Analytics of Business Operations Management: River Island Clothing Company - Case Study Example

Analytics of Business Operations Management: River Island Clothing Company Insert your name Insert tutor's name here Insert Institution here Insert a date Table of Contents 1.0.Background Information 3 2.0.Identification of the Problem 4 3.0.Literature Review 5 4.0.Data Collection 9 5.0.Analysis and Discussion 10 Financial Analysis 10 Figure 1: Liquidity Ratios (Double click to open) 11 Figure 2: Liquidity Ratio 11 Profitability Ratios 11 Margin Analysis 12 Figure 3: Margin Analysis (Double click to open) 12 Figure 4: Margin Analysis 13 Efficiency Ratio 13 Figure 5: Efficiency Ratio (Double click to open) 13 Figure 6: Efficiency Ratios 14 Figure 7: Growth Ratio (Double click to open) 14 6.0.Recommendations 14 References 16 1.0. Background Information The River Island Clothing Company is a United Kingdom (UK) Company whose area of operation includes designing clothes and accessories that it sells to the targeted customers. By approximation, the Company sells between 4,000 and 7,000 different accessories monthly, a projection that has helped it understand its marketing niche (Fosso et al. 2017). Recent studies have observed that that the Company is rated one of the top performing design companies due to its continued rebranding and market positioning when compared to its rival companies (Chambers 2014). Currently, the Company is owned and managed by Lewis trust investment firm and sells its products mostly in Turkey, Ireland, UK, Singapore and Middle East markets. Additionally, River Island Clothing Company is a private company limited by shares capital which was incorporated in (1959). Theoretically, the internal factors for the River Island Clothing Company establishes framework the Company is using so as to determine its competitive advantage, an approach that has helped it dictate operations in the already competitive environment. Currently, main competitors of the Company include Sewport and Bridge and Stitch. The examination of its business operation management shows that River Island Clothing Company is dealing with its competitors by formulating frameworks that are geared towards maximizing profits when they apply different strategies in their areas of operations including production, research & development (R&D), total quality management (TQM) and human resources (HR) (Sharma et al. 2014). 2.0. Identification of the Problem The broad topic of the study is analytics of business operations management. This report is concerned with data analytics of River Island Clothing Company. The report uses the Company’s data to address the organizational approach to business operations, approach to competitiveness with regard to both the internal and external environment including economic, socio-cultural, political, technological and natural environment conditions in the last 5 years (between 2010 and 2015). We recognise from preliminary data obtained about the company that it has moved from its traditional model of operation to embrace modern approach in its operations and design of their products (Seddon et al. 2016). However, the Company’s business analysis will put the finding above into context so as to understand different variables including areas of core competence, operations management, financial performances, future forecast and the extent to which its operations will align with its competitors or general demand in its areas of operations. According to Laursen and Thorlund (2016), business analysis acts as an integrated analysis of business operations so as to understand how companies are making attempts to remain competitive and how they balance their financial performance in the market. Based on this study, we pick the Company’s financial data to understand among other variables, its financial positions, and competitiveness and future forecasts. 3.0. Literature Review There are different authors who have presented their arguments regarding analytics of business operations management. According to Tremblay et al. (2016) this topic deals with analysis of company’s data with the aim of understanding objective assurance as well as independent process the company has designed to look at their financial operations, marketing environment and competitiveness in terms of market penetration. While Tremblay et al. (2016) findings try to understand the company’s position with regard to its financial operations, there is consensus among other studies that business analytics is abroad concept that stretches beyond gathering data on financial performance. Accordingly, recent studies look at this topic (analytics of business operations management) as a broad spectrum where researchers attempts to companies use to meet its objectives and systematic approaches such objectives steer the company’s governance processes, risk management and marketing approaches (Qie et al. 2016; Tremblay et al. 2016). Based on Qie et al. (2016) research, data search from River Island Clothing Company focuses on its risk management and governance processes. What these authors suggest when it comes to governance structure is that analytics of business operations management assess numeral values of companies that help them approach and determine their competitive advantage. Recent scholars have view attempted to separate the concepts of business analytics from business operations management (Asadi Someh et al. 2017; Qie et al. 2016; Tremblay et al. 2016). According to Asadi Someh et al. (2017), business analytics should be seen as a comparative discourse or analysis where actors attempt to define the financial positions of companies. On the other hand, studies that have focused on business operations management uses