Mothercare Marketing Strategy Analysis

This assignment delves into a comprehensive analysis of Mothercare's marketing strategy. It requires an evaluation of the company's Strengths, Weaknesses, Opportunities, and Threats (SWOT) using provided resources. The analysis also includes a segmental breakdown, examining specific product offerings, and explores Mothercare's global footprint. Students must demonstrate their understanding of market dynamics and apply analytical frameworks to assess Mothercare's competitive position.

Company Strategic Review
Table of Contents
2) Introduction to the Company 2
2.2 Company Profile 2
2.3 Segment Analysis 4
3) PEST and Industry Analysis 7
3..1 PEST Analysis of Mothercare plc 7
Political factors 8
economic factors 8
Social factors 9
Technological factors 9
Competitors Rivalry using Porter’s Five Forces Model 10

3.2 SWOT Analysis of Mother care Pl c 15
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4) Business Model 17
5) Corporate strategy 18
6) Summary Analysis of financial statement 19
7) Financial risks of the Company and the risk management methods currently used 21
8) Critical Evaluation of different strategies 22
9) Summary 24
References 25
PAGE
1
1) Introduction
The motive of this report is to review a company with global operation. The selected
company for this report is Mother care Pl c which is a British retailing company which
specialize in offering products for infants, children and expectant mothers. The purpose of
the project is to review the business performance of Mother care Pl c company. It also
emphasizes on presenting the financial performance of firm and value provided by
organization to its stakeholders.
This report includes a brief company profile of Mother care PL C and also a analysis of the
company’s financial position and evaluations of major financial risks faced by the
company. Moreover, financial Analysis, and analysis of different financial strategies has
been included. Project has included various models such as PESTLE analysis , five porter

analysis in order to judge the effectiveness of industry in which company is operating.
Assignment will have focus on using important models in order to identify the strategies
used by Mother care Pl c for improving financial performance and dealing with complex
situations. It will also include evaluation as well as comparison of financial statement by
using profitability and liquidity ratios. Study will further include critical discussion on
growth strategies which can be adopted by Mother care PlC in order to develop business.
The project will also include conclusion or a summary of findings of the analysis. It will
also have focus on identifying the alternative plan or strategies to deal with financial issues
in business.
2) Introduction to the Company
This report is a strategic review of Mothercare Plc with its global operation. This
report will help to identify the strengths and weaknesses of Mothercare Plc which in
terms help to take the future movements towards the business growth of the
company.
Additionally, this report will discuss the external influences for the company with the help
of PEST analysis and also will discussed the competitor rivalry with the help of Porter’s
Five Forces model.
Furthermore, the discussion of the company’s business model and the current risk
management methods will be discussed. Key financial risk which the business take will be
analyzed.
2.2 Company Profile
Mothercare plc is a global retailer for parents and young children. Our iconic brands have a
long history as specialist UK retailers, with Mothercare opening its first store in 1961 and
Early Learning Center in 1974. Both brands resonate well with customers the world over.
Across their UK and International businesses, now they have c.1,300 stores across more
than
50 countries, offering a range of products from both Mothercare and Early Learning Centre.
In
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the UK, Mothercare and Early Learning Centre products are sold through the Group’s own
multi-channel (in-store and online) retail operations and via a smaller wholesale operation.
Internationally, the Group’s products are sold through its Franchise Partners’ retail stores
with a small but growing online presence and a fledgling wholesale business for territories
where they do not have Franchise Partners (mothercare, 2017).
Source: http://www.mothercareplc.com/who-we-are/our-vision-and-strategy.aspx
1. Mothercare Plc’s aim is to be the leading global retailer for parents and young
children. Early Learning Centre (ELC) became one of their greatest achievement which
started to function in June 2007. ELC is one of the key step they took to achieve their
target along with their vision. Their objective is to develop exciting and innovative own-
brand products under both Mothercare and Early Learning Centre brands (UKEssays,
2015). Internationally, otheir Franchise Partners operate across four regions – Europe,
Asia, the Middle East and Latin America. Our Franchise Partners operate through 1,150
stores and have c3.0 million sq.ft. of retail space (as at 25th March 2017). Mothercare
stores, both in the UK and across their International markets, use a variety of formats to
serve the needs of the needs of customers. This varies from the smaller shop-in-shop
format to mid-sized high street store to the larger out-of-town or larger store in a mall.
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We work to ensure each store fits the needs of their customer based in that particular
territory (Mothercare, 2017).
Vision of the company-The objective of Mother care Plc is to become a global retailer for
parents and young children.
Mission-The company intends to offer online services to its customer. Its mission is to reach
wide number of customers through use of technology. Another mission of organization
is to drive online customer retention as well as personification.
Objective of company- The purpose of the firm is to deliver innovative as well as quality
services to parents and young children. Another objective is to enhance customer experience.
It also intends to invest further in digital offering, improving customer experience on website.
Goals – The business goal is to increase sales as well as profitability within six months.
2.3 Segmental Analysis
Source: http://www.mothercareplc.com/who-we-are/our-product-ranges.aspx
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Figure 2.3.1 Segmental Analysis

