Growth Through Investment A Bibby Line Group Case Study

Page 2: Growth as a business strategy

Choosing the right business strategy can give a company a competitive advantage over its rivals. A strategy is a plan to meet business objectives. These might be to increase profits, to grow the business or even just to survive through a difficult economic period.

A strategy needs to set the scope and direction of a company. The scope relates to what products and services the company produces and what markets it operates in. In recent years Bibby Line Group has extended its scope to branch out into new products and markets. The direction the company has taken has been one of growth. This has been achieved through both organic and inorganic growth. Organic growth comes from growing the existing business by winning new customers and increasing sales.

Inorganic growth involves acquiring or merging with other companies to increase the portfolio.

There are several business benefits associated with a growth strategy:

  • Efficiencies from economies of scale. As businesses grow larger, they may be able to reduce their unit costs. For example, the same information technology system can be used to serve several businesses in the Group rather than just one. Larger companies can buy supplies and materials in bulk and so benefit from discounts for large orders.
  • Control through large market share. Companies with a large share of a particular market can, to some extent, exert influence over the market and their competitors. They can be leaders rather than followers in terms of pricing and other aspects. Smaller rivals will not have the same influence.
  • Security from spreading financial risk. Having a portfolio of businesses enables a company to spread risks. If some subsidiaries have poor results, they can be supported by those areas of the company that are doing better. All businesses in the portfolio help the Group's results by making a contribution to overheads.

A focus on innovation

Bibby Line Group has achieved outstanding performance by continually seeking ways to grow and diversify. One of the Group's values is ‘restless momentum’. This means continually innovating.

Innovation involves the development of new ideas, both for improved goods and services and for new and better ways of working.

This focus on innovation is central to all businesses within Bibby Line Group. Each subsidiary operates independently but all are encouraged to innovate. Each management team is responsible for the achievements of its part of the Group's business. The subsidiaries are also expected to grow and, like the overall Group, this can be achieved both organically and inorganically.

Presentation on theme: "Growth through investment. Introduction to Bibby Line Group Started as a family- owned shipping business on 1807 Group now includes logistics, financial."— Presentation transcript:

1 Growth through investment

2 Introduction to Bibby Line Group Started as a family- owned shipping business on 1807 Group now includes logistics, financial services, asset management, food retail Employs over 5,000 people in 21 countries Annual turnover exceeds £1 billion Remains a privately- owned company Retains control of business and core values Generates wealth for the future generations of the family

3 Bibby Line values Positively challenging - seeing how things it already does can be done better Restless momentum - focused on innovating to develop new products, markets and services Making sure that all employees act with real integrity Nurturing lifetime relationships with customers, suppliers and employees Powered by people and focused on customers

4 Growth as a business strategy Business strategies are wide-ranging and can include: increase profits grow the business survive difficult economic conditions Bibby Line expanded into new markets and products Focus on innovation – new ideas, products, better ways of working

5 Benefits of growth Efficiencies from economies of scale reduce unit costs buy supplies/materials in bulk with discounts for large orders Control through larger market share influence the market and competitors lead rather than follow in terms of pricing Security from spreading financial risk poor results from some parts of business supported by higher performing areas all businesses in the portfolio make a contribution to overheads

6 Organic growth From within a business: Adding new customers or markets Increasing sales New products and services A less risky approach Uses existing expertise and knowledge

7 Organic growth at Bibby (cont) Early Bibby Line characterised by organic growth 7 ships at outset Expanded over 20 years with another 18 vessels Initial routes to Mediterranean ports; expanding later to India, China and South America Fleet of ships sold in 2005-07 (at peak of global economy) to release cash to: reduce debts in some of its businesses re-invest in businesses less likely to be hit hard in a global recession

8 Organic growth at Bibby During global recession in 2008/2009, Bibby Line Group invested in growth opportunities Took advantage of lower prices of vessels and cheaper loans Purchased 6 new ships in 2010-11 as well as diving support vessels Continued to develop new specialised businesses Bibby Maritime – providing/operating shallow water floating accommodation vessels to house workers Bibby Offshore - provides diver support vessels for installing, repairing and maintaining sub-sea oil and gas platforms and pipelines

9 Inorganic growth Involves merging with or acquiring other businesses A faster way of growing a company Gains customers as well as assets and market position A higher risk approach Involves assimilating a different business culture and way of doing things May be expensive

10 Inorganic growth at Bibby Bibby Line Group moved into industries with strong growth prospects Diversified through acquisition into new products and services areas, e.g. The returnable packaging market Logistics to the food manufacturing industry Other examples include: Garic - a young and dynamic company hiring plant and equipment The Costcutter retail chain – with excellent long term prospects Bibby Financial Services – now the UK's largest independent (i.e. non- bank) debt factorer Since expanded organically into Hong Kong, Sweden and New Zealand Grown inorganically by acquiring businesses in the UK and Europe Created new financial products in Australia and Poland

11 Measuring growth Measures include: increased market share greater volume of sales larger profit At Group level, measured in terms of funds available for shareholders Measures need to be relevant to the type of business, e.g.: Bibby Financial Services measures debts factored (up 24% in 2010) and growth in sales (up 25% in 2010) Bibby Distribution measures profit (increased by 21% in 2010) and turnover (increased by 25% in 2010) Garic measures turnover (increased by 36%)

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