SEEN MATERIAL

INTRODUCTION
Savior Box Limited (SBL), a private limited liability company, was established in 1974 by James Mensah, a Chemist, who had spotted the opportunity to distribute Over the Counter (OTC) drugs in his local area. James had no ambition to extend the business, seeing it as a means of making enough money to enjoy life with his family. When James retired, his son Edwin Mensah who has been associated with the business since childhood, took over. Edwin has known most of the staff, suppliers and local customers for much of his life.

In the last ten years Edwin took over, the business has grown into a pharmaceutical empire with manufacturing, retailing & wholesale distribution and export. It still focuses on pharmaceutical products but now supply companies across the whole of West Africa and beyond. In recent years, he has appointed six directors, including his father, to help him run the increasingly complex organisation after retirement as a non-executive director.

SBL’s BOARD OF DIRECTORS

James Mensah, Non-Executive Chairman
James is a retired business executive who established SBL and worked for many years before his retirement. James was appointed in 2018.

Edwin Mensah, Chief Executive Officer
Until he took over from his father in 2010, Edwin was in charge of the retail and wholesale distribution division of SBL.

Debora Dede Boateng, Chief Financial Officer
Debora was a Senior Accountant with a large commercial food chain before she was appointed to SBL’s Board. She is a qualified accountant. Debora was appointed in 2018.

Gladys Yaa Noye, Director of Overseas Operations
Gladys is a qualified Pharmacist and a Chartered Marketer with specialisation in pharmaceutical products, marketing and distribution. She has worked in several countries with extensive overseas experience. Gladys was appointed Director in 2018.

Linda Adwoa Opoku, Manufacturing & Commercial Director
Linda has held several senior positions in major quoted companies, including Director of Human Resources in one of SBL’s competitors. Linda joined SBL’s Board in 2018.

Joana Ama Fynn, Human Resource Director
Joana trained and practised as a human resource manager in a large production company before joining SBL as a senior HR Manager in 2014. She was promoted to HR Director in 2018.

The Directors of SBL are having sleepless nights and wondering the best solution over the following issues, which they only provided as insight from the latest board minutes summarised below for reason of confidentiality:

• Board remit and effectiveness
• Evolutionary (not revolutionary) change
• The digital opportunity
• Greater need for hands-on pharma experience
• Winning in emerging market

Edwin is aware that the business world is changing rapidly around him, and he needs to be updating the culture, structure and technology used in the business. His decision to appoint the directors two years ago has resulted in a different approach to business and change in the business culture but unfortunately not improving the bottom line, profit. Edwin and the directors agreed at an earlier board meeting that some sort of strategic review was needed. Since none of them had any experience in structuring such an exercise, they decided to obtain an expert to help from outside the business. Blessed Consulting agreed and sent Bismark Guy to dedicate four months on a full time basis for the assignment effective February 2021.

Bismark Guy joined a large West Africa bank after graduation from University as a trainee Accountant. During his first eighteen months with the company, he completed his Institute of Chartered Accountant Ghana (ICAG) examination and, having worked on a variety of projects, was able to gain the experience necessary to award him the designation CA. Having qualified, Bismark was keen to develop his expertise in a wide range of businesses and so left the bank to join a management consultancy firm. Blessed Consulting is based in a country in West Africa but with clients all over the world. His work centred around short project re-imaging in a variety of industries. He advised on best fit organisational structure, governance, improvement to planning and control processes, and was often involved in implementing organisational restructuring (re-imaging).
Bismark enjoyed the opportunity to work on a project that involved reviewing a whole business rather than just one department’s system. During his time with SBL, he carried out a thorough review of the resources, the business development cycle, past business performance, and the business environment in which the company was operating. Recognising that the strategic process ought to be oriented to the future rather than the past, he spent some time talking to the directors, employees and external key stakeholders, including industry competitors.

BISMARK’S INTERNAL REVIEW NOTE OF SBL

SBL is the biggest pharmaceutical company in Ghana. The company is driven by a mission to provide a full range of quality pharmaceutical products at affordable prices and be the preferred supplier in Ghana. With many years of experience in the Pharmaceutical Industry operating as a manufacturer, retailer, and exporter to West Africa’s sub-region.

SBL is a wholly-owned Ghanaian private company.It was founded by Mr. James Mensah as a family business. SBL has made giant strides since the retirement of the founder James Mensah in 2010 and has grown from a single retail outlet into a thriving business entity with its own office complex as headquarters in Ghana, retail & wholesale shops and warehouse facilities across West Africa. SBL also owns a manufacturing plant located in Ghana.