Internationally, their Franchise Partners operate across four regions – Europe, Asia, the
Middle East and Latin America. Our Franchise Partners operate through 1,150 stores and
have c3.0 million sq.ft. of retail space as at 25th March 2017, (mothercare, 2017).
Performing a market segment analysis is key for converging company’s marketing efforts on
the most promising groups of likely customers and clients. Whether the company is
launching a new venture or are running an existing one, knowing what kind of people
business is targeting and how to reach them is necessary for success. You may have an
extraordinary product or service, but if you're not getting it directly in front of the people
who need it, your venture will struggle (Brookins, 2017).
Source: http://www.mothercareplc.com/who-we-are/our-product-ranges.aspx
Product ranging of Mothercare Plc offers clothing & footwear with children’s ranges from
entry price offering mums everyday value to the more premium Little Bird and Baby K
ranges and Blooming Marvellous, maternity range; Home & travel which includes
pushchairs, car seats, furniture, bedding, feeding and bathing equipment; and toys mainly
for babies. All product ranges are supplemented with ranges from carefully selected third
parties. Mothercare Plc is selling their products through multi-channel retail and wholesale
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Figure 2.3.2 Product Analysis

operations in the UK and through franchise operations across their International markets in
Europe, the Middle East and Africa, Asia and Latin America (Mothercare, 2017).
CLOTHING & FOOT WEAR:
Clothing and foot wear products of Mothercare Plc offers product range from infants and
children age of 0-10 years and maternity products for mothers and the products for
mothersto-be. According to Mothercare’s Annual report (2017), they have delivered, target
of 20% of clothing ranges in the ‘best’ category compared to 11% three years ago, while
continuing to innovate with new collections. This is a good sign that they have already
reached the 20% of their target market. In FY2016/17, Mothercare Plc’s sales and margin
were impacted by unseasonable weather during the first half of the year and their planned
warehouse changes which reduced the flow of stock to store for an eight-week period
(Mothercare, 2017). This is one of the major reason of sales reduction in 2016 and also it
has direct effect to the year
2017’s sale. Uncertainties will occur in every business and the situation controlling process
might need to spend more on indirect expenses sometimes.
HOME AND TRAVEL:
In 2017 Mothercare Plc have introduced 13 new brands, with 81% of options now in the
‘better’ and ‘best’ category. They are also market leaders in travel and nursery furniture with
26% share in pushchairs; 24% in car seats and 30% in nursery furniture (Mothercare, 2017).
Conferring to Annual report (2017) of Mothercare plc, home and travel products include, car
seats, buggy and pushchair systems, bedding, soft furnishings and furniture, bathing
products, high chairs, feeding products and baby monitors amongst other products. These
are both own brand and third party branded products.
TOYS:
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Toys operates mainly through the Early Learning Centre brand. The focus over the last few
years has been on investment in product innovation to develop ranges that encourage logical
thought and dexterity through touch, textures and shapes (mothercare, 2017).
Mothercare Plc has enhanced margin over the last year, with the result that at the start of the
year, they sold 70% of our product at full price. Unseasonable weather impacted the sales
margin at the first half of the FY 2016 and largely impacted the sales of 2017 as well
resulting in higher markdown and their planned warehouse infrastructure change reduced
the flow of product for eight weeks over the summer. Despite these challenges, they made
good progress in the second half, finishing the year with margin up 54bps, with 60% of our
product at full price. They also continue to focus on improvements in pricing architecture,
with 20% of our clothing and footwear now in the ‘best’ category as well as growing
product exclusivity for our customers (Mothercare, 2017).
Source created by the Author
From the above figure (figure 2.3.3), it has assessed that revenue generated by UK stores are
comparatively higher over the international operations. However, profit generated by
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Figure 2.3.3 segmental analysis & global foot print

