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<p>1 Introduction<br/>AutoFone was established almost twenty years ago at the beginning of the mobile telephone boom. It was formed by<br/>a dynamic Chief Executive Officer (CEO) who still remains a major shareholder of the company.<br/>AutoFone brought two new concepts to the market. Firstly, it established retail shops where customers could go and<br/>handle the products and discuss mobile phone options with trained sales people. Before AutoFone, all mobile<br/>telephones were sold through the customer directly contacting the telephone network provider (like conventional home<br/>land line services) and were generally aimed at business rather than leisure users. Secondly, AutoFone sold products<br/>and services from all the four major network providers licensed by the government to provide telecommunications<br/>services in the country. Previously, customers could only choose products and services from within one network<br/>provider’s range. AutoFone allowed customers to choose products and services across the range of the four providers<br/>and reflected this in the company’s motto ‘ethical advice: the customer’s choice’.<br/>In 1990, AutoFone signed a thirty-year supply contract with each provider. Although, in retrospect, these deals were<br/>on commercially favourable terms for AutoFone, the network providers were happy to agree these deals because none<br/>of them believed that mobile telephones could be successfully sold through retail shops. However, speaking in 2003,<br/>the managing director of one of the networks suggested ‘that AutoFone had got away with incredible profit margins’<br/>when they signed the deals in 1990. The four network providers themselves had re-signed twenty-five year licence<br/>deals with the government in 1995. Under the terms of these deals, licences will be restricted to the four current<br/>providers until their renewal date of 2020.<br/>Retail shops Division<br/>AutoFone currently has 415 shops around the country. To reduce costs most shops are on the edge of (but not in)<br/>the main shopping area of the town they serve. It is usual for AutoFone to sign a fifty-year shop lease in return for<br/>low initial annual rental and a rent-free period at the start of the lease while the company fits out the shop to reflect<br/>AutoFone’s corporate image. In 1997, AutoFone floated on the country’s stock market to assist the funding of further<br/>shops and so continue its organic growth. The national coverage of its shops, the publicity generated by its CEO and<br/>a successful television advertising campaign culminated, in 2005, with it being rated by consumers as one of the top<br/>20 brands in the country.<br/>The CEO of AutoFone established the retail shops along, in his words, ‘entrepreneurial lines’. He regards each shop<br/>as an independent business, having to achieve a profit target but without being closely monitored within these targets.<br/>He believes that the company is ‘about providing opportunity to its employees, providing them with autonomy and<br/>responsibility to achieve their goals. It is not about monitoring them every hour of the day, stifling creativity and<br/>enthusiasm.’ To support this approach, sales staff are given a relatively low basic salary with a substantial element of<br/>profit-related pay linked to the profit targets of the shop. Commission is also paid to sales staff who successfully sell<br/>mobile phone insurance to the customer. Each shop is relatively small, usually employing three or four people.<br/>In recent years the CEO has been increasingly involved in television, sports promotion and charity work. At AutoFone<br/>he has established a strategic planning committee of senior headquarters managers to develop and implement the<br/>company’s business strategy. This committee includes the two longest serving board directors. The strategy still<br/>continues to have at its heart the central business idea of giving independent and impartial advice to customers so<br/>that they can choose the best equipment and network for their needs.<br/>Marketplace trends<br/>Since AutoFone’s arrival into the market, two significant trends have emerged:<br/>(i) The licensed network providers have opened their own retail stores, usually in city centres. AutoFone has reacted<br/>to the opening of these shops by stressing AutoFone’s independence and impartiality. Only at AutoFone can<br/>impartial advice be received on all four competing networks and their supporting services. The CEO now refers<br/>to this as ‘our central business idea’ and, as well as being core to their strategy, it is heavily emphasised in all<br/>their promotional material.<br/>(ii) Mobile phones have become more sophisticated. Many now offer integrated cameras, mp3 players, web<br/>browsers and e-mail facilities. AutoFone offers these products in both its shops and through its Internet operation.<br/>Mobile phones are either purchased outright or provided on monthly contracts. The minimum contract period<br/>with the network provider is usually twelve months.<br/>2<br/>AutoFone has itself established its own Internet division, AFDirect, as a separate division within the group. It has also<br/>established an insurance division (AFInsure) offering insurance to cover loss or damage to mobile phones purchased<br/>from the company. Revenue earned from each division, analysed by the age of the customer, is shown in table 1.<br/>Table 1: Analysis of AutoFone Sales: 2007 (all figures in $m)<br/>Age of customer<br/>Under 15 15–25 26–40 41–60 Over 60 Total<br/>Division AutoFone retail shops 5 90 60 120 65 340<br/>AFDirect 0 15 20 8 2 45<br/>Total sales of mobile phones 385<br/>AFInsure 0 1 3 7 3 14<br/>Group total 399<br/>Analysts agree that growth in the mobile phone business is slowing down and this is supported by the figures given<br/>in table 2 showing revenue from sales (both retail and Internet) for AutoFone and its competitors, the four licensed<br/>network providers, for the period 2003–2007.