Company Business Model Analysis Briscoe Group Ltd · PDF fileP a g e | 1 APMG8119 Vipin Kumar...

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APMG8119 Vipin Kumar 1414046

Company Business Model Analysis

Briscoe Group Ltd

By

Vipin Kumar

APMG 8119: Digital Enterprise

Post Graduate Diploma in Business Enterprise

Professor: Dr. Robert Davis

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2. EXECUTIVE SUMMARY

Retail industry is a very important aspect of modern world and is happening both offline and

online. In order to fulfill our necessities and luxuries, the existence of a well-structured retail

industry is a must. Retail industry has faced innovative ideas in last century and has seen many

forms with each idea. Chaotic markets, single brand outlets, multi brand outlets, shopping

centers, huge malls, and interactive home shopping are forms that retail industry has seen in the

last century. In a highly competitive retail industry which operates on very small margins, there

is no scope of errors for retailers. Customer experience has become the key to successful retail

operations. It is interesting to understand the different business models retailers’ use and how

they have been shaped over the years.

This report studies the business model of Briscoe Group (BG), a prominent retail organization in

New Zealand. BG facilitates retail for homewares and sports related goods. Company operates in

both marketplace and marketspace, hence; possess the necessary tools to stay competitive.

Original company was founded more than 150 years ago in England. Fortunes smiled on BG

New Zealand’s operations after Rod Duke took over as managing director in 1988. BG holds a

strong position in the market today with 48Homeware and 32 Rebel Sports outlets. BG operates

under three nameplates in New Zealand market and they are Briscoes Homeware, Living &

Giving and Rebel Sports. BG has dedicated Ecommerce websites for all three nameplates.

The study looks into company’s structure, value proposition and value creation to understand the

business model. BG’s engagement in aggressive promotions and value capture strategies have

paid well and resulted in huge cash reserves for the firm. Report identifies implications to the

current value proposition of the company and they are:

Regional Dominance

Acquisitions

Cross Selling and Alliances

Improvement in consumer’s web Experience.

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3. TABLE OF CONTENTS

1 Co v er Pa g e 0 1

2 E x ecut iv e Su mma ry 0 2

3 T ab l e o f C ont en ts 0 3

4 Co mp any B ackgro und 0 4

4 . 1 In t r od u c t i on 0 4

4 . 2 P ro du c t s and Se r v i ce s 0 5

4 . 2 In d u s t r y 0 6

4 . 4 S t ak eh o l de r s 0 7

5 Bu s in es s Mod el 1 1

5 . 1 C od e o f Co nd uc t 1 2

5 . 2 Ob jec t iv e s 1 2

6 R ev enu e An al ys i s Cha r t 1 3

6 . 1 Op e r a t i on a l A c t iv i t i e s 1 4

6 . 2 No n -O p er a t io na l A c t iv i t i e s 1 6

7 Co s t Ana ly s i s Ch a rt 1 7

8 Va lu e C rea t i on A na ly s i s 2 0

8 . 1 In t e r n a l & Ex t e r n a l P e rs p ec t i ve 2 0

8 . 2 Im p l i ca t io ns 2 2

9 Con c lus i on 2 4

1 0 R ef eren ces 2 5

1 0 App en d ix 2 7

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4. Business Background

4.1 Company introduction:

Briscoe Group Limited (BG) features among the biggest retail companies on New Zealand. BG

has its headquarters based in Auckland; New Zealand. Its product range constitutes clothing,

equipment and accessories for household, outdoors and sports purposes.

BG is not only one of the major players in Homewares and sports equipment retail, but also is

one of the oldest businesses across world that is still functioning. What is known as Briscoe

Group today was established in Wolver Hampton, England in 1781. British Empire dominance

presented flourishing business opportunities and soon business expanded into British colonies

including New Zealand and Australia. William Briscoe and son opened the first warehouse and

an established a store in 1862. From 1973 to 1990 the New Zealand and Australian operations of

the company changed hands from Merbank Corporation, Hagemeyer and RA Duke Trust. Rod

Duke established trust under the name of RA duke is the majority shareholder with 78.47% stake

in the company (Annual report, 2013).

During the time from 1973 to 1988, BG faced multitude of troubles because of changing

management, business transformation and continuous losses. Rod Duke gained control of the

company as managing director of the company in 1988 and finally bought it in 1990 via his trust.