Mothercare Plc from UK operations in the year of 2016 & 2017 was negative. On the other
side, such retail firm is achieving suitable margin or return from global operations.
3) PEST and Industry Analysis
3..1 PEST ANALYSIS OF MOTHERCARE PLC
Aside from the company’s internal resources and industry factors, there are several other
macro-economic factors that can have a profound impact on the performance of a company.
In particular situations such as new ventures or product launch ideas, these factors need to
be carefully analyzed in order to determine how big their role in the organization’s success
would be. One of the most commonly used analytical tools for assessing external macro-
economic factors related to particular situation is PEST Analysis (Contributor, 2013).
POLITICAL FACTORS
➢ Political stability: Mother care is a globally diversified business which operates
their stores in a dozen of countries in the form of franchise business. So, each of the
country has varied amount of political solidity. Normally the political factors have a
great influence in the business structure of each country. Thus, there must be numbers
of difficulties to adjust the business in different countries. Such businesses need to be
alert on the changes of the countries political firmness. This will affect the marketing
strategies and other business plans. The political factors have direct effect on business
operations and system. Some political variables are, regulation for company operating
in different industries formed by political parties etc. In context of MOTHER CARE
PLC, business entity does not have to face the issue as it is operating in diversified
segment. Favorable political situation in the country has provided firm an opportunity
to expand business operations.
➢ Risk of military invasion: Military incursion will sometimes ruin the business
environment could be the huge loss for the international investors like Mothercare
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franchisees and from this there will be a direct impact on the sales growth and
profitability of the company. So the industry average would be reduced and it might
affect the financial basis of the Mothercare.
➢ Pricing regulatory mechanism highly influences the level of customer service.
➢ Product requirements and other mandatory requirement in the retail sector.
➢ Anti-trust laws relating to retail activities has direct and significant impact on the
business system and organizational growth.
ECONOMICAL FACTORS
➢ UK economy is growing after the recessionary period so Mothercare plc also need to
forecast the sales growth according to the economic situation of the UK and other
international regions they are operating the business.
➢ Decrease in Inflationary tendencies have both positive and also negative impact on
retail firms. In a positive way , it would ease the market growth of the company so as
sales growth. The whole industry would have positive impact on this which could
improve the other rivalry businesses which in turn some time negatively effect
Mothercare Plc. Increasing the number of competitors would reduce the customers
and force to review the pricing strategies of the company.
➢ Mothercare Plc has 1300 stores in more than 50 countries. Considering the same it
can be presented that global economic conditions also have significant impact on
the firm’s operations.
➢ Economic Variables have direct impact on the firm financial performance as well as
stability. It also has great influence on the buying power of organization, due to
which company may face difficulty in fulfilling the requirement of operations which
may further lead to comprise in quality of products that will result in high level of
customer dissatisfaction. Ultimately it will have adverse effect on the sales as well as
profitability.
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➢ The Mother care enterprise does not have to face such issues as its is following
the strategy of diversification.
SOCIAL FACTORS
Social factors plays important role in success of every organization. Some of social variable
include trends, culture, etc. These variables have direct and significant impact on demands of
products or services by customer in the market. As Mothercare Plc. Is offering diversified
products as well as services , these factors have littler impact on the business growth.
➢ Changes regarding falling birth rates and small family size have greater influence on
the operations of Mothercare Plc. The reason is their target market is infants,
children and expected mothers. This would affect the whole industry as there should
be sales reduction possibilities.
➢ Varied living standard or pattern of individuals would have great impact on the
globally operating businesses like Mothercare Plc. Social wealth condition of the
countries varies from each other. So, the pricing strategies and the quality of
products will influence the profit margin of the business.
➢ Attitude and education level of the society would have a great impression on the
business.
TECHNOLOGICAL FACTORS
➢ Considering the significance of internet shopping and convenience aspect Mothercare
plc offers products or services to the customer via online means. This factor has
supported business entity in delivering quick and quality products as well as services
to client.
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➢ With the motive to enhance brand image and market place such retail unit focuses on
placing advertisements on social sites considering the aspect of technological
advancement. Use of social media sites for promotional activities has allowed firm to
reach wide number of customer and increase sales as well as profitability. It has also
provided organization an opportunity to interact directly as well as continuously with
customer and positively influence them to buy particular brand. Technology such as
use of internet sites has provided business entity a chance to promote brand and by
communicating objectives gain customer loyalty.
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➢ Technology would impact on the product offering and there is a positive connection
between the rival technology advancement in the industry. So, it is important to
upgrade the services and update the machineries and employees conferring the
technological advancements coming in the industry.
Competitors Rivalry using Porter’s Five Forces Model
For conducting an extensive internal marketing audit, the use of the 6Ms model – men,
machinery, money, minutes, material and markets – could be used, but for the purpose of
this project report, the internal market of Mothercare will be examined by using Porter’s
five forces model (Sheikh, 2010).
Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E
Porter of Harvard Business School as a simple framework for assessing and evaluating the
competitive strength and position of a business organization (CGMA, 2013).
This is useful, because, when you understand the forces in your environment or industry
that can affect your profitability, you'll be able to adjust your strategy accordingly. For
example, you could take fair advantage of a strong position or improve a weak one, and
avoid taking wrong steps in future ( (team, 2017).
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Positive Negative
Competitive Rivalry
Mothercare faces
forceful competition
from these 4 main
competitors including
the price and quality
of its products and the
product offering style
and also the
advancement in their
technology in the
mean of their revenue.
These four
competitors are
competing
Mothercare plc in
franchise business and
Sky
Target
Nike
Mark & Spencer
The changes in pricing
Mothercare will
need to try harder to
attract and retain
customers but will
offer an additional
service not being
offered by its major
competitors.
Introduction of the
Mothercare’s Investment
has been maintained in
both UK store
refurbishment and IT.
Building a business that
reflects the needs of
today’s digitally enabled
consumer who moves
seamlessly between stores
and online process would
increase the number of
competition in the industry
market. So Mothercare
need to find more ways to
step forward by
competing the rivals in the
industry with new
innovations.
PAGE 15
Force issue Impact on Mothercare

