following a downturn in the US Dollar hedge rate and reopening during the June sales period after slowing down over the last three years. The company was one of the first major retailers to shut its stores in Australia on 26 March, possibly because of its presence in foreign markets like France and the UK, where government closures had already been mandated. But, though Australia opened up again in the middle of April and in other markets gradually until the end of FY20, sales stayed below average. Comparable shop sales were 32.5% down on the same time last year after reopening shops. In the first 8 weeks of FY21 this changed marginally as comparable shopping sales fell 19%.

The continuing effect of constraints on events such as marriages and socialisation that its customers would otherwise have bought new jewellery was due to Fallscheer's slow recovery. Today, all but 30 stores in Melbourne, Auckland and parts of the USA where a second round of locking was carried out by local governments reopened (Fabeil et al., 2020). As stores closed in Q4, Lovisa tried to boost its e-commerce operation including the launch of new websites in South Africa and the USA. The growth in online sales for the year was impressive, even though it was poor.

Company expects to continue investment in digital technologies and has implemented many new features to enhance e-commerce business advantages and customer experience, including store fulfilment, multi-store delivery and live chat. He has also hired a digital and marketing manager.

Mr Fallscheer said its necessary return on investment in the present environment is very difficult to model, where it is a storey of the two hemisphere: the new half is being well-traded by the Southern hemisphere, but stores in France and in Great Britain still remain shut out. Mr Fallscheer said he still see plenty of life in shopping malls in spite of difficulties in securing rental reductions and customers flocking online (Handfield et al., 2020). He said after disclosing that in the first seven weeks of the new half, comparable sales in shops are up by 12 percent. "We have increased our attention on line but we still think the future of the shops that we are seeing is in Australia."

Lovisa has grown internationally to escape the smaller Australian shopping malls that would be stressed faster as foot traffic falls. In light of lease negotiations, Mr Fallscheer would not reveal how many stores he plans to open this half in the different markets. The company said that its 460 store network will expand (it will add 25 in half), but will continue at a slower rate.

"Ensuring that we are not out of the forest and need security when opening stores in the middle of COVID is important, in simple language," he said.

The place of Lovisa strengthened in the first half and the second quarter saw positive worldwide same-store revenues, but COVID-19's temporary shop closures also impacted the markets. In the 26 weeks ended December 27, the overall comparable store sales were down 4.5%. Total revenue fell to $146.9 million by 9.8 percent. Net tax benefit fell from $19.6 million to 26.7%.

Overview of The Firm's Environment Using Porter's Five Forces Model

Professor Michael Porter, Harvard Strategy, created a method for analysing the micro environment of a business (Isabelle et al., 2020). Porters Five Forces is an instrument used to analyse the effect of each group on a company in an industry in various micro-environmental classes.

Industry Revelry

The degree of competition between established companies on the market is a significant force defined by Porter. With the resulting competition pressures, costs, benefit and strategy would be driven as more firms compete with each other.

If a company offers a variety of quality goods on the market, it may end up with little to no influence in its own industry. Customers simply have the option to move on to another business. Instead, the business can set rates and profit margins without the attractiveness of the consumer, in the absence of such a rivalry.

Threat of New Entrant

Not only existing players on the market but also potential new entrants into the market place may be the competitive threat to the company's business. If a business is lucrative or strategically attractive in the long run, new companies would be attractive. Without obstacles, new companies can quickly enter the market and shift the industry's dynamics. Barriers to entry are called the particular dynamics of an industry that limit entry When a potential market has low obstacles to access but high barriers to entry, the most enticing scenario of a new business is.

Threat of Substitutes

The goods that exist in another sector but can be used to meet the same needs are part of the context described by Porter. The larger a product is replaced, the greater the competitive climate of the industry and the lower the profit potential. Example is that fresh juice, water and soft drinks are replacements for packaged juice producers, but all of them can be found in different categories. A high threat of replacements can affect the ability of an enterprise to set prices it needs. If a replacement is lower prices or fulfils a better need than it will eventually draw buyers and cut sales to existing firms.

Supplier Power

Nearly every company has suppliers selling components, materials, works or goods. Supplier control refers to the power balance in the business-supplier-to-company relationship. Providers may take a lead when providing specific goods or controlling rare resources. For example, Sony often works with a single provider to produce the most advanced processor chip for their console while developing a new PlayStation model. It is therefore possible for its supplier to order a reasonably high price for its processors, which indicates that the supplier has control.

Buyer Power

The ultimate strength of Porter is buyer influence, which refers to the balance of power between a company and its clients. If a company offers a specific product or service, it has the capacity to charge its consumers the highest prices, since customers cannot but purchase the product from the company. In comparison, as clients have multiple potential suppliers of a commodity, companies will have to draw buyers to sell their goods by providing cheaper prices or an improved value for money. One company protects against buyer power is to change the costs, the penalty is imposed when customers want to use a product manufactured by another company.