Edwin’s deep insight, knowledge, and experience in the pharmaceutical industry have enabled SBL to continue providing quality and affordable pharmaceutical products to meet everyone’s health needs in Ghana and beyond. SBL has consolidated its position as the biggest distributor of pharmaceutical products with a vast distribution network across Ghana and West Africa’s sub-region. SBL has the largest retail chain of shops, with an ultra-modern pharmacy set up to bring products closer to customers, coupled with perceived exceptional customer service.

Besides the manufacturing of quality and affordable medicine, SBL also has the most prominent Agency representation for multinational pharmaceutical and consumer brands, enabling them to offer the widest range of pharmaceutical and consumer products in Ghana and the sub-region of West Africa.

SBL is made up of three main divisions- Manufacturing, Retailing & Wholesale Distribution and Exports. SBL goes beyond the offering of quality and affordable medicine to offer quality customer service. All SBL staff are trained to put the customer’s needs first with the view of exceeding the expectations of customers. SBL has a staff strength of 500 with 54% in the manufacturing division and the remaining 46% in the other divisions at the end of 2020.

Vision

SBL’s vision is to be a leading pharmaceutical company in Ghana and to become a significant global player by providing high quality, affordable and innovative solutions in medicine and treatment.

Mission

SBL’s mission is to be a globally admired pharmaceutical company, providing excellent quality products to its customers and people worldwide. To dedicate itself for humanity’s quest for longer, healthier, happier lives through innovation.

Corporate Objectives

• Source products and raw materials from reputable organisations that will help the company offer top quality products at affordable prices.
• Engage in continuous improvement of customer service and internal processes through research and development.
• Make SBL products more available and accessible to all its stakeholders.
• Be among the largest indigenous African pharmaceutical companies by 2030.
• Treat the planet with respect.

Core Values:

• Transparency: Honest with their clients when examining the needs of the market with precision to meet all their customers’ needs, provide the highest levels of quality for the company’s services in the field of customer service.
• Integrity: Have a high level of ethics and integrity in the provision of everything they do, promote the principles and work ethics among the company’s employees.
• Quality: Have a passion for excellence in quality products and services in every aspect of their business. Innovation and new features and constantly creating value for customers and employees through teamwork at the company.
• Respect: Have a good feeling of pride and high regard for all employees, attract top talent, and maintain a good continuity relationship.
• Teamwork: Encourage cooperation, advice and promote the spirit of teamwork. The company employees are familiar with the policy of total commitment to quality which will reflect the spirit necessarily when they are doing business.

SBL’s DEVELOPMENT AND GROWTH STRATEGY

In line with its vision, mission and corporate objective, SBL operates three divisions of Manufacturing, Retailing & Wholesale Distribution and Export to ensure efficient and effective operations. The divisions are headed by managers who provided goods and services to other divisions of the same organisation using transfer pricing. This ensures that SBL achieves goal congruence for the entity while not losing sight of each division’s autonomy.

Manufacturing Division

It was established six years ago to maintain a high standard of quality in manufacturing pharmaceutical products. Through the manufacturing division, SBL is able to meet the health needs of all segments of the market with affordable medicine. The manufacturing division of SBL started operation in the year, late 2015. The manufacturing plant is located in the Heavy Industrial area along the coast of Ghana to ensure access to cheap but skilled labour and easy logistics and supply chain management.

Following the report submitted by the consultant, the division noted that the plant is obsolete and not competitive, resulting in higher production cost and an increase in wastage. Additionally, the plant has higher setup cost with spare part not readily available on the local market to support its smooth operation. The plant was procured from a far Eastern country with no back up after-sales service support.

Product range and plant capacity

Currently, there are four product range in their plant, capable of producing on an annual basis and in a single shift the following dosage forms and their quantities as indicated below:

• Capsules – 37 million units: Optimal production capacity 84 million units annually.
• Liquids – 6 million units: Optimal production capacity 24 million units annually.
• Powders – 15 million units: optimal capacity 60 million units annually.
• Tablets – 450 million units: Optimal capacity 2 billion units annually.

Most of the product range are tropical medicine which is SBL’s competitive advantage. SBL’s manufacturing division produces about Two hundred (200) different Finished Pharmaceutical Products for the Ghanaian, West African and Africa markets.

