15 May 2010 Board of Directors CeeCee

Dear Board of Directors,

Greetings of Peace! TactiCorp is pleased to submit this proposal in respect to the work that your good office has entrusted to us. In line with this, we are requesting a payment of 2, 000 per day that we will devote for the welfare of your company. Less assured that we will go through with all the materials you had provide and make further investigations. At your notice, we will start digging down all the possible solutions we can provide to ensure the strong position for your company. By engaging with TactiCorp, we can give you the confidence that we will take all the measures to ensure that we will give you the best alternatives about all the problems and proposals that you have presented to us. And even those problems and opportunities which are present and yet no importance have been given, will also be take into consideration. At your convenience, wed appreciate the opportunity to discuss this matter with you. We are anticipating in making a good relationship with your company and in bringing our well-honored public relations, marketing, financial and interpersonal communication skills internally to make your organization continue its strong position in the fashion industry. Thanks for your consideration; we look forward for a possibility of meeting you in nearest possible time.

Sincerely, TactiCorp Cavas, Enrick V. Columna, Maybelle M. Culala, Jean G. Muyot, Precious N. Navarro, Jeffrey

TABLE OF CONTENTS

Covering Letter Addressed to the Board of Directors ....................................................................1

Table of Contents..................2

Introduction..............................................................................3

Terms of Reference........................................................................4

Prioritization Statement...............................5

Discussion of the Problems and Alternative Solutions And Recommendation...7

Conclusion................................9

Appendices SWOT Analysis................................................................................................................16 Table 1: Distributor's Strike.........................17 Table 2: I.T. Failure..........................17 Table 3: Celebrity Marketing.18 Table 4: Expansion into a Jewellery Range.....................................................................18

INTRODUCTION

In 1989 Carla Celli founded CeeCee Company and used a new business model known as fast fashion, essentially replicates the principles of just in time aiming to generate sales in entirely different way. She opened her first shop focusing on up to minute fashion styles for women with pricing features were very similar to higher-end clothing fashion shops. The shop succeeds particularly with young professional women who wanted to wear stylish clothing but who had limited budgets.

As years went through, Carla Celli recruited experienced professionals in the design, finance and logistics area to help implement cost management and at the same time develop the fast fashion model. In 1990, together with Paulo Badeo, a logistic IT consultant, CeeCee implemented the fast fashion model for a greater number of retail shops. At the same year in early 1990s, the company became a favorite among the young professional shoppers in Europe, and by the year 2000, it was then listed in a major European stock exchange, contributing to the generation of cash, enabling a faster roll out of shops. The listing gave CeeCee access to the less expensive debt finance. At the end of 2000, CeeCee had 280 shops across Europe. With all the developments, the company has opened 40 shops each year, having 610 shops across 18 countries at the end of 2008.

CeeCee and other competitors in the same line of business experienced difficulties trading, having low number of customers due to world recession at the end of 2008 and during 2009. The year 2009 was unusual year for the sales of different product lines, where customers preferred smart clothes rather than party clothing.

Behind all the success and drawbacks in its operation, CeeCee still faces problems in some of its marketing strategy, liquidity, possible fallbacks of the fast fashion models they introduced and other concerns.

TERMS OF REFERENCE: Consultancy Support for Prioritization report, Analysis and Evaluation of the Issues facing the Board of CeeCee Company

Introduction

Prioritization is a report used to let the management know what are the issues that needs an immediate solution. It is a strategy that uses sound information for policy making. The recession faced by the Europe, the base country for the operation of CeeCee, is the main reason for preparing such report. Due to the bottleneck set by this instance, it is recommendable for them to address the issues according to their priority and its impact to the companys performance. Objective of the study

The main objectives of the study are To examine the financial and institutional dimensions of CeeCee company; To develop suggestions for improvement and solutions to the problem faced by the CeeCee in relation to the recession they are experiencing. To evaluate the feasibility of the proposals made by the company.

The Consultants are expected to recommend appropriate cost effective decisions and estimates on the cost and profit to be incurred.

