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Ayamoun Company Case Study Solved Questions

Ayamoun Company Case Study Solutions with Questions

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AYAMOUN COMPANY CASE STUDY

FILE N1: Development Strategy

The company “AYAMOUNE” was created in 1968 by Amar AZIZ, a former steel engineer. When it was created, it specialized in the manufacturing and marketing of traditional silver jewelry. The company had 6 employees. Sales are made in two own stores and 15 intermediary stores.

The family business relies on mastery of the manufacturing process and product designand marketing. In 10 years, the company’s turnover increased tenfold, reaching 100 million dinars in 1979. This growth is due to an intensive growth strategy, through investment in the mechanization of certain phases of production. production, a training policy and an employee motivation system based on performance.

In 1979, the company had 40 employees, and with its success, director Amar AZIZ decided to launch into the manufacturing and marketing of gold jewelry. On the one hand, the existing know-how and skills allow it to launch into this activity, and the existing production capacities make it possible to carry out additional production of gold jewelry without investments. The manufacturing technology and know-how are the same, the intermediary customers and consumer targets are the same. This situation allows the company “AYAMOUN” to have a synergy of costs and value in order to offer high-finish products at a competitive price.

In 1990, the company became leader in the silver jewelry market with a market share of 20% and led in the gold jewelry market with a market share of 15%. To date, the company has 30 own stores and 150 approved stores (exclusivity contract).

With the opening and liberalization of the Algerian market in 1991, the company had to face new challenges: economic crisis, social and security crisis, competition from importers and the unavailability of a qualified workforce. The advanced age of Mr. Amar AZIZ, pushes him to associate his son Rachid, freshly graduated from France (Master in luxury products). In collaboration, they decide:

  • to launch a training school in craft trades (jeweler, etc.) in 1994
  • the importation and marketing of costume jewelry in 1997, marketed in the usual sales network and through independent distributors.
  • a diversification towards poultry activity (production of chicks intended for broiler breeding) in 1999, with the arrival of his younger brother fresh from the veterinary school of Algiers. This activity is independent from traditional activities and managed by Belaid AZIZ.
  • Creation of a construction activity through ENSEJ for little brother IDDIR, but managed by big brother Rachid. IDDIR has no experience in construction in 2001.

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In 2005, the company’s situation was catastrophic; it can be summed up by the following observation drawn up by a consulting firm in early January 2006:

The company’s turnover fell by 10% on average over the last four years (2001 to 2005), representing only 900 million Dinars in 2005.

  • Stagnation of the turnover of the gold and silver jewelry activity (it represents 40% of turnover) (120 employees)
  • The costume jewelry business is unprofitable, despite double-digit growth (it represents 20% turnover) (20 employees)
  • The school is experiencing negative growth, with colossal losses. It only contributes 5% of turnover. Against 30% of turnover in 1998. (50 employees)
  • The poultry business is taking off, with growth of 25% on average per year, the company becomes leader in its segment, and it contributes 25%. (5 employees)
  • The construction activity is experiencing major problems, it is unable to win major public contracts, growth is very low, a cash flow imbalance, and enormous costs due to non-compliance with project completion deadlines. (40 employees)

The consulting firm recommends that the company’s management:

  • To abandon construction activity in the short term.
  • To review the referencing strategy of the costume jewelry activity as well as the distribution policy, or to create its own specialized store chain or to go only through independent distributors. The firm advises them to take costume jewelry out of their own stores and exclusive independent stores.
  • To transform the training school into an internal practical training academy or to sell it immediately.
  • Increase their investment in poultry activity with a perspective of downstream integration (becoming a producer and distributor of broilers) given that the family has land suitable for the activity and a favorable regional microclimate.
  • Refocus on traditional activity in order to reposition it on the market and ensure its growth, given that the market is growing, driven by an increase in living standards in Algeria, an explosion of marriages, births and demographic growth. .
  • Consider exporting traditional jewelry to the European market, to follow the Algerian diaspora established in southern Europe and take advantage of free trade agreements with the European Union.
  • On the managerial level, the firm is asking to move from entrepreneurial management to a form of managerial governance by calling on a General Director, who will be controlled by a board of directors made up of family members and two consultants. external.
  • To review the organizational structure: from autonomous subsidiaries in the form of SARL, to moving to an SA and adopting a divisional structure (DAS).
  • To consider an export unit directly linked to general management.

