KW follows the sound principles of business development established by his father. He prefers to rely on a capital structure which is low geared and has generated organic growth rather than undertaking large takeovers. The last time MW undertook a takeover was 25 years ago when it bought six supermarkets. If a bid is made for FS then it is most likely that KW will wish to offer a share exchange rather than pay any cash. He is acutely aware of competition in the industry within the country and has been advised by the Finance Director that there are two other main competitors which may put forward counter-bids if MW makes an offer for FS.

FS

FS's stores operate within the South West and South East of the country. Approximately 55% of its shares are held by ten major institutional shareholders who have been disappointed in recent performance. These institutional shareholders have been impressed by the success of MW and instructed the Chairman to begin takeover negotiations with KW

Performance of both companies for the last financial year for simplicity, the data supplied below represents the average for each store in the relevant area. All stores for each company are built to a standard layout. On average, FS stores are 20% smaller in terms of area than MW stores.

Tumover Cost of sales (excluding wages) Overheads Salaries

MWFS

North West

$ Million

North East

$ Millions

South West

$ Millions

South East

$ Million

Turnover10.08.06.05.0Cost of sales (Excluding Wages)4.03.02.01.8Overheads salaries1.01.00.70.6Non-supervisory wages1.00.70.70.6Other overheads1.01.11.10.9Local taxes1.00.80.70.6Net Profit2.01.40.80.5Additional informationPer storeNorth WestNorth EastSouth WestSouth EastTotal square metres6,0006,0004,8004,800Average number of customer visits0.3 million.25 million0.15 million0.1 million Managers and supervisors15121412Total staff69565651

The profit attributable to ordinary shareholders in the last financial year was $225 million for MW and $200 million for FS. Inventory is held centrally by each company in its own secure warehouse. It is issued daily to each store. On average, each MW store has an inventory turnover of 2 days while each FS store has an inventory turnover of 3.5 days.

Required:

(a) Produce a SWOT analysis for MW (6 Marks)

(b) Explain how such an analysis can assist the company in achieving its organisational objectives (6 Marks)

(c) In your capacity as Management Consultant for MW, prepare an initial briefing report for the Board's consideration prior to any combination of the two businesses which compares the performance of the two businesses. Your report should include an analysis of the data provided in the scenario by making whatever calculations you think appropriate (8 Marks)