Business Case Studies - The Shock Shop Ltd.
The Shock Shop is a medium-sized retailer of electrical goods. It has developed from a family-run business that started up in Bristol and expanded into other major towns. It now has six shops all in the south-west of England. They sell a variety of electrical quipment ranging from personal computers and palmtop computers to stereos and other hi-fi.
Here is a more detailed company profile:
| General information | |
|---|---|
| Product: | A variety of electrical products: personal computers, palmtop computers, music systems and personal stereos, white goods (fridges, freezers, washing machines and dishwashers), televisions, videos and cameras (still and video and all digital models) |
| Market: | Generally specific to the 6 towns it operates in in the South-West. |
| Ownership: | A private limited company with most shares owned by families of the two founders and the founders themselves having 60% between them. |
| Financial Information | |
| Turnover: | £1.75 million |
| Profit: | £148,000 |
| Ratios: | |
Profit margin
: | 8.5% |
|
Gearing (level of debt)
: | 10% |
| Acid Test Ratio: | 0.8 |
|
Return on capital employed (ROCE)
: | 28% |
| Cost structure: | Reasonable indirect costs associated with each individual store, but mainly direct costs from employment and purchase of stock. |
| Marketing | |
| Marketing strategy: | The company relies mainly on passing trade and word of mouth. |
| Average market growth over last 5 years: | The market has grown quite quickly (12% per year) with many new products coming onto the market providing a growing level of demand. |
| Market prospects: | Good. Growth looks set to continue, but recession or economic slowdown could lead to sharp falls in demand. |
| Types of marketing used mainly: | Mainly point of sale but some advertising in local newspapers and magazines. |
| Product | |
| Characteristics: | The demand for the products is very dependent on the state of the economy. When there is a high 'feel-good factor' demand will increase significantly. |
|
Price elasticity of demand
: | Electrical goods retailing is a price-sensitive market and so price elasticity is relatively high. |
|
Income elasticity of demand
: | Income elasticity is also high as people's spending patterns are strongly linked to the level of economic growth. |
Intro | Aquamania | Road Hogs | Musicalia | The Shock Shop | Dairyland