Covid 19 Recovery Plan

In unpredictable times, our planning for the COVID-19 financial recovery plan has centred on building a new 18-month reference view of our organisation. We are aware of the need for a timeframe in support of our operations for an increased degree of external funding and resilience in the light of continuing uncertainties and risks (Paul and Chowdhury, 2020). This strategy takes external financing and proves that the organisation has no further external financing except in our worst case scenario from a cash perspective.

We have established a role for three years to present, but our emphasis is on creating a new normal basis for our future business planning for the next eighteen months. We will review the position monthly and make changes, as our observations become clearer. It is recognised by our Management Board and Governing Council that our longer-term sales assumptions are to be re-established with trust at least 1 year from now.

Objectives

In thinking leadership, we have outlined two indicators of success:

  • Evidence of adoption of our thinking and influence of financial markets, policy makers and industry.

Our perspective, analysis and economic comment programme offers key stakeholders the opportunity for visibility and profile building. We seek to ensure the adoption, use and action of our views by many stakeholders – key industry employers, capitals markets and policymakers. By key sector, we will set goals for the demand of these groups of stakeholders for our thought leadership.

  • Achieving goals for norm acceptance across our regions worldwide.

By developing our profile for leadership and presence, we plan to meet demand in our main markets for our professional qualifications and standards (Pan et al., 2021). Just as in previous years, we will set special goals, meaning that the operating practises of key employers, as well as the final consumer of the profession such as banks, funds and administrations will be included in our qualifications.

Cost-Volume-Profit Analysis Tools

The cost-benefit (CVP) analysis is a cost-accounting approach that investigates the effect on operational profit of different levels of costs and volumes.

The cost-volume benefit analysis, also known as break-even analysis, is intended to calculate the difference of cost structures and revenue rates that can be useful for managers to make short-term financial choices. The study of CVP presupposes many factors, including constant price of sales, fixed and variable cost per unit (Dewi et al., 2018). The study involves using several price, cost and other variables equal parameters and then drawing them on an economic diagram. In order to measure the amount of sales required to cover expenses and even split, CVP can be employed. The break-even point is the number of units to be sold to offset the expense of making the product and the amount of sales revenue to produce. The formula for the breakdown of CVP sales volume is this:

Breakeven Sales Volume=FC / CM

where:FC=Fixed costsCM=Contribution margin=Sales−Variable Costs

In addition, simply add a target profit per unit to the formula's fixed cost variable, using the above formula in order to find the target sales value. This helps you to fix the goal volume on the basis of the models' assumptions.

CVP Research also administers the margin of commodity contribution. The disparity between overall revenue and net operating costs is the contribution margin. The contribution margin shall surpass the general fixed costs in order for a company to be profitable (Le et al., 2020). It is possible to measure even the contribution margin per unit. Once the unit variable expense is subtracted from the unit purchase price, the unit contribution margin is simply the balance.

References for Strategic Management Research Report

Fabeil, N.F., Pazim, K.H. and Langgat, J., 2020. The impact of Covid-19 pandemic crisis on micro-enterprises: Entrepreneurs’ perspective on business continuity and recovery strategy. Journal of Economics and Business, 3(2).

Paul, S.K. and Chowdhury, P., 2020. A production recovery plan in manufacturing supply chains for a high-demand item during COVID-19. International Journal of Physical Distribution & Logistics Management.

Lea, R., 2020. Next steps in Government’s recovery strategy, disappointing GDP data and OBR expects£ 370bn borrowing this year. Arbuthnot Banking Group, 20.

Pan, T., Shu, F., Kitterlin-Lynch, M. and Beckman, E., 2021. Perceptions of cruise travel during the COVID-19 pandemic: Market recovery strategies for cruise businesses in North America. Tourism Management, 85, p.104275.

Handfield, R.B., Graham, G. and Burns, L., 2020. Corona virus, tariffs, trade wars and supply chain evolutionary design. International Journal of Operations & Production Management.

Dewi, A.A.P.R., Ardina, C. and Suardani, A.A.P., 2018. Cost-Volume-Profit (CVP) Analysis as a Profit Planning of Tour Packages at PT Tour East Indonesia, Denpasar. Journal of Applied Sciences in Accounting, Finance, and Tax, 1(1), pp.7-13.

LE, O.T.T., TRAN, P.T.T., TRAN, T.V. and NGUYEN, C.V., 2020. Application of Cost-Volume-Profit Analysis in Decision-Making by Public Universities in Vietnam. The Journal of Asian Finance, Economics, and Business, 7(6), pp.305-316.

Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C., 2020. Is Porter's Five Forces Framework Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6).

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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