Company negotiated a franchise agreement with as Australian sports company, Rebel Sports for

New Zealand operations. Company opened Rebel stores across New Zealand and by 2001 had

established, 28 Homeware and 11 Rebel Sports stores. BG saw a phase of rapid expansion and

by 2006 had established 48 Homeware and 27 Rebel sports stores. In 2006 company acquired 9

stores from Living and Ginving. By 2008 company had established 57 Homeware and 32 Sports

goods stores. BG reduced the number of Homeware stores to 48 in 2013 and continues to operate

with 32 Sports goods stores (History, n,d,).

BG has its product range divided into three subsidiaries: Briscoes Homeware, Living & giving

and Rebel Sports. Group has its presence across New Zealand via 41 Briscoes Homeware stores,

32 sports good stores and 7 Living & Giving stores located in Hamilton, Northland, Auckland,

Waikato, central North Island, East coast, Wellington, Upper south Island, Christchurch and

Otago. BG has also consolidated its presence in terms in Marketspace and has fully functional

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Ecommerce websites for all three subsidiaries. The group continues to hold a strong position in

terms on constantly increasing sales revenue and clocked 452,702,000 in fiscal year 2012-13, an

increase of 3.35 % to previous financial year (Annual Report, 2013).

Table 1: Briscoe Group Sales Trending

Financial year 2012-13 2011-12 2010-11 2009-10 2008-09

Sales Revenue 452,702 438,037 419,294 416,686 388,467

GP Margin 40.00% 39.50% 39.80% 39.90% 38.60%

EBIT 40,970 36,666 32,755 30,118 15,113

NPAT 30,468 27,529 21,612 21,026 11,634

Cash Flow from Operating Activities 31,406 42,030 45,264 14,910 28,099

*in $000 Source: Annual Report (2013)

BG provides financial support to Cure Kids. Cure Kids is an agency that supports medical

researchers across the globe dedicated in finding the cures to diseases. Cure kids has invested

close to USD 32 million by 2012 and BG has raised more than 2 million for the charity

organization (Cure kids, n.d.)

4.2 Product and Services

BG facilitates retailing for a huge selection of products under three name plates: Briscoes

Homeware, Rebel Sports and Living & Giving.

Homeware:

Briscoes Home ware offers selection in various categories such as bed & bath, Electrical,

Kitchen, dining & entertainment, Cleaning & Laundry, Bags & Luggage, Decorating &

Accessories, Outdoor Living, Furniture & Storage. Store offers selection form various brands

such as Brabantia, Breville, Churchill, Classic Living, Cloud 9, Cloud 9 Optima, DeLonghi,

Design Plus, Essential Collection, Fieldcrest, Galaxy, Goldair, Habitat, Hampton & Mason,

Jamie Oliver, Kas, Kenwood, Maxwell & Williams, Philips, Playboy, Prestige, Remington,

Royal Doulton, Russell Hobbs, Scanpan, Sunbeam, Table fair, Tefal, Urban, and Zip. Company

has a dedicated Ecommerce website apart from 41 stores that serve to the needs of the customers

(Briscoes Homeware, n.d.). Living & Giving offers similar but less diverse selection in the

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Homeware range. BG has a different website for the name plate and product selection offered in

the nameplate (Living & giving, n.d.)

Sports Goods:

BG offers a variety of sports gear related to majority of sports and games under the nameplate of

Rebel Sports. Selection available is categorized under Clothing, Foot ware, Sports Gear, Exercise

& fitness, Camping & Fishing, Games & Accessories, Swimming and water sports. Various

brands that are associated with Rebel Sports are ADIDAS, ASICS, AVIA, CASIO, CCC,

CONVERSE, EVERLAST, GILBERT, HI-TEC, KOOKABURRA, LOTTO, MIZUNO, NEW

BALANCE, NIKE, PRINCE, PUMA, RUNNING BARE, RUSSELL ATHLETIC, SAUCONY,

SKINS, SPEEDO, THE NAKED GYM, UNDER ARMOUR, WILSON, and YORK (Rebel

sports, n.d.).