Positive Negative
strategy by competitors
have direct effect on
profit margin of
Mother care plc. The
manager ion cited
business venture is
planning to its business
into non -core field in
order to reduce
competition.
It is required by
Mother care company
to adopt one of
strategy among three
significant strategies
these are hybrid ,
market segmentation
and low cost strategy.
The business venture
has adopted the
concept of Value for
money. This principle
has enabled
organization to achieve
its objectives and
foster growth.
In this growing
industry, new entrants
bring latest new
As Offering new
services doesn’t
mean to attract new
Increasing the number of
new entrants would force
Mothercare Plc to spend
PAGE 16
Force issue Impact on Mothercare

Positive Negative
Threats of New Entry
innovations through
latest technology and
quality and attractive
products to meet the
customers’ needs in
more magical way. So
this will put
Mothercare in a
pressure to manage all
this competitors
actions by reducing
the price with the
high quality products
and need to build
effective barriers to
overcome these
challenges.
AS Mother care Plc is
operating in very big
industry which
requires huge capital
customers only, but
it would also help to
retain the loyal
customers as well.
Increased
competition will
help to compete the
rivals in a more
innovative way as
they could achieve
an economies of
scale which would
lead to reduce the
fixed cost per unit.
more on R&D. This
would lead the high cost
and significantly reduce
the amount of high profit.
So this could again force
Mothercare Plc to start
new ventures which will
need lots of financial
investments, to improvise
the profitability.
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Force issue Impact on Mothercare