business analytic data to understand socio-cultural, economic, political, technological and natural environment conditions of a given company. The understanding that these studies draw is that analytics of business operations management should be concerned with company’s data that when analysed, will reveal among other parameters, pricing model, marketing audit to its brand, competitiveness with niche operators and product design. With increasing threats of competition in the marketplace, it now becomes inevitable that the general understanding of our report topic should be addressed from a wider perspective. That is, for a clear presentation of data, analytics of business operations management should seek to establish River Island Clothing Company’s myriad of its external forces which should include threats of new entrants and bargaining powers of its suppliers (Asadi Someh et al. 2017; Appelbaum et al. 2017). According to Appelbaum et al. (2017), analytics of business operations management should be able to present and analyse data that reveal these parameter so that the Company can be able to determine which of the parameters it can pursue ultimately, taking into consideration external and internal threats. Performance focused researchers have argued that for business valuation of a company to be undertaken effectively, other approaches such as Capsim simulation should be incorporated so that analytics of business operations management can also act as a tool that monitors how a given company moves towards the realization of research and development (R & D), production, finance and marketing (Asadi Someh et al. 2017; Appelbaum et al. 2017). However, there is general understanding from other studies that assessment of strategy option remains essential because that is the only credible approach analytics of business operations management can take in comparing a company’s weaknesses and strengths strategy one data from two or more companies are drawn (Sorooshian 2017; Asadi Someh et al. 2017; Appelbaum et al. 2017). Contrariwise, these scholars do not offer appropriate framework for data gathering and analysis so that a study can discuss the most profitable and relevant strategy that companies can implement for different years of operations including Capsim competition rounds. Different researchers have indicated that UK based design companies could no longer rely on monopolies as their business strategy to survive in the industry (Sorooshian 2017). This finding is supported by the fact that currently, River Island Clothing Company facing several other competitors who are vying for the same market share. Additionally, the company has launched different products in the last 3-5 years including Co-ordinates and Matching Sets. Nonetheless, their current product offering in the market continue to post different issues, including lack of marketing efforts, high cost, inefficient production, absence of innovation and chaotic financial management (Marjanovic and Dinter 2017). Our data search therefore focuses on the company’s perceived ‘chaotic financial management’ so that data drawn and analysed will help it redesign its approach so as to remain competitive. According to Wang and Byrd (2017) a comprehensive analytics of business operations management helps fix “chaotic financial management.” This view was supported by Panigrahi (2017) who noted that presenting and analyzing data on company’s financial position help such companies to narrow down the possible strategy it could adopt. Contextualizing this argument within the context of River Island Clothing Company, the Company has had what Côrte-Real et al. (2017) terms as ‘dwindling gross profit margin’ (p. 49) between 2010 and 2013 therefore approaching analytics of business operations management from the perspective of its financial management will help the company have a preferred strategy that will help it keep its prices and costs low but at the same time, serve as many market segments as it can. Relevant studies such as Kache et al. (2017) have noted that in such cases presenting data on financial management help determining spikes in company’s net profits. Business analystics and operations management are presented as aspect of business processes which help policy makers within an organization to put in place, mechanisms that will help in solving management problems (Panigrahi 2017). River Island Clothing Company is currently struggling to put into place factors that will help it improve the quality of their products over time as there is evidence that competition that is based on low pricing without amending their products is unlikely to sustain it in the long run (Kache et al. 2017). It is from this point that we assess analytics of business operations management as a topic that will provide solutions to the company’s current position and on the other hand, draw on previous studies that have detailed the connectedness between comparative analysis of company’s data and performance improvement. Taking a case study from Kache et al. (2017), data collection and analysis of a company’s financial position is the basis for understanding its gain in market value. The point the author is developing is that by assessing a company’s financial position it will be possible to understand how it is establishing a strategy that assesses its broad cost leader strategy. The limitation of this study however, is failure to conceptualise how business analytics can help determine ways in which companies can attain high profits while maintaining low R&D, reduction on production and increasing market penetration. According to Laursen and Thorlund (2016), business analytics need to be concerned with analysis of data that will give companies a way of attracting customers due to low pricing and allow the company to gain better competitive advantage over its rivals. 