1(a) Using Extract B, explain how a change in the size of the home products market

might affect Dunelm.

Dunelm is likely to increase its revenue since market size is set to grow and Dunelm
should benefit from that growth. This is shown in extract b when it says the home
product is set to increase by 2021

(b) Using Extract C, calculate, to two decimal places, the return on capital employed
(ROCE) for Dunelm. You are advised to show your working.

Operating profit/non-current liabilities + total equities x 100

126.9/267.3 x 100= 47.47%

(c) Discuss the benefits for Dunelm of having more than one distribution method.

• A distribution method is how a business gets its product to the end user

• Dunelm has three ways customers can purchase goods – 170 superstores, two high
street stores and on its website Dunelm.com

• Dunelm offers over 30,000 products in store and has an extended product range on its
website

• It also has its own delivery fleet and Reserve and Collect in its stores which will
enable customers who purchase goods on its website to either have them delivered or
collect in store

• All of this enables Dunelm to offer more choice and convenience to its customers
depending on how they like to purchase home products

• By offering different ways to shop, Dunelm may be able to increase its sales of home
products and maximise its revenues

• However, offering multiple ways to purchase its home products will require Dunelm
to maintain both its superstores and online offerings

• This may require further investment to run its own fleet of delivery vehicles,
maintaining its website, all adding to its overall running costs

• Dunelm may have to spend more on buying inventory and warehousing of its
inventory by having more than one way to purchase home products
(d) Assess the likely benefits for Dunelm from offering financial and non-financial
rewards to its employees.

• Human resource strategies include financial and non-financial techniques

• Dunelm offers financial rewards such as paying above the UK NMW

• Dunelm offers employees the chance to purchase shares at a discount in the

business which may result in employees working hard as they own part of the business

• Financial rewards can provide an incentive for employees to stay at Dunelm and can
help to increase productivity levels in the superstores

• Dunelm not only provides financial rewards but offers a range of non-financial
rewards such as the empowering female leaders programme, regular meetings where
employees can consult with management and are informed of events in Dunelm

• Not everyone is motivated by money so by offering a range of human resource

strategies, Dunelm might be able to appeal to all its employees in terms of motivation

• By offering such a wide range of HR strategies, Dunelm may see an overall decline in
labour turnover and a related improvement in productivity and good customer service

• However, offering such a wide range of incentives may add to Dunelm’s labour costs
which could put Dunelm at a competitive disadvantage with other businesses selling
home products

• Management time will be needed to ensure all these strategies are implemented
effectively for all the 9,000 employees

• The effectiveness of offering such a wide range of HR strategies will depend upon how
Dunelm compares to other retail businesses in the same industry or similar industries

• If employees can earn higher wages or have better working conditions in a rival
business, then Dunelm may still have to spend time recruiting new employees
(e) Assess the extent to which Dunelm’s corporate culture contributes to its success.

• Corporate culture is the set of important assumptions that are shared by people
working in a particular business and that influence the ways in which decisions are
taken

• Extract E shows that Dunelm has an open and straightforward culture, with strong
ethics based on the values of the founding Adderley family

• Dunelm monitors its culture twice a year and all employees at Dunelm, including the
Board, are expected to follow its corporate culture

• By having a strong and open culture, employees are likely to be more positive and feel
that Dunelm cares about its stakeholders

• There could be an increase in employee engagement/motivation at Dunelm if

employees see that culture comes from the top down and is valued by the business

• This could result in lower labour turnover and higher productivity

• However, as the size of Dunelm grows it might be more difficult to keep the original
corporate culture in all its 172 stores

• Corporate culture alone does not guarantee the financial success of Dunelm and
there are many other factors which contribute to the success of a business

• The wider economic environment may have more of an impact on the success of
Dunelm rather than its corporate culture

• To be successful, Dunelm must ensure it continues to offer the products and prices
that customers want as well as maintain its original corporate culture
2 Evaluate how cash-flow forecasting could have improved the financial position of a
business such as Jamie’s Italian.

• A cash-flow forecast is a month by month prediction of the timings of expected cash

inflows, outflows and balances for a business

• Positive cash-flow is essential for the survival of a business to ensure that suppliers,
employees and the government can be paid on time

• Extract F states that Jamie’s Italian had run out of cash despite having regular board
meetings

• If the management of Jamie’s Italian had paid more attention to the inflow and outflow
of cash, then it might have been able to have spotted potential cash shortfalls and
taken appropriate steps to fund these shortfalls

• Better use of cash-flow forecasts by the management at Jamie’s Italian might have
been able to predict the changes in the economic climate in terms of ‘What if’
scenarios

• Better use of cash-flow forecasting may have helped the management to see the
impact on Jamie’s Italian of rising wages, increasing food costs and higher rent

• Plans could have been made to deal with these external events

• Better use of cash-flow management could have avoided Jamie Oliver having to invest
a further £13m and borrow £37m from HSBC

• However, no cash-flow forecast is ever 100% accurate despite careful financial

projections

• Restaurant sales may not be as high as expected due to a number of factors which
are beyond the control of the business

• Cash-flow forecasts can be affected by external factors - PESTLE (political, economic,

social, technological, legal and environmental) which may have a negative impact on a
business such as Jamie’s Italian

• Extract F states that there was a perfect storm which resulted in the cash-flow
problem for Jamie’s Italian rather than poor cash-flow forecasting by the management
• Although good use of cash-flow forecasting is an integral part of any successful
business it must be used in conjunction with other management tools such as
quantitative sales forecasting, contingency planning and PESTLE analysis

3 Using Ansoff’s Matrix, evaluate whether the takeover of Graze is a good corporate
strategy for Unilever.

• Ansoff’s Matrix helps businesses to analyse a range of possible growth options by

considering their relative risks

• Unilever is a large conglomerate business with 400 brands in a range of different

consumer markets and countries

• Taking over Graze is an example of inorganic growth and can help Unilever diversify
into the market for healthy snacks as well as acquire a business which is also
established in the direct to consumer channels

• This could help to complement its existing product offering in its Food and
Refreshment division

• This could be a tactical move by Unilever in response to an increase in healthier food

products and is a relatively low risk strategy given its resources and expertise in its food
division

• Extract H shows that there is an increase in the world snack food market that will be
worth $192 800m by 2023 with nuts and seeds accounting for approximately 1/3 overall

• Graze is already an established business therefore giving Unilever a foothold in the

market which could result in higher profits overall

• However, according to Ansoff, diversification can be more of a risk than market

penetration or product development

• Unilever could have developed its own range of healthier snacks rather than spending
£150m acquiring Graze

• Unilever has already acquired three other businesses within three months which may
see the business overstretch itself in terms of finances

• Although Unilever does have products in its food division, there could be culture
clashes between the existing team at Graze and the way things are done at Unilever
• Diseconomies of scale may occur as decision-making will involve Unilever having to
coordinate with Graze and this may make Graze less flexible to react to changes in the
marketplace

• Overall, acquiring Graze may have been a good decision for Unilever’s product
portfolio if it exploits Graze’s technology and e-commerce expertise for other products
in its portfolio