We are in 2015, the company “AYAMOUNE group” is completely transformed. It experienced growth in its turnover of 25% on average for the years 2010 to 2014. Its profit increased from 5% to 30% on average per activity. The board of directors has just renewed its confidence in the General Director, and to motivate him to remain in the position, we decide to give him as a reward 5% of the company’s capital and to pay 30% of the profits after taxes to the employees of the company in the form of participation (shares).

You are a third year Bachlor Commercial Engineer student at INSAG, with a view to completing your end-of-study dissertation, you will benefit from the agreement signed between INSAG and the company

“AYAMOUNE” to carry out your internship and your integration into the life of the company.

Under the responsibility of the General Manager, you must support him in the company’s future development plan. In order to introduce you to the difficult job of a business manager, and to consolidate the knowledge acquired during your course at INSAG, he asks you to carry out the following work:

  1. Analyze the development strategies of the company “AYAMOUNE” since its creation:
    1. From its creation date until 1994
    2. From 1994 until 2005
    3. From 2005 to the present.

You must specify the type of strategy, the reasons for failure or success.

  1. To justify the recommendations of the consulting firm in 2005 on the management of different activities through:
    1. Analysis of the company’s activities using a matrix of your choice.
    2. Calculate employee productivity by type of activity
    3. Strategically justify the orientations of the consulting firm
    4. Justify the change in governance and organizational structure of the company.
    5. Why did the cabinet recommend the export of traditional jewelry and the creation of an export unit?
  2. Justify the reasons which pushed the board of directors in 20015 to make such decisions.
  3. In your opinion why the new strategy was a success?
  4. Why the board of directors decided to transfer 5% of the capital to the CEO and 30% of the profits to employees in the form of participation (shares)

Very satisfied with your analysis, the CEO asks you to support him in the strategic diagnosis of the company to create a future strategic development plan. First of all, you must carry out an analysis of all activities on three levels: portfolio balance, financial health, and position of the company on the market.

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FILE N2: Analysis of Strategic Activities

Based on the information available and your knowledge acquired during your BIC training, you will make a diagnosis of the jewelry activity.

Appendix 1: situation of the Algerian economy

After 12 years (2000-2012) of a financial improvement, which allowed the country to have financial ease to make public and private investments, to increase the salaries of employees and retirees, Algeria is entering a new economic situation. very delicate economics. Economic growth remains very weak, foreign exchange earnings stagnate, then drop sharply to reach only 48 MLD dollars compared to 68 MLD in 2010. This drop is due to the fall in the price of oil on the one hand and the drop in production hydrocarbons.

The country’s imports, on the other hand, are increasing sharply (25% average growth over recent years. In 2014 and 2015, the trade balance was in deficit, so the foreign exchange reserve had to be used.

To cope, the government has decided to put in place entry barriers (black list of import products, license and quota for vehicle imports, etc.). The aim is to reduce the import bill and likewise reduce the trade balance deficit.

The legal environment is also in focus, with the change of ministers, the rules of the game change quickly, which creates a climate of instability and a lack of visibility. (Example: freezing of vehicle imports, change of specifications, etc.).

Socially, despite the great efforts made by the government in past years (housing program, Ansej, CNAC, etc.) social discontent is back (strikes by teachers, health officials, employees of certain companies, road blockages , riots in certain large cities of the country Ghardaïa, Tiaret,…).