Positive Negative
investment in order to
establish and maintain
leading position in the
industry. So there are
less chances of entry
of new firm. Another
factor that restrict the
entry of new
companies from
entering into the
industry is that there
are already giants
organization have
been successful in
capturing wide share
of market, it will
difficult for small
firm to replace such
big enterprises.
PAGE 18
Force issue Impact on Mothercare

Positive Negative
Threats of
Substitution
There are numerous
varieties of substitute
products which the
customers could
easily switched on.
So there is high
chance that the
industry profitability
suffers.
There are many big
organization who are
financially stable and
have high potential to
develop and introduce
innovative or
substitute product in
order to drive weaker
firm out of the market.
Mothercare needs to
monitor the customer’s
taste and their behavior
continuously.
Increasing the customer
awareness leas to provide
the high quality products
compared to the
competitors.
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Force issue Impact on Mothercare

Positive Negative
Buyer power
Normally buyers
always need to buy
best quality at a lower
price. This would
impact on
Mothercare’s long run
profitability, as a
result they might go
through lots of
pressure. Customers
Buyers will go for
the products which
could meet their
needs at best.
Mothercare is very
innovative and they
have broad range of
products to offer. So
this will reduce the
customers demand
Mothercare needs to
innovate new products to
attract the customers as
with the unique features.
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Force issue Impact on Mothercare

always seek the way
of getting discounts.
The bargaining power
of consumer is high.
This factor has the
great influence on the
prices of company
products and services.
It is required by an
enterprise to focus on
improving the quality
of product and
providing satisfaction
to customer.
for the continuous
discount.
Force issue Impact on Mothercare
Positive Negative
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Supplier power
-Companies in retail
industry buy their
raw material from
numerous suppliers.
Suppliers in leading
position can decrease
the margins
Mothercare Plc can
earn in the market.
The overall impact of
higher supplier
bargaining power is
that it drops the
overall productivity
of Retail. There is
low bargaining power
of suppliers. As
marks and Spencer is
well recognized
company and has
popular brand name
many suppliers has
willingness to work
with such big
companies and gain
profit.
-Mothercare can
increase their
productivity with
building an efficient
supply chain with
multiple suppliers
and negotiate with
them.
-Many
suppliers have
interest to
supply the
Companies like
Mothercare, because
of there strong
position in the
industry. So
Mothercare can
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3.2 SWOT ANALYSIS OF MOTHERCARE PLC
SWOT analysis (strengths, weaknesses, opportunities and threats analysis) is a framework
for identifying and analyzing the internal and external factors that can have an impact on
the viability of a project, product, place or person (Rouse, 2014).
The main purpose of the analysis has to be to add value to our products and services so that
we can recruit new customers, retain loyal customers, and extend products and services to
customer segments over the long-term. If undertaken successfully, we can then increase our
Return On Investment (Teacher, 2018).
Strengths Weakness
- Well-known brand and well performing
in the market as one of the leading
Company in the industry
-Expert workforce with different work
skill all over the world.
-Wide range of products and services.
-Able to meet the customers need
-There is a product gap in in the company
where the competitors have already taking
the advantage of. -There is no clear USP
-Need to invest more on new technologies
Opportunities Threats
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purchase goods
from quality
suppliers with the
lowest price.