4.3 Industry:

The era of exponential growth in retail industry has gone and retailers constantly contemplate

operational efficiency to gain competitive advantage. Retail Industry is being driven via online

expansion, operational restructuring, promotional planning, cost control tactics, people

development and inventory management (Retail market, 2013). Businesses operate in a highly

competitive and challenging environment. Value proposition in highly competitive retail

environment is closely associated with product choice availability and customer experience.

Abundance of retail outlets and diminished profit margins in New Zealand clearly reflect that it

is a mature industry. The following chart shows that the profit margin for retail industry has

come down to 3 % from 6.3 % in 2003 (Retail market, 2013).

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Figure 1: NZ Retail’s Profit/Revenue Ratio trending

Source: Retail market (2013)

Retail industry has an intense competition in the market. The presence of stores in New Zealand

market is evenly poised with the population concentration and the following table outlines the

kind of competition BG faces in the retail environment across the country.

Table 2: Category Wise Store Competition

Store Type Number of Stores

Department Stores 284

Footwear Retailing 601

Other Personal Accessory Retailing 186

Furniture Retailing 737

Houseware Retailing 280

Electrical, Electronic & Gas 1,149

Other Electrical Equipment Retailing 218

Sports/Camping Equipment Retailing 1177

Toy & Game Retailing 223

Newspaper & Books Retailing 642

Total 5,497


0.0

2.0

4.0

6.0

8.0

2003 2003 2004 2004 2005 2006 2007 2008 2009 2010 2011

NZ Retail Industry: % Net Profit before tax/Revenue

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BG’s area of focus for the year has been on effective implementation of resources in order to

generate maximum revenue. In order to understand its competitive position, it becomes

imperative for BG to look into the regional breakup of the competition that group faces. It is

necessary and very critical for BG to identify the opportunities and reap their benefits which

arise from strategic locations. Group can also look into creating regional dominance if possible.

Following table shows the regional concentration of various retail outlets as per different

categories BG deals in.

Table 3: Category Wise Regional Concentration of Retail Stores


The retail industry and the environment as a whole are evolving because of various reasons such

as advancement in technology, buying patterns, consumer focus, and Ecommerce (Retailer

association review). Incessantly increasing use of smart phones by the customers is a new

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version of web space retailers need to look into. Price comparison, user reviews and social media

connectivity is happening round the clock via these mobile devices. Retailers consider this as a

new area of opportunity to reach their target consumers and simultaneously understand that

failing to do so may impact future performances. Consumers’ behavior has changed too

especially in terms of price and value. Price offers linked to brands are getting more results than

just the price offers, which is a compelling fact for the brands and their need to accommodate the

consumers’ demand (Conseur, Fiorito & Gable, 2010).

Despite the economic conditions across globe, retail industry in New Zealand continues to grow.

Retail sales for the year 2012 has shown an increase of 3.7% as compared to the previous year

with a total revenue of $70,302 M. Majority of the classes in the industry have shown positive

movement except clothing, footware & accessories and Electrical and electronic goods in 2011-

12. Looking at a global perspective, the economy world over is recovering fast, however;

considerable uncertainty continues around the retail sector. Advancement in technology,

especially mobile arena, is affecting consumer behaviors and coming years may see such trends

accelerate (Retail market, 2013)

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4.4 Stakeholders

BG has its presence in New Zealand and hence majority of its stakeholders are local.

Figure 2: Briscoe Group Stakeholders

Listed below are the most prominent stakeholders in the company:

BG is a publically listed company however, majority of the shares are held by RA Duke

Trust. This accounts for 78.47% stake in the company. Other prominent shareholders are

Gerald Harvey, Harvey Norman properties and New Zealand Central securities

depository Ltd.

BG has more than 1700 employees across 80 stores in New Zealand. Group has 72

employees in various support functions such as management, information technology,

finance and administration, and other support functions

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Company is closely associated with more than 55 brands and numerous suppliers which

are both local and international.

Being one of the oldest companies in New Zealand, BG has a large and diverse consumer

base across the country.

Another key stakeholder for the company is Cure Kids, a nonprofit organization. BG has

been closely associated with the charity organization for more than a decade.

BG has multitude of people associated with the company in industries such as

manufacturing, retail, logistics, and advertisement.