The purchasing power of households, which experienced real progress in the years 2000 to 20010, is put away by almost double-digit inflation, added to that the devaluation of the Dinar against the Dollar and the Euro. Over the last two years, the Dinar has lost 40% of its value against the Dollar. However, most of society’s needs are met by importing goods and services.

Despite this situation, the 2014-2019 development program is almost maintained. The housing program is relaunched, weddings are increasing, and so are the number of vacationers.

On a technological level, Algerian players are increasingly connected. The launch of 4G, the generalization of ADSL, electronic payment, the development of ICT, etc. allows economic players to have access to the latest technologies.

Appendix 2/ situation of the jewelry market

Algeria is by tradition a country of jewelry, it is enough to mention the jewelry of AITH YENNI, CONSTANTINE, TLEMCEN, BATNA….

The market represents enormous potential given Algerian traditions (weddings, prestige, fashion, etc.). Generally sales are boosted by marriages and births.

It is a very fragmented market, drowned out by artisans. Rare are companies that are structured.

Market growth remains very strong at 20% in value, despite the increase in raw materials (the price of gold continues to increase on the world market, given that it is considered a safe haven), the Silver price too. Other raw materials too: the corral is becoming rare, plus it is protected by the government, its harvest is subject to authorization. This favored the black market and smuggling, making it expensive. Note that the lack of production of gold and silver in Algeria is strongly compensated by imports of either raw materials or jewelry.

Distribution is fragmented, generally it is direct sales through its own stores. These sales represent 70% of the market. The remaining 30% is made through sales by intermediaries. We are even observing the beginnings of structuring distribution through the launch of Algerian or foreign brands.

In terms of market trends, it is dominated by jewelry with a modern design, even if traditional ones have experienced strong popularity in recent years. The return to traditions and the high number of weddings have stimulated this segment. Exclusively imported costume jewelry is growing very quickly among young people, even among active women under 35.

Competition generally occurs across range and price. Due to a lack of structure, companies generally ignore the marketing approach. The only communication and promotion events are organized by the supervisory authority.

With the arrival of foreign brands we see the emergence of increasingly serious marketing campaigns, and stores with professional merchandising. This is already starting to give ideas to Algerian actors to imitate.

Competition from foreign brands and products (Dubai, Italy, France, etc.) is increasingly significant.

Some Algerian operators have started to explore foreign markets, with real success, but a managerial approach to these foreign markets is required. Simply participating in trade fairs abroad via aid from export support organizations is not enough. But the first results are encouraging.

Noting that the government, through the Ministry of Tourism and Crafts, offers a lot of support for actors who want to invest and develop their activity in this area.

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The market situation:

Global market sales represent 1,500 million dinars for 2014, an increase of 20% compared to 2013.

The following table gives us sales by segment over the last four years in million Dinars.

Segment 2011 2012 2013 2014
Silver jewelry

traditional

155 160 170 200
Jewelry in modern agent 60 75 80 100
Jewelry in        gold traditional 360 410 450 500
Jewelry in            modern gold 390 400 450 550
Jewelry of fantasy 5 10 30 50
Others 60 65 70 100
Total 1500

Market analysis shows that the offer is very varied, although the market in volume has experienced moderate growth, this is offset by very strong growth in value. This is due to increases in jewelry prices but also the upscaling and marketing of jewelry with high value-added pearls and diamonds. The high end is experiencing remarkable growth in volume and value, despite its weight remaining marginal in the overall market.

Appendix 3: internal situation of the AYAMOUN company for the jewelry DAS

Sales of the company “AYAMOUN” for DAS jewelry are doing well overall. The results of the activity for the last years are recorded in the following table:

Segment 2011 2012 2013 2014
Silver jewelry traditional 25 30 50 70
Jewelry in modern agent 5 10 11 15
Jewelry in               gold traditional 30 40 45 65
Jewelry in            modern gold 40 50 65 85
Jewelry of fantasy 1 2 6 12
export 1 3 9 20
Total

The AYAMOUN company has 50 own stores which contribute to 60% of its turnover, the intermediary network with 160 stores contributes to the rest of the turnover. The company only offers high and mid-range products. The sales and marketing director is very strict about respecting the brand image and marketing policy with a customer orientation. In own stores, quality of service is a motto even when recruiting salespeople.

