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Pschological Contract

Essay by   •  October 26, 2010  •  7,674 Words (31 Pages)  •  1,281 Views

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EXECUTIVE SUMMARY

This report is about the crisis of Ratner/signets group plc. The report analysis how the company got started hoe it managed to be successful and why it started to encounter problems

The report starts by giving a brief about the case. It further gives the financial position of Ratner/signets group plc

The report shows how Ratner/signets group plc satisfy its customers and what the company should do to improve its performance. It then analysis the internal current performance of the company and inter long-term development of Ratner/signets group plc.

The report further analysis the internal and the external environments for Ratner/signets group plc, which led to a swot analysis of the company. After the swot analysis a tows analysis is done to generate strategies to improve Ratner/signets group plc's performance

Lastly the report gives the strategies, which Ratner/signets group plc should avoid to avoid loss. This report will enable Ratner/signets group plc top management to know the strategies to implement in order to make Ratner/signets group plc more competitive in the global market

INTRODUCTION

Ratner/signet group was started by Leslie Ratner's father with one shop in 1949.in 1984 Gerald took over as the managing director, at that time it had 130 stores in a fragment retail market, trading under the Ratner name. His initial vision was to expand the retail market for jewellery

, and gain a 50 % share within a few years.

Ratner's share was estimated to 23%.by the time his vision had expanded to embrace the USA, where the aim was to obtain a 10 % share of the US market over a 5- 10 year period. This would have made Ratner the largest chain in the US market, and required a build up to about 1500 shops.

The acquisition of Kays which was not performing well with poor quality and bad debts was to use sterling system for it to improve. The group reached the peak of its growth by 1990 with a very high return on investment.(R.O.I) for the shareholders but there is a drawback where the group does not reach maturity and instead start to go into decline stage at once since in 1991 the profit drop by 7millions pounds the US market share drop to 3.6%.this was due to the comments Ratner made when in a meeting at the institute of directors he said "...we sell a pair of earring for under ¦ 1, which is cheaper than than a prawn sandwich...''.this statement made customers to lose confidence in the company where they stop buying their products leading to huge losses.

When the company started making losses investor started losing

confidence with Ratner.So he stepped down as M.D for McAdam .

Mc adam vision was to introduce a new strategy of cost reduction by single management of all activities in U.K,differetiate the stores by segmenting their operation jurisdiction where Ratner was to be on the low price segment Samuel on the middle and Jones on the upper.He was to use different promotion for each group and a reduced marketing budget.

During McAdam's leadership the company's name was changed to Signet but Ratner chain continued with the same name.

Financial Performance

Financial Ratios

Net Profit Margins 1994 to 1998

Net Profit Margin shows how much after tax profits are generated by each dollar of sales and is got by dividing Net Profit after tax by Net sales and is expressed as a percentage.

1992 NPM = Ј 125, 950 x 100 = 11.16%

Ј 1,128,634

1993 NPM = Ј 25,556 x 100 = 2.75%

Ј 928,625

1996 NPM = Ј 17,517 x 100 = 1.96%

Ј 894,682

1997 NPM = Ј 33,855 x 100 = 3.75%

Ј 901,952

Gross Profit Margins

This indicates the total margin available to cover other expenses beyond cost of goods sold and still yield a profit. Subtracting the cost of sales from the sales and dividing the answer by the total sales revenue gives the GPM. It is expressed as a percentage.

1992 GPM = Ј 901 x 100 = 0.08%

Ј 1,128,634

1993 GPM = Ј 40555 x 100 = 4.37%

Ј 928,625

1996 GPM = Ј 110,339 x 100 = 12.33%

Ј 894,682

1997 GPM = Ј 120,833 x 100 = 13.39%

Ј 901,952

ROE =net profit after taxed x100

Shareholder equity

1992 Ј 125,950 x100 =41.62%

Ј 302,553

1993 Ј 25556 x100 = 9.961%

Ј 256,560

1996 Ј 17,517 x100 =8.06%

Ј 21.327

1997 Ј 33,855 x100 = 11.26%

Ј 300,745

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