-New trends in the consumer behavior
will provide a product development in the
Mothercare business which could increase
their profitability
-Capable to enter the new markets with
their pride and popular image.
- Changing technology offer Mother care
to develop new innovated products -
Franchise business will open slots for the
international investors
- Numerous competitors are already
in the market with the same quality and
low price
-Competitors have target market for
teenagers so as the drip of sales in
Mothercare
Plc
-Unexpected seasonal issues lead to reduce
the sales
- Risk of currency fluctuation due to
political instability is high, because they
are operating the business in 4 regions of
the world .
- New technologies adopted by the
competitors will badly affect the
customer’s choice, which will lead to shift
them to the competitors
- Falling market share
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4) Business Model
At its core, your business model is a description of how your business makes money. It’s an
explanation of how you deliver value to your customers at an appropriate cost. According to
Joan Magretta in “Why Business Models Matter,” the term business model came into wide
use with the advent of the personal computer and the spreadsheet (Parsons, 2018).
“The Mothercare business model describes how we operate and create value for our
shareholders, our customers and other key stakeholders” (Mothercare, 2017).
According to the their Annual report (2017) they have four key growth channels how they
operate their business and generate profit by developing their exclusive brand. Those 4 key
channels are discussed below.
UK RETAILING:
UK LFL sales have enlarged by 1.1% with support from online sales which were up
7.8% year on year. Total UK sales were steady year on year, with fundamental trading
counterbalancing the impact of 21 planned store ends and three new store openings. The
business continued to sell more at full price, and this along with enhanced buying
margins and planned competences improved profitability (Mothercare,
2017).“Mothercare expects its retailing outlets property strategy to deliver £16.1 million
of annual benefits each year by the end of 2012. It has planned to do this by opening
more out-of-town parenting centres, rationalizing High Street chains for cutting down
costs and targeting certain favorable intown areas as golden opportunities” (Sheikh,
2010).
DIRECT:
Direct has continued its rapid growth with total sales of £126.8 million in the year, an
increase of 18.2%. The development of e-commerce in the UK over the last ten years has
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transformed the face of UK retailing and Mothercare has been in the vanguard of that
transformation.
Mothercare UK's Direct business is now over 20% of its UK business, split between orders
placed online at home and online in store (Sheikh, 2010). At the end of 2017 Direct
INTERNATIONAL FRANCHISE
Mothercare earns profits from its royalties as a fixed percentage of international retail
sales. Its strategy is to form joint ventures with franchise partners where substantial growth
is expected. Mothercare plans to enter new countries, open larger format stores and open at
least 100 additional overseas stores per year for the foreseeable future (Sheikh, 2010).
International retail sales decreased by 2.4% on a constant currency basis and up 10.3% in
actual currency, reflecting the ongoing currency tailwinds. However, the decrease in
International volumes along with lower royalties from China resulted in profits being down
on last year (Mothercare, 2017).
INTERNATIONAL ONLINE SALES
“Although small, Mothercare have continued to grow our International online sales and see
significant opportunity . They are now trading online in 21 countries with 26 online
channels, having started the year with 11 countries and 14 online channels. We also have
iPads in stores in Ireland and China and see further opportunities to introduce them in other
markets” (Mothercare, 2017).
5) Corporate strategy
In FY2016/17 Mothercare settled a strategic review with contribution from key stakeholders
called “CR 2020” which was launched in January 2017. Mothercare’s vision is to be the
leading global retailer for parents and young children. their role is to “unite mums and dads
to take on parenting together”. CR 2020 ambition to “unite with mums and dads to create a
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better world for the future of our children” has been developed to be consistent with and
supportive of our vision (Mothercare, 2017).
According to their Annual report (2017) , Mothercare consume structured their CR 2020
programme into three areas of focus:
Products: addressing the social and environmental impacts of making and using our
products;
Environment: making our operations greener; and
Communities: strengthening our ties with the communities in which we work and investing
in our people
Each of the areas of focus has defined priorities, along with a high level activity plan with
supporting commitments and targets where relevant (Mothercare, 2017).
6) Summary Analysis of financial statement
Particulars 2016 2017
GP margin 8.8% 8.8%
NP margin 0.94% 1.23%
Table 6.1
Source: Created by the Author
In FY 2016 & 2017 GP margin of Mothercare Plc was constant such as 8.80%. Due to
decrease in the level of sales revenue business unit failed to generate high gross margin.
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Figure 6.2 Profitability Ratio
Source: Created by the Author
From the above figure (figure 6.2), shows increasing trend has assessed in NP ratio of such
firm but it is highly lower. As it has been identified from the above information that the
Mother care Plc is performing well but there is scope of some improvement. Having high
level of indirect expenses business unit failed to attain high margin. It can be depicted that
currently profitability condition of Mothercare Plc is not good for making improvement in
the profit margin business . It is required by management team in an organization to
develop their focus on identifying the techniques or strategies to reduces the expenses. As
this is essential for the company to eliminate addition overheads which have adverse effect
on the profitability of firm. Management should concentrate on recognizing the activities
which are leading to additional expenses for organization.
Liquidity Analysis
“Liquidity has to do with a firm's assets and liabilities. In particular, liquidity looks at
whether or not a firm can pay its current debt with its current assets”(Peavler, 2017). If the
company have more liquid assets it could cover their short term obligation quickly. So as the
liquidity ratios are higher than the industry average, company would get short term loans
from lenders easily. It is required by manager in business venture to pay debt as soon a
PAGE 28