The export unit created has contributed to the penetration of neighboring markets (Tunisia and Morocco) and two European markets, France and Germany, through franchised stores.

The production tool remains very efficient, but production capacities reached 90% utilization in 2014. The workforce is very qualified, the contribution of the academy in internal training either in production or marketing is invaluable. But recruiting new staff is very difficult given the lack of qualified labor on the market and the difficulty of retaining all staff. The production manager uses overtime to meet production plans. The company is experiencing some production disruptions due to poor collaboration between the production department and purchasing, added to that the negotiating power of foreign suppliers and the rigidity of the rules for importing raw materials. Imports must be paid for by an irrevocable documentary credit payable on sight. The quality of service in own sales stores is excellent, the customer dissatisfaction rate is only 3%.

The financial balance sheet of the company is given by the following table (in Dinar):

Active passive
Fixed assets

Operating values

Realizable and available values

8,020,813

17,185,342

24,273,673

Equity*

Long-term debts

Short-term debt

22,363,433

3,489,304

23,627,091

Total 49,479,828 Total 49,479,828

* of which profit 2,348,160

JOB :

  1. Analyze the business environment situation with a model of your choice.
  2. Conduct a competitive analysis of the FCS release activity
  3. Carry out an analysis of the company’s competitive position.
  4. Knowing that the marketing director wants to achieve a growth objective for 2015 of 30% for DAS jewelry. Using the data in the appendices and statistical calculations, produce sales forecasts for 2015 and then make a judgment on the objective. (you must use the least squares method).
  5. Make a diagnosis of the financial situation of the company with the data provided in the appendix.
  6. Make an overall diagnosis of the company, then identify the strategic development directions, as well as the marketing mix plan.

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FILE N3: Commercial Development Plan

The sales director wants to develop his sales through the opening of his own stores in new shopping centers (Cevital, Ardis, etc.). He thinks he can take advantage of regular customers to gain new customers and visibility for AYAMOUN stores. He decides to associate you with the project. As the project requires large investments, he decides to do a test by opening the first store in the Sétif shopping center.

Step A: marketing research study:

The young son of the director (Amirouche, a business student) designed a study intended to test the possible attractiveness of the point of sale among the customers of the Sétif shopping center, the most affluent in the region. The activity of the point of sale would be to offer personalized jewelry and catalog sales. To do this, he asked one of his friends, a business student, for advice and presents his project to you.

Using the study project of young Amirouche, below, you answer the following questions:

Q1: You will highlight the main errors made in:

  • The construction of the sample,
  • Conducting the investigation,
  • Development of the questionnaire.

Q2: propose a new model questionnaire to eliminate the errors of the first one. Question 3: you advise him regarding the counting.

Q4: In particular, the sales director would like to evaluate the percentage of “hot” prospects (compared to all those surveyed), likely to become customers of the point of sale in the relatively short term.

You suggest to his son Amirouche to carry out, based on the questionnaire proposed by you, the appropriate type of sorting.

Q5: what are the sources of information and the information that must be collected to see the legal and regulatory terms for opening a jewelry sales store in Sétif.

Appendix: Study project of young Amirouche

I intend to survey the inhabitants of Sétif and my friend claims that the best, that is to say the most scientific, is “by chance”?

So we have to question people in the street who pass by and who are willing to respond?

As we are free after classes, Tuesdays and Fridays at 6 p.m., we will be able to go there, with 2 friends who will come and help me.

With them, we will be able to “pass” 1000 questionnaires, that sounds good to me, doesn’t it?

I had initially thought only 500 but it is better to double this number to halve the margin of error…

The project is important!

The big problem is that we’ll have to strip everything by hand, it’ll take a long time. Don’t you know a faster way?

