Merbatty An analysis

By Nick Best
Reed Business School
In the August issue, I discussed the two key problems students have when aiming to
pass TOPCIMA; time management and prioritisation !ow I"m going to turn to the
current case study, Merbatty, and speci#ically, give you a helping hand with your
analysis $irstly, I"ll look at the lu%ury yacht industry and then, more speci#ically,
Merbatty and its current position
The industry
The lu%ury yacht industry has primarily been #ocused on the &'A and (urope, which
is where most o# the key competitors are based and also where the biggest markets
have traditionally been located It is a #ast growing market ) 'howboats International
reported industry growth o# *+, in *--., while &/ companies, 'unseeker and
Princess, achieved 0+, and 01,, respectively, in revenue growth in *--2
There is an increasing trend in the market towards bigger yachts and many industry
players are increasing their range in this market 'unseeker, #or e%ample, recently
launched its largest motor yacht yet 3 a massive 14m vessel costing 50*m
In addition, new markets are ripe #or e%pansion The emerging economies o# China
and India have good potential as the number o# wealthy individuals increase, and
China in particular have building plans which will signi#icantly e%pand the available
marina space The Middle (ast is also a key market, and Merbatty are relying upon
this #or much o# their #uture growth 6ubai, in particular, is undergoing massive
e%pansion and building works including a signi#icant amount o# new mooring space
Most competitors in the market attribute their success to 7uality, innovation and
design, and Merbatty is no di##erent A recent report by /PM8 #or the 6TI noted that
there are 9 critical success #actors in the industry These are:
Innovation and ;<6
'kills and processes
Investment
Competitiveness and supply chain
In the unseen, look out #or #actors that might erode Merbatty"s competitiveness in
these areas and #iercely de#end them
PEST analysis
A P('T analysis on the industry, as it relates to Merbatty, might look as #ollows:
Political/Legal
Threats o# political instability in the Middle (ast a##ecting the production in the
new 'urania #acility and their key growth markets
;egulations in 'urania need to be understood and incorporated into operations

Economic
As a lu%ury item, a prosperous world economy o##ers opportunities #or growth,
while you might e%pect sales to #all i# their were a worldwide recession
Countries with increasing wealth such as China and India o##er new market
opportunities
$oreign e%change risk occurs against the dollar, and the 'uranian currency
Social
A trend #or replacement o# yachts every *)1 years o##ers an opportunity to retain
loyal customers by providing good service, 7uality workmanship and design, and
building customer relationships, perhaps using a customer relationship
management system
=anguage, cultural and religious di##erences in 'urania could cause work#orce
issues
=u%ury yachts are currently a growing trend amongst the wealthy
Technological
!ew technologies such as Computer Aided 6esign and Manu#acture
>CA6?CAM@ can help produce #aster, more e##icient, more lu%urious designs
Innovation is key to industry success
As you do your own research on the industry, look at the websites o# some o# the key
players in the market In the &/, 'unseeker, have a very smart website, where you
can see videos o# their boats and #amiliarise yoursel# with the products they sell
Aou"ll notice that their product range bears a striking resemblance to MerbattyB
Princess have a good site which is worth investigating I would also recommend the
/PM8?6TI report on the industry, which is available online at
Cwwwdtigovuk?#iles?#ile*4*.0pd#"This will give you an e%cellent and detailed
analysis o# the industry $inally, general internet searches on key topics may prove
use#ul 6oing this, I was able to #ind an article on 'unseeker"s D; polices >very
use#ul given their D; problems@ and e%amples o# #raud and alliances in the industry
Aour aim should be to generate a list o# *-)1- industry e%amples, #rom which you can
pick the most relevant to use in the e%am based on the issues in the unseen Aour
target is to include ., one #or each o# the . diversity marks available
S!T analysis
As you are no doubt aware, a 'EOT analysis is a must #or the appendices o# your
report Aou must learn a 'EOT be#ore you go into the e%am and have practised
reproducing this 7uickly, so you do not waste time doing it #rom scratch Aou will
earn a mark in the technical section o# the marking matri% #or including a 'EOT, and
a #urther 0)1 marks, in the application section, #or doing it well To earn these e%tra
