AALTO_CASE5.international case competition pdf

Case competition

1. Aalto University School of Business
Exit the Brexit
Chairman Sir Charlie Mayfield
JLP Partnership board members
5 January 2018
Aalto
Consulting
Group
Casimir Kontio Kimi Paivarinta Nicky Tuominen Valtteri Viitala

2. Aalto
Consulting
Group
Key challenges faced
What is the role of
technology?
How is the job designed?
How Brexit affects supply
chain management?
✓Utilize AI and self-service tech in stores and
warehouses
✓Re-educate warehouse and shop clerks to
administrative and IT employment
✓Focus on locally produced foods in food retail,
automate supply chain mgmtthrough AI and
data collection
How to replicate
signature customer
service online?
✓Establish live chat boxes to websites

3. Aalto
Consulting
Group
Our recommendation
Automatize warehouses
Launch e-commerce for Waitrose
Utilize in-shop technology
Invest in education program and re-educate employees
1
2
3
4
Enjoy 4%-points increase in EBIT margin and sales CAGR of 6.5% by 2028

4. Aalto
Consulting
Group
“JLP –your most trusted
partner wherever you are”

5. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Analysis

6. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
UK is one of the early adapters of e-commerce
•E-commerce is changing the whole retail industry rapidly, especially in
Europe
•UK was among the first European countries to deploy e-channels in
retail
•UK has the highest penetration rate in shopping food and groceries
online
Even >30% of British people utilize e-
channels in grocery shopping
Focusing on e-channels in grocery stores seems highly beneficial in UK

7. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Macroeconomic conditions in Europe
•Brexit’s impact on imports, employees and prices
•Economy is recovering and growing ~2% in UK
•Locally produced fresh food is in demand
•AI is replacing human works in lower salary categories
Leverage these trends to maintain competitive advantage

8. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
JLP Positioned itself as premium brand –Leveraging its quality products
and excellent customer service
Price
Focus on E-commerce Focus on E-commerce
Price
Low Low
M&S
Waitros
e Sainsbur
y
Tesco
Morrison
s
Lidl
Harrod
s
John
Lewis
M&S
Dickson
Nike
H&M
Waitrose competition field
John Lewis

9. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Shift the focus more on e-commerce
Price
Focus on E-commerce Focus on E-commerce
Price
Low Low
M&S
Waitros
e Sainsbur
y
Tesco
Morrison
s
Lidl
Harrod
s
John
Lewis
M&S
Dickson
Nike
H&M
Waitrose competition field
John Lewis
Waitros
e
John
Lewis

10. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Margin and bonus-% has been decreasing
8,465
9,028
9,701
9,749
10,026
5.4% 5.2%
4.6%
4.1%
4.8%
17%
15%
11%
10%
6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
7,500
8,000
8,500
9,000
9,500
10,000
10,500
2013 2014 2015 2016 2017
Revenue EBIT-% Bonus-%
Income statement
GBP m 20132014201520162017
Gross sales 9,54110,17210,94311,01911,374
Waitrose 5,7646,1126,5096,4616,633
John lewis 3,7774,0604,4344,5574,741
Revenue 8,4659,0289,7019,74910,026
Waitrose 5,4165,7546,1356,0866,246
John lewis 3,0493,2743,5663,6633,781
EBIT 453471441401478
Waitrose 292310237232253
John lewis 217226250250243
Group and other (56)(65)(46)(81)(19)
Profit for the year 101102144223354
EBIT-% 5.4%5.2%4.6%4.1%4.8%
Profit-% 1.2%1.1%1.5%2.3%3.5%
Partnership Bonus 210.8202.5156.214589.4
Bonus-% 17%15%11%10% 6%
y-o-y growth n.q. 7% 8% 1% 3%

11. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Alternatives

12. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Screening approach
Leverage technology and trends in retail business to grow
Ensure happiness of partners and customers
How to tackle risks arising from Brexit

13. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Identified alternatives
Expand to EU area with department stores first to get foothold
Divest the department stores and focus solely on food retail with e-commerce first
Focus on e-commerce, self-service and automation
1
2
3

14. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Alternative 1: Expand to EU area with department stores first to get
foothold
Pros Cons
•Hedge against risks arising
from Brexit
•Diversified geography and
customer base
•Recovering economy in
Europe
We see that staying in UK is more feasible strategy, especially due to long history
and local connections
•Under-utilisation of the well
known brand in UK
•Lack of expertise outside UK
•Difficulties with food retail

15. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Alternative 2: Divest the department stores and invest to
“farmers to homes strategy”
Pros Cons
•Decrease Brexit risk through
decreasing imports
•Decrease competition with
major players such as M&S
•Emphasis of local farmers
•Decrease number of revenue
sources
•Supply chain mgmtproblem
Supply chain problem and under-diversification of revenue sources imply not
executing this strategy

16. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Alternative 3: Focus on e-commerce, self-service and automation
Pros Cons
•Utilization of increasing e-
commerce adaption
•Decrease cost-structure
•Role of technology
emphasised
•Enhance customer
experience through data
utilisation
•Technological risk attached
to automation
We suggest to stay in UK with focus on e-commerce, self-service and automation

17. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Alternatives summary
Leverage technology and
trends in retail business to grow
Ensure happiness of partners
and customers
How to tackle risks arising from
Brexit
Expand to EU area
with department
stores first to get
foothold
Divest the department
stores and focus solely
on food retail with e-
commerce first
Focus on e-
commerce, self-
service and
automation
= full fit
We suggest to stay in UK with focus on e-commerce, self-service and automation

18. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Implementation

19. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Implementation plan and indicative timeline
Develop supply
chain
Improve e-
commerce
platform
Utilize in-shop
technology
2018 2019 2020 20222021 2023+
Re-educate
employees
Plan and re-structure automated
warehouse
Launch the combined e-commerce platform for use
Launch in-shop in
every store
Launch an education platform for
today’s jobs
Develop combined platform for dept. store and
food retail
Prioritize in-shop technology

20. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Develop supply chain
Hire 3
rd
party project
team to plan and re-
structure the warehouse
technology
Close 30 supermarkets
and establish 60 new
pick-up locations
Gradually automatize all
warehouses
Enjoy enhanced supply chain management through data usage for e.g. inventory
prediction

21. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Improve e-commerce platform
Improve existing e-platform to serve
both John Lewis’ and Waitrose’s
customers
Develop an interactive live chat box
to enhance online customer
experience
Enhance customer experience through the usage of e-channels and interactive online
service

22. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Utilize in-shop technology
Waitrose Jon Lewis
•Implement self check-out
counters
•Implement self-scanning
technology
•Position with local products
•Launch an app to improve the
experience (QR scanning
linked to online store)
Improve operations and cross-selling through technology

23. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Re-educate employees
Launch an education program of
today’s jobs
Re-educate employees that are
replaced by automation
Ensure the happiness of partners

24. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Financials

25. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Assumptions
•All figures in GBP millions
•Average convenience store size 7000 square meters. Average sqm price 40 GBP
•Close 35 convenience stores
•Average pick-up location size 350 square meters. Average sqm price 40 GBP
•Open 60 convenience stores
•Reduction of warehouse workers by 10%. Average salary 33,000 GBP annually
•5% of warehouse workers educated by year. Education cost 50,000 GBP
•Warehouse automation estimate based on previous automation cases
•Winebox automation (Complex and precision required automation)
•Large European retailer warehouse automation
•10 year forecast is based on linear growth after 5 years
•5 year forecasts takes into account costs of the strategy and trends
•Margin growth based on:
•Better margin in online sales
•Warehouse automation reduces labour intensive manual work

26. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Costs and benefits
Costs and Benefits
GBP m 2018 2019 2020 2021 2022
Costs (65.8) (60.8) (49.3) (47.3) (46.3)
Warehouse automation (15.0) (10.0) (2.0) (1.0) (1.0)
Checking scanner & Scanner app (2.0) (2.0) (0.5) (0.5) (0.5)
Check-out counter (2.0) (2.0) (0.5) (0.5) (0.5)
Education of employees (45.0) (45.0) (45.0) (45.0) (45.0)
Chatbox (1.0) (1.0) (0.5) 0.5 1.5
Pick-up locations (0.8) (0.8) (0.8) (0.8) (0.8)
Benefits 21 48 92 92 92
Closed stores 4.8 6.7 9.5 9.5 9.5
Warehouse workers 17 41 83 83 83
Total (45) (13) 43 45 46

27. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Development of Online & Retail sales split
874 1,113
1,431
1,856
2,408
3,123
5,371
5,507
5,653
5,794
5,855
5,800
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2017 2018 2019 2020 2021 2022
OnlineRetail
Waitrose sales split
John Lewis sales split
1,323
1,478
1,667
1,879
2,119
2,390
2,457
2,454
2,462
2,456
2,433
2,390
-
1,000
2,000
3,000
4,000
5,000
6,000
2017 2018 2019 2020 2021 2022
OnlineRetail
14%
35% 35% 50%
CAGR
7.4%
CAGR
4.8%

28. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Five year forecast –Stable growth with higher margins
GBP
13.7 m
Revenue
GBP
1.1 m
EBIT
9,749
10,026
10,552.16
11,212.17
11,985.29
12,814.06
13,702.64
4.1%
4.8%
4.3%
4.6%
7.1%
7.6%
8.1%
10%
6%
8%
10% 10%
13% 13%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2016 2017 2018 2019 2020 2021 2022
Revenue EBIT-% Bonus-%
CAGR
6.4%

29. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Double the revenue by 2028
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
-
5,000
10,000
15,000
20,000
25,000
2016201720182019202020212022202320242025202620272028
Revenue EBIT-% Bonus-%
GBP
20.5 m
Revenue 2028

30. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Risk mitigation

31. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Key risks and actions to mitigate them
Demand for e-channels
less than expected
Partners unwilling to re-
educate/change
employment
Compiling inventory
and failing supply chain
mgmtthrough AI
Identified risk ProbabilityMagnitude Actions to mitigate
Low/mid
Mid
Low/mid
Mid
Mid
High
•Keep brick & mortar stores in place
and utilize in-shop technology
•Emphasise convenience of e-tailing
•Invest to education program
•Emphasise the benefits of new
employments
•Change the technology gradually
•Name IT specialists responsible for the
implementation

32. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Conclusion

33. Analysis
Aalto
Consulting
Group
Alternatives Implementation Financials Risk mitigation Conclusion
Exit the Brexit
Automatize warehouses
Launch e-commerce for Waitrose
Utilize in-shop technology
Invest in education program and re-educate employees
1
2
3
4
Enjoy 4%-points increase in EBIT margin and sales CAGR of 6.5% by 2028