More specifically, the Study will: Suggest on what mode of payment should be taken in hiring Kool in the proposed celebrity marketing. Determine whether the company should accept the offer of an outside agency to collect the debts caused by the IT failure or to use their own staff in collecting debts. Recommend whether the CeeCee should expand into jewellery range or not. Propose a solution in relation to the interruption in distribution process due to the distributions strike. Advice CeeCee on what are the proper actions to be taken in relation to the child labor done by their supplier in Asia.

Scope of the study

The study shall entail the following specific tasks:

Task 1: Preparation of Prioritization Report The consultant shall examine the issues faced by CeeCee and arrange them according to priority. Prioritization Report should include issues addressed by the company and issues that they found out while examining CeeCees operation. The effect on income, the cost, urgency and the limited time should be considered by the consultant in making priorities.

Task 2: Analysis of the Issues faced by CeeCee The Consultant shall conduct a comprehensive financial analysis of the issues faced by CeeCee. During the assessment of operation the consultant should observe things to improve and the problems that might occur.

Task 3: Evaluation of the Issues faced by CeeCee The Consultant shall evaluate the issues faced by CeeCee, and give recommendations needed for it to be resolved. Using SWOT the consultant can use the strengths and opportunities against the weakness and threats they seen. Expected output

The Consultant shall produce the following: a) A prioritization report b) A SWOT analysis c) An analysis of the problems and proposals d) An evaluation of issues including recommendation for the problem they experience. e) Tables showing how the consultant arrives on their stated recommendation Schedule and Payments Arrangements

The Consultant shall provide monthly progress reports summarizing progress in this work, outlining problems and constraints encountered, and presenting issues for the Clients decision, as required.

The consultant will be paid for work performed over the contract time period based on a negotiated daily rate, which represents a full 8-hour work day. Required Qualification Knowledge on the companys operation Knowledge on legal, ethical and other business aspect Ability to conduct financial analysis.

PRIORITIZATION STATEMENT

1. Distributors
Strike

- Most crucial issue that immediate action is necessary to minimize losses brought by partially stocked shops. -Although people get boring on this issue, it will seriously damage the reputation of CeeCee. - Major threat to CeeCee because they easily penetrates the market where CeeCee is operating. - Not as important as enumerated above since the problem has been solved. Recovering of losses is the real issue here. -An opportunity should be carried out because it would increase Ceecees total profit. -Though has been always apparent in the operation, a solution must be given to stop the recurrence of this problem . -Least important issue because this is not urgent and its impact on sales is unpredictable.

2. Child Labor
Accusations

3. Value Retailer

4. I.T. Failure

5. Expansion to
Jewellery Range

6. Surplus in
Inventory

7. Marketing
Strategy

PROBLEMS AND ALTERNATIVE SOLUTIONS AND RECOMMENDATION 1. Distributors Strike

Situation A legal ballot for the members of the union is held and work to rule is implemented by the said union in benefit for their members. This means that no union driver will drive a vehicle until it has been fully serviced and repaired. The union is demanding a full service and repair for all of EITs 5,000 vehicles and that each vehicle is given a clean bill of health. Due to the distributors strike these are the problems will occur CeeCee will suffer from lost sales in different shops. The companys reputation as producing very fast turnarounds for its fashion design will be damage. The shops will have shortage in stocks due to the long time it would take before new design clothes to be delivered.

Recommendation CeeCee must investigate why distribution to their stores is not taking precedence over EITs contract with the multinational corporation. Legal advice should be sought to see if compensation and or precedence over the multinational corporation can be obtained from EIT. If there is no assurance from EIT that they can distribute CeeCees products on time, we recommend that CeeCee, for the time affected, should employed another carrier for the distribution of their products in their different stores. CeeCee should make a research in using their idle cash or asset for investing in insourcing distributional operations. In this way, the company may incurred fewer expenses and ensure a quicker lead time from factory to store though it may reduce distributional flexibility. If the strike lasts for more than a month, and theres no other way to deliver the products to the stores certainly, then CeeCee must make sure that 100% of their stores should atleast have 50% of stock in their store because completely empty of stock in a shop could damage CeeCee reputation.