<br/>Table 2: Market Analysis (all figures in $m) of sales of mobile phones<br/>Company 2007 2006 2005 2004 2003<br/>AutoFone 385 377 367 340 320<br/>NetAG 350 348 345 340 305<br/>09Net 390 388 380 365 350<br/>PhoneLine 315 315 315 305 300<br/>NetConnex 295 295 294 290 285<br/>Total 1,735 1,723 1,701 1,640 1,560<br/>However, while the AFDirect and AFInsure divisions are prospering, there are increasing problems in the retail shops<br/>division. Profitability has been declining over the last few years (see table 3) and this has had a demoralising effect<br/>on shop employees. One shop manager commented, in his exit interview, that the profit targets were unattainable in<br/>the current market. ‘They might have been appropriate in 1997, but they are not in 2007.’ Staff are particularly<br/>demoralised by spending time explaining a particular product to a customer who then leaves the shop and buys the<br/>product cheaper on the Internet. They have to wait for it to be delivered (usually two or three days) but they are<br/>prepared to do this to gain the lower prices offered by the direct Internet-based companies, including AFDirect. It is<br/>also increasingly common for customers who have bought from AFDirect to take their phones to AutoFone’s retail<br/>shops for support and service. This activity is not recognised in the shop employee’s reward package.<br/>AutoFone’s central city branch<br/>Despite the overall decline in the profitability of the shops, one branch has continually met or exceeded its profitability<br/>targets and is held up by the CEO as an example of best practice – proof that the company’s approach to mobile phone<br/>selling can still be profitably applied. This is the central city branch in one of the country’s most prosperous cities.<br/>The CEO arranged for three members of the strategic planning committee to visit the shop, posing as customers, to<br/>investigate the reasons for the shop’s success. They found the staff very friendly and helpful. However, they also found<br/>that they were guided towards products and services which had higher profit margins. Further investigation showed<br/>this always to be the case and so customers were sold products which were profitable to the shop, rather than those<br/>best suited to the customer’s needs. On receiving this information, AutoFone’s board concluded that this was unethical<br/>as it compromised their central business idea which stressed impartial advice to guide the ‘customer’s choice’. The<br/>manager of the shop was reprimanded and asked to adhere to company policy. He resigned soon afterwards, followed<br/>by his two assistants. The shop is currently run by temporary staff and profitability has significantly dropped.<br/>Future strategy<br/>The two longest serving directors on the strategic planning committee are increasingly concerned about the company’s<br/>decline in profitability (see table 3). They have written an internal paper suggesting that the retail division should be<br/>sold off and that AutoFone should re-position itself as an on-line retailer of phones. They believe that the retail shops<br/>business model is no longer appropriate. They argue that a company concentrating solely on Internet sales and<br/>insurance would be a ‘smaller but more profitable and focused’ business. The CEO is strongly opposed to this<br/>suggestion because it was the shop-based approach to selling mobile phones that formed the original business model<br/>of the company. He has a strong emotional attachment to the retail business. The two directors claim that this<br/>attachment is clouding his judgement and hence he is unable to see the logic of an ‘economically justifiable exit from<br/>the retail business’.<br/>3 [P.T.O.<br/>Table 3: Extracted Financial Information for AutoFone (retail shops division only)<br/>Extracted Financial Information (all figures in $m)<br/>Extracted from the Balance Sheet<br/>2007 2006 2005 2004 2003<br/>Total non-current assets 143 140 134 128 123<br/>Current assets:<br/>Inventories 345 340 335 320 298<br/>Trade receivables 1,386 1,258 1,216 1,174 1,120<br/>Cash and cash equivalents 345 375 390 400 414<br/>Total current assets 2,076 1,973 1,941 1,894 1,832<br/>Total assets 2,219 2,113 2,075 2,022 1,955<br/>Total shareholder’s equity 150 155 160 165 169<br/>Non-current liabilities:<br/>Interest bearing long-term loans 55 50 45 40 35<br/>Other provisions 16 15 13 13 10<br/>Total non-current liabilities 71 65 58 53 45<br/>Total current liabilities 1,998 1,893 1,857 1,804 1,741<br/>Total equity and liabilities 2,219 2,113 2,075 2,022 1,955<br/>Extracted from the Income Statement<br/>2007 2006 2005 2004 2003<br/>Revenue 340 337 332 320 305<br/>Cost of Sales 250 252 230 220 205<br/>Gross Profit 90 85 102 100 100<br/>Wages & Salaries 39 38 37 35 33<br/>Other expenses 40 38 35 30 30<br/>Interest payable 4 4 3 3 3<br/>Total 83 80 75 68 66<br/>Net Profit before tax 7 5 27 32 34<br/>Tax 2 3 5 4 4<br/>Net Profit after tax 5 2 22 28 30<br/>Extracted from annual reports<br/>Number of employees 1,400 1,375 1,325 1,300 1,275<br/>4<br/>Required:<br/>(a) Using an appropriate model or models, analyse the competitive environment of AutoFone’s retail shops<br/>division.<br/>Note: requirement (a) includes 2 professional marks. (20 marks)<br/>(b) AutoFone’s CEO is anxious to develop a rational and well argued case for retaining the retail shops division.<br/>Write a briefing paper for the CEO to submit to the strategy planning committee explaining why the retail<br/>shops division should continue to form a key part of AutoFone’s future strategy.<br/>Note: requirement (b) includes 3 professional marks. (15 marks)<br/>(c) The AutoFone retail shops division faces problems in remaining faithful to the original business idea of offering<br/>impartial advice to customers and developing an appropriate rewards system for its staff.<br/>Evaluate what changes the AutoFone retail sales division should consider making to both its business idea<br/>and its rewards system. (15 marks)<br/>(50 marks)<br/></p> 谢谢！！！！！！ ding <p>谢谢，正在找这个答案</p>正在找答案,谢谢啦!
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