5. Business Model

Zott et al. (2011) define business model as a framework that looks at a holistic perspective on

how a firm downs its business, with an emphasis on firm’s activities and importance of value

creation. BG’s business model can be looked at as a first level distribution channel that uses both

marketspace and marketplace in order to conduct its operations.

The business model for an organization can be understood by four interlocking elements together

that create and deliver value. They are profit formula, value proposition, key processes and key

resources (Johnson, Christenson & Kagermann, 2008, as cited in Zott et al., 2011).

In order to understand the business model for an organization, there are multiple aspects which

need to be looked at. Let’s Start with Rodney Duke, individual who shaped a loss making

business of 1980s to a profit center of 2000. He is the managing director of the company and

holds 80% stakes in the company. Rod took over as managing director of the company in 1988

with a goal to bring the company back into profitability and sell it off. He has worked in retail

industry all his life and has been associated with names such as Waltons Ltd, Homecraft/Eric

Anderson Stores, Grace Brothers and Norman Ross Ltd. Looking to expand business, Rod took a

franchise of Rebel sports in 1995 and the exclusive rights to operate from 2005 in New Zealand.

He reflects the acumen of a true entrepreneur and is shows interest in the business that is related

to groups’ core competencies. BG has not been under debt in 15 years and as a result of huge

cash reserves, Rod acquired 9 stores of Living and Giving in 2006. He understands the

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importance of online businesses and hence, has dedicated websites for all three business lines

(Director profiles, n.d.).

To understand what BG looks to deliver to the customers, the code of conduct BG mandates on

all employees and parties associated must be looked at.

5.1 Code of conduct

Company has defined a code of conduct which serves as values for the company and believes

that these are essential to group’s recognition and success. The values apply to all employees and

businesses that are associated with the group. The Group requires all to preserve and enhance

group’s reputation among all by:

Being truthful and fair

Abide by law

Demonstrate respect, integrity and openness.

(Code of conduct, n.d.)

5.2 Objectives

Group has been working on various objectives over the years to stay competitive and improve

continuously. The objectives of the group are

To improve value and quality of products

To promote relevant products at great prices

To improve inventory management process and stock turn

To control operational cost and improve customer service levels

BG is looking forward to enhance customer experience and increase company’s profitability in

near future. The objective outlined by the group for 2013 are

To maximize Profit growth.

To continue develop and improve the quality of our people

To develop our online businesses.

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To expand the number of fulfillment locations that will result in lower freight costs and

quicker deliveries to customers.

(Annual report, 2013)

6. Revenue Analysis Chart

BG has been looking forward to improving customer service in the stores to generate more

revenue and enhanced customer experience. Another area of focus is to fine tune the profit

centers to ensure optimization of resources. Online business presents another opportunity for the

business to grow further and focus remains at making the online experience efficient, easy and

attractive. The efforts put in by the BG reflect well on sales revenue for financial year 2012-13.

Business earned $452,702,000 from operational activities. Company received a total of

$3,051,000 additional earnings from non-operational activities such as financial and lease related

activities (Annual report, 2013).

Figure 3: Revenue Breakup Briscoe Group 2012-13

Table 4: Revenue Analysis 2012-13

Nameplate Homeware Sport Goods

Revenue 307051000 145651000

No Of stores 48 32

0.67%

67.37%

31.96%

Non Operational Homeware Sport Goods

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Area of stores 93014 51884

Revenue/Store $6,396,896 $4,551,594

Revenue/Sq M $3,301 $2,807

Source: Annual report (2013)

6.1 Operational Activities

Operational activities for BG are the core retail activities of the group. These include business

operations for Homeware and sporting goods name plates. Operational revenue for the group was

$452.7 million in 2012-13.

Homeware

Homeware represents Living and Giving and Briscoes Homeware. Together they accounted for

67.3% of the total earnings of the group which was $307,051,000 in 2012-13. BG believes this is

the outcome of relevant and aggressive promotion strategies developed by the company which

has kept the brand in front of customers. New range of products accompanied by price based

promotions, kept the stores in limelight and special emphasis was given to range, quality and

value combination. BG realizes the potential of the web based retail and believes that Living &

Giving section’s future would be web dominated in near future. Average revenue per store for

Homeware nameplate was $6,396,896. Revenue earned per square meter was $3,301 (Annual

report, 2013).