2. Child Labor Accusation

Situation An information coming from a local Asian agent, that substantial number of Asian suppliers have been using child labor to manufacture garments for CeeCee, has reached the knowledge of CeeCee. The agent considers this issue as not so important, for the newspapers have grown bored of such story, having child labor issues commonly reported. In spite of this, the agent still chooses to inform CeeCee about this for he thinks the company has a right towards this information. Up to now this issue has not yet been disclosed to the public.

Recommendation If CeeCee would choose not to disclose the issue to public, it may suffer a damage of reputation, which may further show its effect on a decrease on sales. While if the CeeCee would choose to disclose it, their relationship with the supplier would suffer. Considering the criteria of CeeCee on selecting suppliers and the CSR it has been implementing, a conclusion can be drawn that CeeCee is truly against such unethical operations. But taking into account the large number of Asian supplier who has done child labor, they couldnt just stop their contract immediately for it may instantly reduce the 30% of their supply. To minimize the risk on reputation and on the relationship to the supplier the following are the recommended actions to be taken: Send Paulo Badeo, since he is the one who manages procurements and the selection of supplier, or his appointee for a visit to Asia. He must address this issue to those involved suppliers and ask them to enter an agreement to eliminate such illegal act. Those suppliers must be given an allotted time for them to do some adjustments. A regular monitoring during and after this adjustment must be made, in order to ensure that they are doing what was agreed upon. These monitoring can be made by an appointee of Jereon de Joost or himself, since this issue concerns the ethical responsibility of company in their CSR. Any supplier who has not acted according to the agreement must have their contract with the company ended. CeeCee has already a policy against child labor and other unethical act. The only thing must be improved upon is its implementation. For a long term benefit, a regular comprehensive audit and monitoring must be done in their suppliers especially those

who are not in the Europe. A clear policy on what must be done to those who has done unethical act must be established. 3. Value Retailers

Situation Ceecee had a hard time retaining its customers because of the emergence of value retailers, though they are not considered as direct competitors still they penetrates some of its market. Value retailers offer low cost garments that are imported from Asia which affects customers behavior in buying CeeCees products. The penetration of these low cost products caused deflation to the prices of other competing clothing products.

Recommendation We recommend that the company should create another product line of different brand distinct from the main shop, sold at a price that can compete to the value retailers. Taking this option involves a higher risk, for it is hard for a new business to penetrate a market already filled with a lot of competitors. In order to eliminate this risk, the new brand should carry the name of CeeCee in it, thereby making the customer of CeeCee also a customer of the new brand.

4. I.T. failure

Situation CeeCee invested 10M in a new online sales system at the end of 2009. The system was designed and developed by an outsourced IT company (ProveIT) with support from seconded staff from CeeCees own IT department. Dianne Innes has discovered that when customers had attempted but failed to pay the ordered goods the system still processed the order. She also thinks that 50,000 orders have been processed without payment at an average transaction value of 120.

Recommendation Although the programming error has been corrected, the system should be monitor to ensure that significant discrepancy in the figures wont happen again. The payment processing system must be fully audited before going online to prevent this from happening again.

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We recommend that collection of money should be outsourced to a recovery agency. It will recover more money than the finance department of Ceecee. And since it a specialized agency, it will be more effective in recovering the lost revenue of Ceecee. 5. Expansion to Jewellery Range

Situation Considering that jewelry products are resistant over recession, Carla is confident about expanding their shop into a jewelry range. Aside from that Carla believes that clientele would buy better pieces of jewelry if they were on offer at the time of buying clothing. Due to this improved shopping experience and a variety of jewelry collection, Carla believes that their competitors in the industry of jewelry can be beaten.