Here is my questionnaire: I have taken into account my friend’s remarks and there should be no mistakes. Besides, to save time, immediately after writing, I had a thousand printed, so we can start very quickly.

Quiz:

Hello, Sir (or Madam or Miss), I am doing an investigation into jewelry. Could you answer a few questions?

Q1: How old are you?

Q2: What is your profession? Q3: Are you married or single? Q4: Do you live in Sétif?

Q5: Do you think it would be profitable to create a store where you could choose jewelry from a catalog, and personalize it before purchasing it?

Q6: If this store opens in the new Sétif shopping center, would you frequent it? Q7: In your family, do you have the habit of buying valuable jewelry?

Q8: Have you until now felt the need to treat yourself or offer valuable jewelry? Q9: Do you intend to make any jewelry purchases in the coming months?

Q10: What importance do you give to valuable jewelry in your family?

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Step B: the store’s marketing policy:

After the study project which concluded on the opportunity to open a store in the Sétif shopping center with an area of ​​800 m2, the commercial director involves you in the continuation of the project. He hesitant about the store’s marketing policy to adopt. He asks your opinion on the following elements:

  • Targeting and positioning
  • The name of the brand (keep the AYAMOUN brand or change it)
  • The product policy (assortment), price which would be suitable to respond to the situation of the jewelry market, while respecting the image and culture of the AYAMOUN company.
  • As well as the communication and promotion policy that must be used.

The sales director entrusts you with this phase of the project and awaits your proposals, for this he structures his needs in the form of questions to be resolved.

JOB:

Q1: the name of the brand, should we keep “AYAMOUN” or change it. In this case propose a new name. How can we protect it?

Q2: What is the STP strategy to propose?

Q3: What product policy (assortment) and price

Q4: what communication and promotion policy should be used to make the point of sale known and create traffic to it?

Q5: Suggest a customer loyalty technique that the store can use in the future.

NB: you must argue your choices based on scientific criteria, and relying on the analyzes carried out in the other parts.

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Step C: GRC and break-even point:

The store development marketing plan is ready, the sales director is asking you to help him organize a sales event. It requires your knowledge and skills in GRC and Project Management.

Before the opening of the store on June 1, 2015, the director wants to participate in the craft fair which is held annually in Sétif. This show has the habit of attracting crowds, not only people from Sétif but even residents of neighboring Wilayas (Bejaia, Bouira, BBA, etc.), in addition to professionals in the profession. The show also receives very good media coverage (TV, Radio, and written press). The show takes place from May 15 to 25 each year. Even foreign actors exhibit and frequent it regularly. Generally they come from neighboring countries and Europe.

According to the show review, published each year just after the show, there are on average 1,500 regular exhibitors, 15,000 visitors per day, the average basket of a buyer is 50,000 DA including tax for individuals, and of 500,000 DA excluding tax for professional customers. 10% of visitors are professionals. Each stand attracts an average of 600 visitors/day. The conversion rate is 5% for individuals and 2% for professionals.

The brand rate applied by our company is 60% for sales to individuals, and 40% for professional sales. The VAT rate is 17%.

To participate in the show you must:

  • A reservation at least 2 months in advance.
  • Rent a well-located space.
  • Design the stand
  • Design documentation in two languages ​​(Arabic and French)
  • Prepare logistics: hotel reservation, preparation of entertainment, creation of the stand (subcontracted).
  • Draw up company brochures with the name of the new brand or the old one.
  • Choose two facilitators and train them (among the company’s own store salespeople), they will accompany the sales director during the show.
  • Prepare promotional gifts, for each customer a perfume box with an average value of 2000 DA.
  • Tickets for participation in the end-of-show raffle. A trip for two people worth 200,000 DA/person.
  • Carry out an e-mailing operation 1 month before the show with a follow-up one week before the show.
  • Design a questionnaire for a customer satisfaction study and a prospect sheet. The questionnaire will be administered only to individuals, the prospects sheet to both categories of customer.