Sports

Sporting goods sales revenue for the year 2012-13 was $145,651,000. Rebel sports accounted

for increased sales in previous year due to Rugby World Cup. The sales performance continued

to sustain the previous year levels and contributed a share of 31.96% to total earning for the year.

BG believes that the performance is a result of aggressive marketing and promotion strategy as

the competition is more intense in fishing, camping and 5 other outdoor categories. Average

revenue per store for Rebel Sports nameplate was $4,551,594. Revenue earned per square meter

was $2,807 (Annual report, 2013).

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Risks: There are a number of risks that are associated with BG’s retail operations revenue and

they are:

1) The volatility of marketplace in constantly increasing because of various reasons such as

dependence on other industries, technological innovations, currency fluctuations and

trade relations.

2) Growing complexity of the operations for group is another risk area. Various factors that

contribute to the risk are: huge number of suppliers and product range, recent advent into

market space, limited delivery capability for ordered goods.

3) Low growth of retail industry and presence of big competitions such as Warehouse,

presents another challenge for the company’s revenue making capability.

4) Profit maximization in retail industry is dependent on operational efficiency and cost

control practices. Inability of retailers to control direct costs makes them vulnerable to

excessive cost control in support and operational activities such as employee numbers

and advertisement, which puts them at risk of sabotaging core operations.

5) BG is a retail firm and does not have any in-house production. Hence, operations are

dependent on suppliers and leave the firm vulnerable to supplier disruptions. Secondly,

majority of the brands on offer are off shore brands and are services through Chinese and

Australian suppliers. Political situation and trade relations also carry significant

importance in company’s successful operations.

6) Another risk to online operations of BG is the dispatch capability of physical stores. All

online orders are dispatched from 2 Auckland stores.

7) The industry analysis of the report reflected that BG faces hyper competition in the

market. With abundance of stores and mega retail players, competition may result in

wrong price image in consumers and may prove fatal to businesses.

8) Real estate is on a boom in New Zealand and hence the prices are sky rocketing. Rental

and related expenses present a severe threat to company’s profitability.

9) BG has a huge product range and there are similarities in the products at offer. BG faces a

trivial choice as reduction in offered products could decrease competitiveness and less

popular items hold space for longer durations impacting profitability.

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Opportunities: Opportunities available to the group in Homeware and Rebel Sports retail are:

1) Market space consolidation as the most apparent area that BG needs to look into. BG has

already announced its plans that Living & giving nameplate would be dominated by web

based business with minimum possible physical stores. Company is clear with the

objective however, a lot of work is required to accomplish the same. The web sites are

basic Ecommerce engines designed to facilitate transactions only. They fail to achieve

Hoffman and Novak (2009) flow perspective.

2) Cross Shopping is the key to current retail industry. More time customers spend in store

or on the website, better are the chances of that they will spend more and hence increase

revenue.

3) BG needs to look into regional dominance for revenue growth. In the face of fierce

competition strategic store location would result in competitive advantage.

4) ICC world cup is approaching and shall be jointly held in New Zealand and Australia.

This presents a bright opportunity for Rebel Sports in near future.

5) Real estate boom in densely populated areas such as Auckland has is a result of scarce

availability of residential spaces. Governments has announced plan to ramp up

construction to meet the demand and presents a juicy opportunity to BG. If BG can

negotiate a contract to supply Homeware in new furnished accommodations, revenue for

the company will be at a whole new level.

6) Co-creation between customers, company and suppliers, is another value proposition that

BG needs to look into. A cohesive relationship will result in higher revenue and loyal

consumer base.

6.2 Non-Operational Activities

Another source of income, though negligible, is through nonoperational activates such as

hedging, lease, interest and financing. Net earnings from this component accounted for

$3,051,000 during the year 2012-13, which was 0.67% of total earnings (Annual report).

There is multitude of risks associated with this aspect of group’s earning. These are set of

different activities that group undertakes as support to operational activities. All of them present

unique risks and opportunities for the members of those industries for example finance for

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hedging and real estate for lease. Although, these activities are unrelated to core operations of the

group, BG must keep an eye out as they can impact financial performance.