Recommendation We highly recommended that CeeCee would expand into a jewelry range. Aside from that, having both clothes and jewelries at the shop could encourage buyers to buy an additional accessory for the bought clothe or vice-versa. Thus making both of the sales of jewelry and clothe higher. Taking this decision involves less risk for it has been proved that jewelry products are recession resistant. But removing the restraints set by the situation, we would like to advice that CeeCee, instead of using the space provided for clothes, should use the space provided for furniture. Aside from being unrelated with clothes, furniture consumes a lot of space in the shop. Through this option more clothes could be sold, a probability of decrease in number of days in inventory could occur and less clothes could be sold at a price lower than cost. 6. Surplus in Inventory

Situation In line with the fast fashion, a policy that slow moving clothing lines should be withdrawn from the shop within 21 days is implemented. However this policy leads to a high number of inventories being sold, at a price lower than its cost, to different distribution channels. This large number of inventories being sold is evidenced by 97 average numbers of days for their inventory.

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Recommendation We recommend that the company should make forecast of demand and limit its production only to the extent of customers demand. This will help the company manage its inventory well and also, to minimize the costs incurred as well as the losses.

7. Marketing Strategy

Situation Juliette Lespere proposed that CeeCee contracts with Kool, a popular European singer of rock music. She thinks CeeCee could be much better with more marketing exposure. But Carla is not impressed, she thinks that word of mouth is all that counts. Kools agent proposed two mode of payment. a.) Fixed payment of 50 000 with a bonus of 150 000 should incremental sales reach 2 million. b.) Royalty basis of 5% of all incremental sales.

Recommendations If CeeCee would approve the proposal of Lespere, the best mode of payment to be chosen would be the fixed payment of 50 000. In every scenario, excluding the incremental sales of 2 million, CeeCee would incur less cost in this option. (See computations) All things being equal, we would not recommend using Kool. The calculations of Lespere shows that only 10% is the chance that the incremental sales of CeeCee would reach 2 million, this represents that the endorsement would only generate 2% more sales for CeeCee. Other things to be considered in changing the marketing strategies are the few serious risks that are to be encountered in using celebrity endorser: Before using Kool as endorsee, CeeCee must evaluate her career so that possible consequences that will affect Ceecees brand will be prevented. Since the behavior of the Kool would reflect on the brand, if she would be involve in a scandal, it is more likely that her endorsement will become liabilities to CeeCees brand. Because Kool is a very well known singer, there is a big possibility that she will overshadow the brand. Instead the audience remembering the brand, it is more likely that Kool will be the one to be remembered.

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 Celebrities manifest a certain persona for the audience. And as for Kool, the image she projects as a singer of rock music is in contrast or she is not in connection with the core market of CeeCee which is the young professionals.

We recommend that Lespere should find out first all the possible impact that the celebrity endorsement will create. And determine whether CeeCee can look for another celebrity with much more applicable personality to promote CeeCees brand. We also recommend taking into the consideration the use of e-marketing as an alternative form of advertisement.

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CONCLUSION

Strengths and Conclusion CeeCees most obvious advantage is their locations, which are the most progressive cities and center of trading. The shops are also spacious to provide customers a comfortable environment for shopping. Aside from these, CeeCee carefully recruits and trains all of its employees to ensure the customer is put first. All employees are ensured to be highly competent for them to be able to produce high quality products, and this is evidently with high turnover. So, despite the competition in the industry and the recent recession, CeeCee still maintain its competitiveness and its product line though decline a bit, if compare with the totality of the industry, it seems it is not that affected. The IT system helps to increase sales and serves as an opportunity in marketing CeeCees brand online. It will allow customers to monitor inventory level of every designs and fashion trends and take response with their reserved product before it is pulled out. It can also create a new market in Asia, for it will be possible them to purchase online through eprocurement. CeeCee is well-known for upholding its stand for its social responsibility evidently that they make sure that their suppliers are also serious in implementing Corporate Social Responsibility. And these serves as an unintentional advertisement, it increases the marketability of the firm and thus, creating a good reputation for the customers. Weaknesses and Threats Though, CeeCee has the big potential to expand globally, and despite its IT advantages it could still be weak in some areas due to the huge span of control. Monitoring the online shoppers will take much of the time of the employees. CeeCee has also too little budget allocated in marketing the product brand compared with the industry. Another is the value retailers which are becoming threat to CeeCee. The customers are choosing their products over CeeCees because they sell their products at a low price. And because of the recession half of the consumers entering shops consider the product price first, before it pays attention to the quality of the product. Another is that the shoppers tend to change their expending habit to fit to their limited budget and change of taste in respect to their choice of clothes. The cost of producing the companys products also changes through times and there is a big possibility that the lease agreement of CeeCee will increase. This change will affect the pricing of the products, which will lead to price competition. Intense price competition is a threat.