SBL has initiated an ongoing investment program to build a new and fully Good Manufacturing Practice (GMP) compliant facility to complement their current output generation effort. This facility, upon completion, shall increase output generation by about 300 percent with a readily available market to absorb the products.

Quality Policy is also in place with a summary highlighted below:

• Produce safe, efficacious and affordable pharmaceuticals delivered as per agreed quality, agreed quantity and agreed time.
• Satisfy regulatory, statutory and current Good Manufacturing Practice requirements.
• Recruit qualified and experienced personnel and continuously develop their competence.
• Establish and implement quality objectives at all levels of the organisation.
• Institute and maintain a company-wide quality culture.

SBL is also committed to conducting its manufacturing processes to protect the health and safety of its employees, visitors, contractors, stakeholders, and the public. The aim is to remove or reduce the risks to the health, safety and welfare of all employees, contractors and visitors, and anyone else who may be affected by its operations.

Summary of industry best manufacturing practices standard committed below:

• Provide a safe working environment and safe systems of work.
• Ensure the plant and equipment are in a safe condition.
• Provide facilities for the welfare of all employees.
• Provide information, instruction, training and supervision that is reasonably necessary to ensure that each employee is safe from injury and risks to health.
• Have a commitment to consult and co-operate with workers in all matters relating to health and safety in the workplace.
• Commit to improving performance through effective safety management continually.

Retailing and Wholesale Distribution

SBL provides a full range of quality pharmaceutical products at affordable prices to all their customers. This philosophy allows them to contribute to the health needs of everyone in society. They are the largest pharmaceutical retailing and wholesale distribution company in Ghana, with their extensive distribution channels and warehouse facilities nationwide. Additionally, their fleet of over 160 trucks, vans and cars ensure that their products reach every corner of the country. This vital function is performed by its strong team of Medical and Sales Representatives. They work round the clock to ensure the delivery of quality and affordable medicines to every customer at a competitive price.

SBL uses prequalified independent pharmaceutical distributors, retail pharmacies, and chemical sellers to augment its warehouses, wholesales, and retails (pharmacies) to reach its customers/consumers. Government medical stores, hospitals, clinics and private health facilities are key partners to their business value chain.

The planned expansion programme is on course to add new wholesales and pharmacies to the network. Their objective is to get closer to the customer, thereby reducing the cost of doing business and increasing the bottom-line profit.

Export

SBL continue to extend their vast distribution network to provide quality and affordable medicines to other parts of West Africa and the rest of Africa. This is in line with their vision to be among the top ten indigenous African pharmaceutical companies.

Well planned export activities commenced within SBL since the establishment of the manufacturing plant in 2015. Before forming the Exports Division, they had already embarked on several prospective activities in West African countries. The cumulative effect of those activities is the leverage SBL has gained in some West African countries initiated by Edwin after his father’s retirement.

SBL exports have mainly been pharmaceutical products manufactured locally in Ghana. They opened their first wholly-owned subsidiary in Freetown, the capital of Sierra Leone, in September 2017 known as GOOD HEALTH Pharma Limited. In addition, they also operate through accredited distributors in the under listed countries:

• Gambia-PK Pharmaceuticals, formerly OJAY Pharmacy
• Liberia-BEST Pharmacy and PAA Pharmacy Ltd

SBL is also gaining a foothold in the Nigerian market and has completed the registration of some of its brands in that country. Fortunately, Nigeria and Ghana Company laws are similar following the adoption of the ECOWAS market integration treaty. Plans are therefore afoot to establish a subsidiary of SBL in Nigeria. In addition to the above efforts to grow its distribution network across Africa, SBL has started making efforts to operate in Benin and Burkina Faso but their challenge is language and stringent French law.

To gain visibility and aid its mission to provide quality and affordable medicine to other parts of Africa, they participate in international trade exhibitions in several African countries, including South Africa, Morocco, Egypt, and Kenya.

With the results achieved so far, they are confident that SBL is poised to increase its reach and impact in West Africa and beyond. There are plans to enter other Africa countries in the near future, with the test market ongoing. They derive fulfilment from their growing capacity to bring quality and affordable medicines to other African countries.

MARKET POSITION REPORT

SBL is suffering due to the fragmented nature of the markets. Growth rates in most of the divisions served have fallen steadily over the last three years due to external competition from overseas rivals, and SBL is now facing a series of market that is stagnant or in decline. While SBL is still profitable due to substantial market shares, it is unreasonable to expect the situation to continue indefinitely. Zero growth is forecast in the SBL current market for the next four years due to overseas rival aggressive market penetration in Ghana and West Africa.