7. Cost Analysis Chart

In order to survive in a mature and heavily competitive industry, BG incurs a lot of costs in terms

of advertisement, brand promotion, and related business investments. BG has been conducting

business in a traditional retail environment. Group has taken into account the potential of Market

space platform since 2010 only. Although, BG is cash rich firm and has not seen debt in last 15

years, need to be mindful of the volatility in the market and need to invest in technology, creative

ideas and innovative ideation principles (Zott et al., 2011).

Figure 4: Cost breakup Briscoe Group 2012-13

Source: Annual Report (2013)

Total cost incurred in2012-13 by BG was $271,598,000. 48 Homeware stores accounted for

67.5% of the total cost incurred by BG. On the other hand, 32 Rebel sports stores accounted for

32.5% of the total cost. To understand further the cost involved in each operations type, we can

look into the following chart. Average cost per store in the Homeware nameplate is $3,820,104,

whereas the average cost per store in Rebel Sports stores is $2,757,281. Comparison can also be

made on the grounds of cost per square meter to get better comparative understanding. Cost per

67.5%

32.5%

Homeware Sport Goods

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square meter in Homeware stores was $1,971, whereas it was $1,701 in Rebel Sports. This is

clear that BG has been concentrating efforts towards the Homeware nameplate to increase

revenue and hence the cost in the efforts made is higher too (Annual report, 2013).

Table 5: Expenses Analysis Briscoe Group 2012-13

Nameplate Homeware Sport Goods

Cost Of sales 183365000 88233000

Expenses 154114000 77863000

No Of stores 48 32

Area of stores 93014 51884

Cost/Store $3,820,104 $2,757,281

Cost/Sq M $1,971 $1,701


The Following chart outlines the breakup of all costs and expenses incurred by the group in the

year 2012-13.

Figure 5: Expenses Analysis Briscoe Group 2012-13


58.89%

31.14%

6.44%

1.69% 1.79% 0.04%

Wages and Salaries Operating Lease and rental Expenses

Depriciation Withdrwan Inventory

Other Bad Debts

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It is clear the maximum cost driver for BG is employee wages, salaries and other short term

benefits. The total cost to company for this component of expenses was $50.56 million which

covered 58.89% of the total costs & expenses. This is in alignment with the traditional

marketplace retailing across markets. With 31.145 of total expenses, Operating, lease and

Rental expenses accounted for a total of $26.74 million during the same period. Depreciation

expenses cost was $5.5 million which was 6.44% of total income. It is very important for BG to

look into the next component of the cost which is Withdrawn Inventory. Total cost incurred by

the group under the component was $1.45 million and accounted for 1.69% of total expenses. It

is nearly impossible to estimate the actual cost of the component as the time this inventory was

on shelves is lost and could have resulted in better sales figures if the space has been occupied by

popular items. Bad debts for the group were at 0.04% of the total expenses and accounted for

only $37,000. This is an indication of company’s robust monetary policy. Other expenses for the

group were $1.53 million and accounted for 1.79% of the total expenses. These expenses include

Director’s fees, audit expenses, share option expenses, software amortization, and loss on sale of

property. BG paid a total of $12.2 million as Income Tax to the New Zealand government

(Annual report, 2013).

Risks: Various risks associated with current cost structure are:

1) Group’s investment has been only towards the core businesses. The number of stores is

showing a decline. In such situation BG should be looking forward to invest considerably

in new ideas or concentrate on acquisition of already successful companies. That has not

been seen and Rod Duke in his interview reflected that BG may not go that route, rather

concentrate on core business. While the big competitors such as Warehouse are

improvising and actively looking for acquisitions, BG may be too late if not stagnated

and stationary business group.

2) As mentioned earlier BG plans to limit Living & Giving to marketspace, it would require

substantial efforts in accomplishing this task as it is in contrary to the rest of group’s

efforts which are concentrated on bringing the customers to physical stores.

3) As mentioned earlier, BG has a primitive distribution system which is concentrated in

Auckland region only. As a result it is less efficient and attracts more cost.

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Opportunity: The opportunity areas for the group related to cost structure are:

1) BG has had to close down 10 stores as a result of underperformance since 2010 under

Homeware nameplate and now stand at 48 stores from 58 in 2010. The firm needs to look

into cost reduction by opening stores in near vicinity to each other. As a result firm can

look forward to introduce shared management, shared warehouses, and regional

dominance to lower costs. This will result in reduced vulnerability of underperforming

stores against closing down.