The sales director gives you the following specifications:

  • Stand rental: 3000 DA m2/day. The company opted for a 60 m2 stand.
  • The design which took 3 days and its creation of the stand (which costs 5 days) cost 200,000 DA.
  • The night at the hotel costs 8000 DA/person. The team will arrive on May 14 and leave on the evening of May 25 by road using a company van.
  • Meal costs are 600 DA per person. Two meals a day.
  • The sales representatives will each receive 2000DA net salary and 1% of the turnover generated during the show.
  • The commercial director, apart from hotel and meal costs, will only receive a bonus on turnover which is 2%.
  • The overall communication budget including e-mailing is 500,000 DA.
  • Insurance costs 10,000 DA, the services provided (security, WIFI, electricity, etc.) a flat rate of 5000 DA.
  • Note that a 10% discount is offered during the show to individuals, and 15% to professionals.
  • The entertainment budget amounts to 10,000 DA, between the remuneration of a hostess and the entertainment objects.

The sales director entrusts you with the following missions:

Q1: what arguments do you think he can use with management to convince them to finance his participation in the show, knowing that a budget has not been provided for in the business development plan?

Q2: calculate the break-even point and evaluate the forecast result of your future participation. What conclusion can you draw?

Q3: based on the information provided, and on your own experience and estimation, propose to the sales director a management plan for this project which must contain:

  • The different tasks to be carried out and a time estimate.
  • Scheduling of tasks

Finally a PERT diagram, which will allow you to find the critical path. This work will allow the team to optimize project time and costs.

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FILE N4: Export Project

As mentioned above, the company, following advice from the firm, created an export department. The results are more than satisfactory. The turnover is 20 million DA. But with the new culture inspired by the current management, exports are no longer considered as an excess of domestic activity. With a young, competent team, equipped with an international culture (the world has no limits and barriers, taste for challenge, mastery of foreign languages, love of travel and availability), the director wants to pass from a presence abroad through uncontrolled exports (import-export intermediaries), to controlled or semi-controlled export (partnership).

Drawing on the experience of the first years where the company favored opportunities to participate in trade fairs abroad and locally, spontaneous requests through their showcase site as well as the experience of geographical, economic and cultural proximity markets. Tunisia and Morocco, management wants to give the company visibility and an international presence.

Firstly, this will allow the company to have new outlets, to share the risk on several markets, and to anticipate in the medium and long term the saturation of the Algerian market and the economic crisis situation which is coming. within 3 to 4 years.

The director of international development wants to favor the French, German and Italian market. For the presence he thinks that the franchise will be the best solution for the company. For this he is asking you to support him in this new project.

JOB:

Q1: What are the factors that pushed the company to internationalize? Argument your answer.

Q2: analyze the company’s internationalization strategy, while making a scientific judgment.

Q3: what are the advantages and limitations of a company presence abroad through a franchise?

Q4: in a structured note propose a plan that will allow the development director to succeed in his project:

  • In terms of selecting the most potential market.
  • In terms of prospecting for future partners.
  • And finally in terms of marketing strategy.

Following your advice, the export department was able to negotiate with two master franchisors, one in France and the other in Germany. But to manage international logistics, we focus on the means of payment and the payment technique that the company can offer in the negotiation, while safeguarding its own interests but also the interests of the partners. Your skills in business English and law are of great use to the success of the internationalization project.

Q5: Based on your knowledge of FCI, propose the most appropriate payment methods that can be offered, emphasizing their advantages and disadvantages.

Q6: propose two payment techniques adapted to the negotiation situation.

Q7: During the negotiation, certain points must appear in the contract. Suggest to the development director the essential points that should be included in the final contract to protect the interests of both parties and eliminate disputes that may arise in the future.

Q8: after discussion with the director of international development of your proposals concerning questions 5,6 and 7; he decides to entrust you with writing a letter in English to inform the German partner of your company’s first offer.

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