marks you must have updated your 'EOT #or the key issues in the unseen
Felow, you"ll #ind my 'EOT analysis #or Merbatty
Strengths
0 Alberto Flanc, the Chairman, has signi#icant skills and e%perience, a proven track
record, and a great reputation in the industry
* 'trong past per#ormance, indicating a success#ul strategy and management team
The business is, there#ore, cash generating
1 G040m in cash is available #or #uture investment and, due to being listed and having
a low gearing, more could probably be raised in the #uture
9 A HH., customer satis#action rating suggests they are success#ully meeting
customers stated needs o# high 7uality and service
. A recognised, respected brand
2 8ood production #acilities, with skilled sta##, the latest production technology, in
good locations, including one Iust about to Jgo liveK (%perience in setting up the &'
#acility, bodes well #or both the new Middle (ast #acility and the one proposed #or the
#uture
4 A worldwide team o# agents who are well incentivised both to sell yachts and
support clients
eaknesses
0D; issues 3 lack o# training, D; not used strategically, high sta## turnover >*-,@
This is particularly concerning given the large e%pansion plans and the di##iculty in
the market generally o# getting skilled labour
* /ey supplies are commonly provided by a single supplier This leaves Merbatty
vulnerable as they are dependent on them In addition they now have the di##iculty o#
sourcing a new supplier a#ter A7ua"s recent re#usal to support their new 'urania
#acility As such there is sign#iciant supplier power, particularly given that historically
there were poor supplier relationships >although this is now improving@
1 Agents are independent, so Merbatty lack control over their sales methods and
approach It is the agents who have the key relationships with customers, giving them
signi#icant power 'ome agents also sell competitors products
9Con#used roles amongst the directors >eg Alberto and Denri@ and some lack o#
e%perience >eg Lesper < Alain@, which may cause con#lict and poor decision making
.'mall market share >+,@ may reduce chances #or economies o# scale
2 An ambitious . year plan, perhaps driven by L/="s desire #or a medium term return
so they can e%it the company #or a pro#it This may cause Merbatty to take
unnecessary risks and grow too 7uickly without su##icient resources, skill or cash
!""ortunities # s"eci$ically identi$ied in the "re#seen
0Middle (ast e%pansion This is a rapidly growing market, and Merbatty"s new plant
puts them in a good position to e%ploit this
* Make larger boats Trends in the market are #or larger boats, and Merbatty have
recently launched their largest boat ever
1&se o# new technologies !ew CA6?CAM may help produce better designs
!ther o""ortunities
0 (ntering other new markets The #ast growing economies o# China and India
speci#ically o##er good #uture potential
* Mertical integration 3 this will overcome the supplier power which prevails in the
industry
1 Chartering or partial ownership, opening up new markets #or less wealthy
individuals
Threats
0Eorldwide recession As a lu%ury item, sales o# Motor Aachts may #all i# there were
a worldwide recession In addition people that do purchase may choose cheaper
models
*Middle (ast 3 this is a key market #or #uture e%pansion yet depends on high growth,
which may not materialise
1Maintaining 7uality during e%pansion 3 particularly in new overseas #acilities where
there will be new sta## who potentially lack key skills
9!ew competitors There are already new competitors entering the market in
Australia and Asia, which may pose increasing threats going #orward, particularly as
these are the markets in which Merbatty aims to e%pand
.Change in social trends Aachting may become less popular It may not longer be
the millionaires" toy o# choiceB
My 'EOT is necessarily wordy to help you understand each point 6on"t try and
reproduce yours to this level o# detail in the e%am /eep to the key points which are
relevant to the unseen and ensure each point is made in no more than * lines
Dope#ully, I"ve managed to point you in the right direction #or your #orthcoming
e%ams Aou should now complete your own analysis by applying Anso##"s matri%,
Porter"s 8eneric strategies and value chain and Mendelow"s matri% to the case Aou
also need to do some ratio analysis, a business valuation using a variety o# techni7ues
and work out the weighted average cost o# capital >which you should #ind is around
0.,B@ $inally, take as many practise e%ams as you can, as ultimately it is lack o#
good e%am techni7ue, which is the down#all o# most people who #ail TOPCIMA