2) As mentioned above that BG lost 1.45 million to withdrawn inventory. There is clearly a

need for better inventory management. Although BG has invested in SAP for inventory

management tool however, more emphasis needs to be put into negating such losses.

3) BG lost $37,000 in bad debts. Though it accounts for very small loss percentage, firm can

look forward to decrees it further.

8. Value Creation Analysis

8.1 Internal & External Perspective

The success of a business model lies in the value proposition for internal and external customers.

Eriksson et al. (2011) divided the study of a business model into three components and they are:

design, value creation and value exchange. Basic component of the business model is design

element. This element includes the operational activities of the firm, the structure and

governance. Value creation is an important aspect of the BG’s business model. Amit & Zott

(2001) identified four drivers of value creation and they are Novelty, Customer Lock in,

Complementarities and Efficiency. Value Exchange can be understood as the exchange of value

between suppliers, marketers and customers (Amit & Zott, 2001). BG gives a face to more than

55 suppliers in front of customers.

Morris et al. (2005) found that the novelty in superior value creation. BG experimented

successfully by opening the Rebel store and Homeware next to each other resulting in better

management for both stores and cost control. BG offers signup vouchers of a value $500 through

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draws to its customers. Group offers deals on Living & Giving such as 30% off storewide which

attracts the customers and creates value for brand.

Figure7: Profit/revenue Ratio comparison

Source: Annual report (2013), Retail market (2013)

The comparison of the profit after tax to revenue between industry average and BG gives a clear

picture on how the company has been creating value by decreasing the direct cost of operation

and increasing efficiency (Zott et al., 2011).

BG’s investment in technology for effective inventory management and attention towards people

development will act as a source of competitive advantage and shape future development of the

organization (Park et al., 2012). BG has been investing in aggressive promotional strategies and

operational restructuring. That has brought stability in the sales revenue to both Homeware and

Rebel sports. BG paid $21,368,750 to its shareholders and also introduced group incentive

schemes for the employees on account of good sales performance. BG is also looking into up-

skilling people as they are the key to an excellent customer experience in stores (Amara &

Landry, 2012).

Value creation should be considered from an external customers’ perspective. Value can also be

created by non-economical means that contribute to societal wealth improvement and reduction

0.0

2.0

4.0

6.0

8.0

10.0

2008 2009 2010 2011 2012

Industry Average Briscoe Group

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in human suffering (Thompson & McMillan, 2010). BG supports NGO Cure Kids, an

organization that funds the researchers dedicated to finding cure for widespread diseases. Cure

Kids has funded breakthroughs related to childhood leukemia, cot death, hole in heart babies,

cystic fibroses, genetic birth abnormalities, and inherited heart disease. In essence, the group

brings value to the whole community by funding Cure Kids.

BG promises the lowest price guarantee for all products on Rebel Sports. With a total of 80

stores across New Zealand, this brings the factor of convenience into customer’s minds. BG

hosts 55 renowned brands and a huge product range to choose from. This helps customers in

onsite features and price comparison and associated brands serve as a symbol of product quality.

BG itself is a brand name in the market and helps product sale of the brands that are less known

in the market, a perfect example of value creation via value exchange (Zott & Amit, 2001).

Extensive product range, promised product quality, associated brands, professional staff from

BG, and customer service all act together to lead to an excellent consumer experience and hence

create value (Osterwalder & Pigneur, 2005).

8.2 Implications:

An understanding of the business model has reflected that BG is doing better than the industry

average in terms of efficiency. There are both risks and opportunity areas that were identified. In

order for BG to increase value, few opportunities can be looked into and they are:

1) Regional Dominance: Retail market is saturated and as a result abundance of retailers can

be seen all around. BG tried to expand and found that some of the stores had to be closed

down due to underperformance. The way forward shall be via consolidation of regional

presence and dominating the market. BG can look into decreasing cost by shared

management and warehouses in high density areas. Also, strong brand presence means

increased customer loyalty and lessened promotional expenses.

2) BG has a strong management team led by Rod Duke. The company is sitting at a huge

cash reserve and the core business is maturing fast. BG should be looking into acquiring

small firms in similar industry. There are numerous promising web based startups in the

market that company can look to acquire. Careful brand diversification will increase

value for shareholders.