possible as this will aid firm in eliminating interest or extra charges. The management
should select the equity for raising the finance as this is the cheap sources and does not
involve extra charges. Joint venture, merger is the best strategy that can be adopted by
Mother care Plac in order to deal with financial issues.
Particulars 2016 2017
Current ratio 1.40 1.31
Table 6.3
Source: Created by the Author
Liquidity position of Mothercare Plc is good but not sound. At the end of 2017, current ratio
of the firm declined from 1.40:1 to 1.34:1. For enhancing efficiency ratios business
organization needs to make focus on developing competent and strategic policy framework.
Sales in the year ended 25 March 2017 were higher by £72.5 million primarily as a result of
favorable currency impact of £88.8 million due to the devaluation of sterling. Including the
currency impact, International sales have increased by £72.8 million driven by an increase in
space offset by reduced LFL sales. UK sales have remained stable with an increase in LFL
sales and wholesale sales offset by a decrease in space (Mothercare, 2017). It is required by
the marketing team in an enterprise to use promotional technique and focus on marketing
activities. Marketing team should develop effective customer policies as this will help firm
in attracting more number of clients and increasing sales. Market penetration as well as
market diversification is the other two strategies that could be adopted by cited venture.
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7) Financial risks of the Company and the risk management
methods currently used
Interest rate risk: The principal interest rate risk of the Company arises in respect of the
drawdown of the revolving credit facility. This facility is at a fixed rate plus LIBOR, it
exposes the Company to cash flow interest rate risk. The interest exposure is monitored by
management but due to low interest rate levels during the period the risk is believed to be
minimal and no interest rate hedging has been undertaken (Mothercare, 2017).
Foreign currency risk: All International sales to franchisees are invoiced in Pounds sterling
or US dollars. International reported sales represent approximately 31% of business sales.
Total International worldwide sales in the 52 week period represent approximately 62% of
business worldwide sales. The Mothercare, therefore has some currency exposure on these
sales, but they are used to offset or hedge in part the business US dollar denominated
product purchases. The Company policy is that all material exposures are hedged by using
forward currency contracts. To help mitigate against the currency impact on royalty receipts,
that the Mothercare Plc has hedged against its major market currency exposure (Mothercare,
2017).
Treasury policy and financial risk management: The Board approves treasury policies
and senior management directly controls day-to-day operations within these policies. The
major financial risk to which the business is exposed relates to movements in foreign
exchange rates and interest rates. Where appropriate, cost effective and practicable, the
Group uses financial instruments and derivatives to manage the risks. No speculative use of
derivatives, currency or other instruments is permitted (Mothercare, 2017).
Credit risk :There is no experience to credit risk is inherent in its trade receivables. The
Company operates effective credit control procedures in order to minimize exposure to
overdue debts and where possible also carries insurance against the cost of bad debts. The
insurance counterparties involved in transactions are limited to high quality financial
institutions. Before accepting any new credit customer, the Group obtains a credit check
from an external agency to assess the credit quality of the potential customer and then sets
credit limits on a customer by customer basis (Mothercare, 2017).
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RISK management techniques
Some risks management techniques that can be adopted by mother care company include
avoidance, mitigation, transfer of risk and Risk acceptation. It is required by manager in
Mother care organization to develop appropriate plan or strategy in order to deal with
financial risk. Another strategy is that management team in an enterprise should conduct
quality control test and monitors the activities at regular interval of time. As this will help
business entity in eliminating the risk of financial loses and ensuring the effective as well as
efficient utilization of resources. Development of accounting management system and
recording of transaction will support the firm in managing cash flow.
8) Critical Evaluation of different strategies
Cost reduction strategies
Cost reduction strategies are effective principles or methods for increasing operations
efficiency. Cost reduction strategies can reduce operations costs while increasing