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APPENDICES

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SWOT Analysis Strength Weakness

Locations are prime locations Good customer Care Having its own IT system/Information system competence Highly Competitive Having good product line Having strong retail brand Having strong relationship with qualified suppliers Employed Competent personnel Well developed Corporate Strategy Fast Fashion Having good corporate social responsibility Opportunities

Low budget allocation in marketing Renting all shops Unfilled positions in shops/large proportion of part time workers

Threats

Online Shopping New Technolgy Establishing new shops outside the Europe

Increase in numbers of value retailers/indirect competitors Changes in Economy Changes in Shoppers behavior and spending Recession Price wars with competitors

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Table1. Distributors Strike First five weeks 1 2 3 4 5 Second five weeks 6 60.00% 7 70.00% 8 80.00% 9 90.00% 10 100.00% 0.50 0.50 0.50 0.50 0.50 % Sales Lost per Shop 10.00% 20.00% 30.00% 40.00% 50.00% Sales Revenue weekly Sales lost due to strike

57,403.85 57,404.85 57,405.85 57,406.85 57,407.85 Half Capacity

5,740.39 11,480.77 17,221.16 22,961.54 28,701.93

57,403.85 57,403.85 57,403.85 57,403.85 57,403.85 Total sales revenue lost

17,221.16 20,091.35 22,961.54 25,831.73 28,701.93 200,913.48

*Sales Revenue: 2,985,000 Gross Margin: 60.10 %

Table2. I.T. Failure No. of Customer Average Order Recovery Rate Amount recovered before charge and fee Charge Success Fee Total revenue recovered after charge and fee Loss

A. Agency 50000 120.00 0.6 3,600,000.00 14.00 0.05 2,720,000.00 3,280,000.00

B. Finance Department 50000 120.00 0.45 2,700,000.00 14.00 0.05 2,700,000.00 3,300,000.00

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Table3. Expansion to Jewellery Range

Cash flow with consideration discount rate Present Value to the opportunity cost from last sales 1 0.8929 0.7972 0.7118 0.6355 0.5674 -6,720,000.00 914,329.60 5,025,548.80 5,398,291.20 4,819,632.00 6,118,841.60 15,556,643.20 6,720,000.00 8,836,643.20 -6,720,000.00 507,167.20 3,450,281.60 3,991,774.40 3,563,884.00 4,997,659.20 9,790,766.40 6,720,000.00 3,070,766.40

Cash flow with consideration End of Year Cash flow to the opportunity cost from lost sales 0- Initial Cash outlay 1 2 3 4 5 Present Value of Cash Flow Initial Outlay Net Present Value -6,720,000.00 1,024,000.00 6,304,000.00 7,584,000.00 7,584,000.00 10,784,000.00 -6,720,000.00 568,000.00 4,328,000.00 5,608,000.00 5,608,000.00 8,808,000.00

Table4. Marketing Strategy Sales Payment method #1 50 000 + 150 000 if sales reach 2m 50,000.00 50,000.00 50,000.00 50,000.00 50,000.00 200,000.00 Payment method #2 5% of sales 50,000.00 60,000.00 70,000.00 80,000.00 90,000.00 100,000.00

1,000,000.00 1,200,000.00 1,400,000.00 1,600,000.00 1,800,000.00 2,000,000.00

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