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3) BGs ecommerce websites for all three nameplates are average to above average setups.

These websites need to be equipped with content and services that make consumers’ time

worthwhile. A number of value additions can be offered to complete the task. For

example, designing solutions can be made available to people to decorate and remodel

their houses on Homeware sites. On the other hand, Rebel Sports can look into providing

fitness tips and other sports related information. Consumers forums and product feedback

is another area that needs to be worked upon as co-creation would lead to value creation

for the business (Rayport and Sviokla, 1994). Advancement in technology is changing the

way consumers interact and shop. Investment in technologies such as tablet and smart

phone will be at the core of value creation in businesses (Prahalad and Ramaswamy,

2004). BG needs to look into integrating all the three web sites to provide a flawless

experience to customers.

4) Densely populated areas have encountered a housing boom. This present an area of

opportunity for Homeware section of the firm. Company can look to get contracts from

builders to provide furnishings in furnished homes. While BG can look to support

builders with huge selection and better price, BG in turn gets a consistent and defined

source of revenue.

5) It is a proven fact that more time people spend in the stores or on websites, better are the

revenue propositions for the business. Hence, cross selling becomes the key retail market

is looking for. Looking at the profiling of the retail customers where majority of

Homeware customers are women and majority in Rebel Sports are athletes, BG should

look into making alliances with other brands to share the consumer base and force people

to spend more time around the stores. Value creation by exchange can be achieved if

Rebel Sports nameplate can look to partner with the fitness institutions and Homeware

can look to share space with coffee shops or interior designing firms (Zott et al., 2011)

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9. Conclusion

Rod Duke has done an exceptional job in bringing a cash strapped company to high levels of

profitability. BG business model seems to be the traditional marketplace style retail. The unique

selling point of the group is a vast range of product availability for both Homeware and Rebel

Sports. BG concentrated on the expansion from 1996 to 2010 and reached to a total of 90 stores.

However, as a result of highly competitive retail environment and business restructuring,

underperforming stores were closed down. Group understands that the time for mindless

expansion is gone and success now lays in strategic locations and efficient operations. BG is

learning from its mistakes and understands that Ecommerce has huge potential especially for big

brand names. BG has invested in the web space for all three nameplates of the group. BG is now

a high cash reserve firm and holds a comfortable position in the market. BG has to look into

some of the shortcoming associated to current business model. Business has reached its mature

stage and requires entrepreneurial ideation to expand further. Competitors such as warehouse are

investing in acquisition of web based promising business. BG should look into different ways

highlighted to create and capture value via value exchange in order to stay competitive and

prosper further.

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10. References

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Director profile.(n.d.).Retrieved from http://www.briscoegroup.co.nz/content.asp?cont=directors

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Hoffman, D. L., & Novak, T. P. (1996). Marketing in hypermedia computer-mediated

environments: Conceptual foundations. [Article]. Journal of Marketing, 60(3), 50.

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an internationalizing entrepreneurial firm: The business model perspective.

Journal of Small Business and Enterprise Development, 18 (3), 556 – 570

Living & giving.(n.d.).Retrieved from http://www.livingandgiving.co.nz/

Morris, M., Schindehutte, M., & Allen, J. 2005. The entrepreneur’s business model: Toward a

unified perspective.Journal of Business Research, 58: 726-35.

Osterwalder, A., & Pigneur, Y. (2005). CLARIFYING BUSINESS MODELS: ORIGINS,

PRESENT, AND FUTURE OF THE CONCEPT. [Article]. Communications of

AIS, 2005(16), 1-25.

Prahalad, C. K., & Ramaswamy, V. (2004). CO-CREATION EXPERIENCES: THE NEXT

PRACTICE IN.VALUE CREATION. [Article]. Journal of Interactive Marketing

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Rayport, J. F., & Sviokla, J. J. (1994). Managing in the Marketspace. [Article]. Harvard Business

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http://www.briscoegroup.co.nz/documents/Annual_Report_27_Jan_2013.pdf

http://www.briscoegroup.co.nz/

http://www.briscoegroup.co.nz/content.asp?cont=code

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Retail market in new zealand an analysis 2013. (2013, may). Retrieved from

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Susan S. Fiorito, Myron Gable, Amanda Conseur, (2010). Technology: advancing retail buyer

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10. Appendix

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