productivity, allowing for strategic reallocation of resources (Tregoe, 2018).
In the quick view of the Mothercare Plc, they need to lay emphasis on undertaking modern
budgeting methods. Mothercare plc should also focus on employing variance analysis tool
which in turn helps in use control over expenses.
Organic growth strategies
Organic growth strategy involves strengthening your company using its own energy and
resources. This approach to company growth is slower than others, but it has relatively low
up-front costs, making it an attractive option for small-business owners who want to expand
their companies but don’t have large amounts of liquid capital (Mack, 2017). Having
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organic growth strategies are beneficial for the Companies like Mothercare Plc. Because,
business could be easily change in the market place towards the vision of the business. It
would give greater satisfaction of reaching the target goals as well.
Mothercare Needs to make online business more efficient which helps in enhancing
customer base. Further, company should assess gap and focus on offering innovative
products to the customers. And also need to monitor the competitors movements in the
market in order to retain the customers.
Inorganic growth strategies
Growing the business inorganically involves joining with another business through a merger
or an acquisition. This immediately expands your assets, your income and your market
presence. You will have a stronger line of credit because of the combined value of the two
businesses. You will also benefit from the added expertise from personnel at the new
business (Johnston, 2017).
M&A
Shares As at 17 May 2017, the Company’s issued share capital was 170,867,497 ordinary
shares of 50p each all carrying voting rights. No shares were held in Treasury. The
Company has one class of ordinary shares. Acquisition of own shares The Company was
given a general approval at the AGM in July 2016 to purchase up to 10% of its shares in the
market (Mothercare, 2017).
9) Summary
International operations of the firm are good as compared to UK in terms of sales and profit
margin. Thus, firm needs to take strategic measure for making improvement in the financial
position of domestic market. Profitability position of Mothercare Plc is not good so it needs
to make focus on employing budgetary control tools.
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It is important for the Mothercare Plc to fill the market gap in order to compete the rivals.
There are many choices for the consumers to switch there preferences by the means of
satisfying their needs. Developing the product range is also needed to compete the revenue
and profitability amount of major competitors.
There is a drop in the UK sales in year 2016 compare to the international sales average. So s
is a sign of negative impression for the company which could be mean that , in UK the
competitors are doing better than Mothercare PLC in the UK market. So as an effective
marketing plan is needed to minimize the financial risks and challenges for a company. In
order to ensure that Mothercare runs its operations and marketing strategies smoothly, both
processes should be closely aligned and well-integrated with each other. This will enable
Mothercare to increase its customer base, elevate market share and generate more revenue
(Sheikh, 2010).
References
Anon. (n.d.) [Online]. Available from: http://fernfortuniversity.com/term-
papers/porter5/lse/436-mothercare-plc.php.
Brookins, M. (2017) Examples of Demographic Segmentation [Online]. Available from:
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http://smallbusiness.chron.com/examples-demographic-segmentation-12367.html
[Accessed 30 December 2017].
CGMA. (2013) Porter’s Five Forces of Competitive Position Analysis [Online]. Available
from: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html
[Accessed 1 January 2018].
Contributor, P. ( 2013) Understanding Pest Analysis with Definitions and Examples
[Online].
[Accessed 31 December 2017].
Johnston, K. (2017) Chron [Online]. Available from:
http://smallbusiness.chron.com/organicvs-inorganic-growth-business-37311.html
[Accessed 4 January 2018].
Mack, S. (2017) What Is Organic Growth Strategy? [Online]. Available from:
http://smallbusiness.chron.com/organic-growth-strategy-57130.html [Accessed 4
January 2018].
Mothercare. (2017) Annual Reort [Online]. Available from:
http://www.mothercareplc.com/who-we-are/global-presence.aspx [Accessed 30
December 2017].
mothercare. (2017) Annual report 2017 [Online]. Available from:
file:///C:/Users/user/Desktop/ar-2017%20(1).pdf [Accessed 29 December 2017].
mothercare. (2017) Our product ranges [Online]. Available from:
http://www.mothercareplc.com/who-we-are/our-product-ranges.aspx [Accessed 31
December 2017].
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