4.0. Data Collection This study adopts internet data collection approach where data to be analysed is collected from River Island Clothing Company online financial reports and presentation. This is therefore a research method where data collected categorises the report as ‘e-research projects.’ Since the report seeks to present data that capture different aspect of analytics of business operations management, collecting the Company’s online was preferred as it yields larger and more representative samples. The excel sheet attached contain data collected from the company on the following: Annual Balance Sheet Annual Cash Flow Annual income statement Financial summary Quarterly Balance Sheet Quarterly Cash Flow Quarterly Income Statement Data Collected from River Island Clothing Company 5.0. Analysis and Discussion Financial Analysis Based on the data collection our financial analysis focuses on economic trends and set financial policies. It focuses on financial activities to establish business sustainability and performance (Laursen and Thorlund 2016). We start with the company’s liquidity ratio of the year 2014 and 2015. Current ratio = current assets/current liabilities 2015 = 478.8/ 159.7 = 2.998 2014 = 453.8/259.1 = 1.751 From the analysis above, the company will be able to pay its debt over the next business cycle. Other liquidity ratio analysis for the last five years are as attached in the excel file below: Figure 1: Liquidity Ratios (Double click to open) Figure 2: Liquidity Ratio The ratios in figure 1 and 2 above has been analysed to help in understanding River Island Clothing Company ability to meets short term obligations. The trend analysis (include average cash conversion cycle, current ratio and quick ratio) show that the company is improving from 2010 to 2015. Profitability Ratios From the company’s data this is calculated as: Gross income/sales 2015 = 183.4/894 = 20.5% 2014= 191.3/890.4 = 21.48% The profit margin in 2015 was 20.5% while it stood at 21.48% in 2014 indicating a drop of slightly 1%. However, their performance is recommendable since it was caused by overhead. Margin Analysis The excel sheet shown in figure 3 below indicate analysis of River Island Clothing Company margin analysis. We realize that the company is having operating profit which is fairly constant for two-period year. Figure 3 further details trend analysis as a synopsis of the company profitability performance. Figure 3: Margin Analysis (Double click to open) The margin analysis shows that profit margin is on upward trend between 2012 and 2015 with declining trend registered only in 2011. The cause for the decline in 2011 might have been brought by hard economic environment in which River Island Clothing Company operates. This analysis is further captured in figure 4 below. Figure 4: Margin Analysis Efficiency Ratio To further understand River Island Clothing Company levels of operation excel sheet attached as figure 5 below describe the analysis of the company’s levels of efficiency. Figure 5: Efficiency Ratio (Double click to open) Figure 6: Efficiency Ratios Figure 6 above further analyse details of the excel file as captured in figure 5 above The analysis further assesses the company’s growth ratio. According to the excel file below, the company has been growing for the last 5 years. Figure 7: Growth Ratio (Double click to open) From the excel file in figure 7 above, the growth of the company has not been stable for the last 4 years. 6.0. Recommendations The study focused on the analysis of River Island Clothing Company establishing analytics of business operations management within the Company. Different analysis shows that one of the problems the company has been facing is competition and penetrating the already competitive market. The data analyses show that the Company has higher possibility of growing and developing from its current position. For instance, figures 3 and 4 indicate that the Company’s capital structure as well as investment strategies can give it the required returns with a higher level of return on capital invested and liquidity. As a result of these positions our analytics of business operations management within the company indicate a need for River Island Clothing Company to increase its investiment in total quality management (TQM) so that they can maximise efficiency when it comes to their operations management. Other areas that should be given considerations include: Undercutting their competitors by leveraging on their price Increasing their customer support by adopting effective sales budgets Currently, their operations management pays little attention on automation. It is therefore recommended that the company increase processes of automation in all their products as this option will help it minimize costs related to labour The company needs to focus on increasing production through effective by adopting measures such as second shift capacity References Appelbaum, D., Kogan, A., Vasarhelyi, M. and Yan, Z., 2017. Impact of business analytics and enterprise systems on managerial accounting. International Journal of Accounting Information Systems, 25, pp.29-44. Asadi Someh, I., Wixom, B., Davern, M. and Shanks, G., 2017, January. Enablers and Mechanisms: Practices for Achieving Synergy with Business Analytics. In Proceedings of the 50th Hawaii International Conference on System Sciences. Chambers, D., 2014, April. ASOA Course: Business Analytics: Real-time Dashboards and Increasing Capacity. In The Annual ASCRS and ASOA Symposium and Congress. Ascrs. Côrte-Real, N., Oliveira, T. and Ruivo, P., 2017. 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