Over the last ten years, SBL has established itself as the market leader in manufacturing, retailing and wholesale distribution, but this has been hard work. The export has a lot of choices and strong market bargaining power. Margins are reasonable for the export division with growth potential but struggling to compete with the new entrant’s rivals. This sector is encouraging, but the business model is not supporting leveraging the potential for growth since only 6% of the staff effort is directed toward this part of the business. Manufacturing is still causing major problems due to price competition from overseas rivals, making SBL a small fish in a big pond.

COMPETITORS ANALYSIS

Key Companies to Watch

YELLOW PLC
YELLOW PLC is the second-largest local manufacturer in the private sector and the second-largest supplier to the public sector in West Africa. It is among the few companies to supply a wide range of generic antiretrovirals (ARVs), including the triple therapy combination, to the public sector through a highly competitive tender system. Besides operating in Sub-Saharan Africa, the company has more recently ventured into the Indian market for an alternative supply source of cheaper generic drugs and expanding its geographic footprint.

GREEN PLC
GREEN PLC, one of the leading pharmaceutical companies in China, is one of the leading exporters of generics to West Africa. The company’s product range includes vitamins, antibiotics, analgesics, cardiovascular, respiratory, and cerebrovascular medicines. The company focuses primarily on the public sector and has recently won several tenders in teaching hospitals in Ghana.

RED LTD
RED Ltd, a subsidiary of Health Professional PLC., is one of the leading pharmaceutical distributors in Nigeria, handling about 30% of pharmaceuticals sold and distributed across the country. Entering Ghana a couple of years ago, RED Ltd is growing steadily in the Ghanaian pharmaceutical industry. Given the recently formed alliance with BOSTER Logistics (June 2020), the company plans to expand its coverage and further strengthen its distribution network.

SBL FINANCIAL STATEMENTS

Summary Statement of Financial Performance for the year ended 31 December 2020

 

Statement of Financial Position as at 31 December 2020

 

ANALYSIS OF TURNOVER BY PRODUCT GROUP AND AREA

BISMARK EXTERNAL REVIEW NOTE: PHARMACEUTICAL INDUSTRY IN GHANA

Executive Summary

In 2020, the pharmaceutical industry in Ghana was valued at GH¢1.15 billion. It is expected to witness a compound annual growth rate (CAGR) of 21.4% and generate a revenue of GH¢2.06 billion by the end of 2023.

SBL accounted for 5.65% of the total Ghanaian pharmaceutical industry’s revenue in 2020 because of its large size, while others accounted for the remaining 94.35%. The pharmaceutical industry in Ghana is fragmented. In 2020, the generic pharmaceutical segment represented the highest revenue share of 51%, while the branded pharmaceutical segment represented the least. The over-the-counter (OTC) pharmaceutical segment is considerably large in Ghana, constituting 59.34% of the total pharmaceutical industry, attributable to a large number of local manufacturers, particularly in the anti-infectives, analgesics, and multivitamins product segments.

In 2020, the anti-infectives therapeutic segment accounted for the highest revenue share of 30.02% of the total pharmaceutical industry in Ghana. It is expected to witness a high CAGR from 2021 to 2024 and remain the largest therapeutic segment during the forecast period. Although the oncology therapeutic segment accounted for the smallest revenue share in 2020, it is expected to be the fastest-growing segment during the forecast period, given the increasing awareness about cancer in Ghana.

The recent achievement of 84% National Health Insurance Scheme (NHIS) coverage in Ghana in 2020 is expected to result in high growth of the pharmaceutical industry, particularly the prescription pharmaceutical (generic and branded) segment, because of easy accessibility and affordability of medicines. The judicious efforts of the Food and Drugs Authority (FDA) in Ghana to control parallel trading and imports of counterfeit drugs are expected to contribute to the growth of Ghana’s legitimate pharmaceutical industry. Furthermore, the government is also encouraging the local production of essential medicines to improve capacity utilisation and reduce imports.

Market Segment

The Ghanaian pharmaceutical industry can be broadly divided into three main segments: branded, generic, and over-the-counter (OTC) pharmaceuticals. Branded pharmaceuticals include research and patented prescription drugs sold by innovator companies, particularly multinationals, through local distributors in Ghana. Generic pharmaceuticals include prescription drugs produced and imported into Ghana by generic companies from India and China and sold through local distributors. OTC pharmaceuticals include drugs sold directly to consumers without a healthcare professional’s prescription by local pharmacists and chemists.

