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. Now I‟m going to turn to the current case study, Merbatty, and specifically, give you a helping hand with your analysis. Firstly, I‟ll look at the luxury yacht industry and then, more specifically, Merbatty and its current position.
The luxury yacht industry has primarily been focused on the USA and Europe, which is where most of the key competitors are based and also where the biggest markets have traditionally been located. It is a fast growing market - Showboats International reported industry growth of 28% in 2005, while UK companies, Sunseeker and Princess, achieved 18% and 13%, respectively, in revenue growth in 2006.
There is an increasing trend in the market towards bigger yachts and many industry players are increasing their range in this market. Sunseeker, for example, recently launched its largest motor yacht yet – a massive 37m vessel costing ?12m.
In addition, new markets are ripe for expansion. The emerging economies of China and India have good potential as the number of wealthy individuals increase, and China in particular have building plans which will significantly expand the available marina space. The Middle East is also a key market, and Merbatty are relying upon this for much of their future growth. Dubai, in particular, is undergoing massive expansion and building works including a significant amount of new mooring space.
Most competitors in the market attribute their success to quality, innovation and design, and Merbatty is no different. A recent report by KPMG for the DTI noted that there are 4 critical success factors in the industry. These are:
? Innovation and R&D
? Skills and processes
? Competitiveness and supply chain.
In the unseen, look out for factors that might erode Merbatty‟s competitiveness in these areas and fiercely defend them.
A PEST analysis on the industry, as it relates to Merbatty, might look as follows:
? Threats of political instability in the Middle East affecting the production in the
new Surania facility and their key growth markets.
? Regulations in Surania need to be understood and incorporated into operations.
? As a luxury item, a prosperous world economy offers opportunities for growth, while you might expect sales to fall if their were a worldwide recession. ? Countries with increasing wealth such as China and India offer new market opportunities.
? Foreign exchange risk occurs against the dollar, and the Suranian currency.
? A trend for replacement of yachts every 2-3 years offers an opportunity to retain loyal customers by providing good service, quality workmanship and design, and building customer relationships, perhaps using a customer relationship management system.
? Language, cultural and religious differences in Surania could cause workforce issues.
? Luxury yachts are currently a growing trend amongst the wealthy.
? New technologies such as Computer Aided Design and Manufacture (CAD/CAM)
can help produce faster, more efficient, more luxurious designs.
? Innovation is key to industry success.
As you do your own research on the industry, look at the websites of some of the key
players in the market. In the UK, Sunseeker, have a very smart website, where you
can see videos of their boats and familiarise yourself with the products they sell.
You‟ll notice that their product range bears a striking resemblance to Merbatty!
Princess have a good site which is worth investigating. I would also recommend the
KPMG/DTI report on the industry, which is available online at
„www.dti.gov.uk/files/file27251.pdf‟.This will give you an excellent and detailed
analysis of the industry. Finally, general internet searches on key topics may prove
useful. Doing this, I was able to find an article on Sunseeker‟s HR polices (very
useful given their HR problems) and examples of fraud and alliances in the industry.
Your aim should be to generate a list of 20-30 industry examples, from which you can
pick the most relevant to use in the exam based on the issues in the unseen. Your
target is to include 5, one for each of the 5 diversity marks available.
As you are no doubt aware, a SWOT analysis is a must for the appendices of your
report. You must learn a SWOT before you go into the exam and have practised
reproducing this quickly, so you do not waste time doing it from scratch. You will
earn a mark in the technical section of the marking matrix for including a SWOT, and
a further 1-3 marks, in the application section, for doing it well. To earn these extra marks you must have updated your SWOT for the key issues in the unseen.
Below, you‟ll find my SWOT analysis for Merbatty.
1. Alberto Blanc, the Chairman, has significant skills and experience, a proven track
record, and a great reputation in the industry.
2. Strong past performance, indicating a successful strategy and management team.
The business is, therefore, cash generating.
3. ?171m in cash is available for future investment and, due to being listed and having a low gearing, more could probably be raised in the future.
4. A 99.5% customer satisfaction rating suggests they are successfully meeting
customers stated needs of high quality and service.
5. A recognised, respected brand.
6. Good production facilities, with skilled staff, the latest production technology, in
good locations, including one just about to “go live”. Experience in setting up the US facility, bodes well for both the new Middle East facility and the one proposed for the
7. A worldwide team of agents who are well incentivised both to sell yachts and
1.HR issues – lack of training, HR not used strategically, high staff turnover (20%). This is particularly concerning given the large expansion plans and the difficulty in
the market generally of getting skilled labour.
2. Key supplies are commonly provided by a single supplier. This leaves Merbatty
vulnerable as they are dependent on them. In addition they now have the difficulty of
sourcing a new supplier after Aqua‟s recent refusal to support their new Surania
facility. As such there is signficiant supplier power, particularly given that historically
there were poor supplier relationships (although this is now improving).
3. 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
significant power. Some agents also sell competitors products.
4.Confused roles amongst the directors (e.g. Alberto and Henri) and some lack of
experience (e.g. Jesper & Alain), which may cause conflict and poor decision making.
5.Small market share (8%) may reduce chances for economies of scale.
6. An ambitious 5 year plan, perhaps driven by JKL‟s desire for a medium term return
so they can exit the company for a profit. This may cause Merbatty to take
unnecessary risks and grow too quickly without sufficient resources, skill or cash.
Opportunities - specifically identified in the pre-seen
1.Middle East expansion. This is a rapidly growing market, and Merbatty‟s new plant puts them in a good position to exploit this.
2. Make larger boats. Trends in the market are for larger boats, and Merbatty have recently launched their largest boat ever.
3.Use of new technologies. New CAD/CAM may help produce better designs.
1. Entering other new markets. The fast growing economies of China and India specifically offer good future potential.
2. Vertical integration – this will overcome the supplier power which prevails in the
3. Chartering or partial ownership, opening up new markets for less wealthy
1.Worldwide recession. As a luxury item, sales of Motor Yachts may fall if there were a worldwide recession. In addition people that do purchase may choose cheaper models.
2.Middle East – this is a key market for future expansion yet depends on high growth,
which may not materialise
3.Maintaining quality during expansion – particularly in new overseas facilities where
there will be new staff who potentially lack key skills.
4.New competitors. There are already new competitors entering the market in
Australia and Asia, which may pose increasing threats going forward, particularly as these are the markets in which Merbatty aims to expand.
5.Change in social trends. Yachting may become less popular. It may not longer be the millionaires‟ toy of choice!
My SWOT is necessarily wordy to help you understand each point. Don‟t try and reproduce yours to this level of detail in the exam. Keep to the key points which are relevant to the unseen and ensure each point is made in no more than 2 lines.
Hopefully, I‟ve managed to point you in the right direction for your forthcoming exams. You should now complete your own analysis by applying Ansoff‟s matrix, Porter‟s Generic strategies and value chain and Mendelow‟s matrix to the case. You also need to do some ratio analysis, a business valuation using a variety of techniques and work out the weighted average cost of capital (which you should find is around
15%!). Finally, take as many practise exams as you can, as ultimately it is lack of
good exam technique, which is the downfall of most people who fail TOPCIMA.