 

 

 

 

f. Intangible Assets: research and development cost
Intangible assets relate to the development of new products. Since the products are not yet on the market, no amortisation has been recorded.

 

ADDITIONAL INFORMATION

Final Bismark Note for SBL Directors discussion
The note below was obtained as part of Bismark’s engagement with Directors of SBL’s competitors in other to help SBL formulate a sustainable growth strategy. The West Africa region currently enjoys a stable political, legal and economic system. Recent attempts to improve the economy have been largely successful, with inflation projected between 5% – 10% in the past two years. Business taxation is likely to remain at an average of 40%. Government payment shall continue to be the main challenge with the associated negative impact on the businesses’ cash flow since it is the industry’s largest customer.

Summary of Chief Executives Officers (CEO’s) Perspective

• Pharmaceutical companies must understand the similarities and differences in market optimisation strategies to ensure maximum profit and product accessibility by patients.
• GREEN PLC and RED Ltd are the leading Multinational Companies (MNCs) in Ghana because of their decentralised decision-making system and strategic relationship with stakeholders.
• Public tenders are attractive target segments for large revenues and long-term commitment, especially MNCs and foreign market participants.
• Urban centres are expected to be responsible for about 75% of Ghana’s growth over the next 15 years. Thus the regional capital contributed 64% of Ghana’s overall share of the market in 2020.
• Government procurement through competitive tenders is the cheapest despite the process bottlenecks but contributes significantly to the Pharmaceutical Industry’s bottom line.
• Government is the main contributor to the industry’s cash flow problems due to delays in payments after supplies to central medical stores.

Summary of Chief Finance Officer’s (CFO’s) Predictions

• Branded pharmaceuticals are expected to adopt a differential pricing strategy specific to patient segments and geographies in West Africa to make treatment affordable to a large group of patients, thereby significantly expanding their customer base.
• Foreign traders in West Africa are expected to bolster their distribution channels by engaging in strategic partnerships with trustworthy local stakeholders.
• Given the immense growth potential and business opportunities, it is expected that companies would invest significantly in their marketing capabilities, patient awareness programmes, and treatment support services to enhance brand loyalty.

SECTION B

5) Bismark’s four months consultancy service contract was running out of time with so much yet to be done. He then contracted you as a Consultancy Business Support Advisor to summarise his work to enable him meet with the Directors of SBL. He provided you with the following format to use to ensure that all issues reviewed are covered:
i. Title page
ii. Table of contents
iii. Introduction
iv. Executive Summary
v. Body of the report

• Business environment analysis
• Industry background
• Competitor analysis
• Market Analysis
• Operations analysis
• Management Summary
• Financial Performance

vi. Conclusions and recommendations         (20 marks)

BACKGROUND

The Company was registered as Cheetah Investments Limited on 3rd June 2015 and was incorporated as a limited liability company on 7th May 2016. It received its certificate to commence business on 25th September 2016. The company was registered with 20,000,000 shares of no par value out of which 5,000,000 shares has been issued equally to the initial shareholders or promoters, Asebu Amanfi and Asebi Boakye. They decided that each shareholder should nominate his adult child to be appointed as a member of the Board of Directors. They will at all time maintain four individuals as members of the Board and the Chairmanship will alternate between the two shareholders every two years. Asebu Amanfi decided to nominate his daughter aged 18 years, who has just been admitted to a University to be appointed as a member of the Board of Directors. Asebi Boakye decided to nominate his daughter aged 25 years, who has finished a course in animal husbandry in a college in Guanduanaland and has just returned to Ghana, to be appointed as a member of the Board of Directors. They appointed a mutual friend who has been the lead person in assisting them to set up the Hotel as Company Secretary. The question of who should be the Managing Director has come up in most of the shareholders discussions but no firm decision has been taken. They are of the view that the Hotel does not need a Managing Director at this stage of its development. Each of them can play that role as and when needed.

The company was certified and licensed to operate as a Hotel under the name GHANA GOLDEN ONYX HOTEL (GGOH) by the Ghana Tourist Board on 1st January 2017. GGOH became operational on 1st January 2019.

The company’s vision is to be the leading business destination hotel in Ghana and indeed in Africa providing world class hospitality services to its clients. Its marketing catchword is “Local in Character, International in Outlook”. The mission of the Hotel is to offer unforgettable home away from home lifestyle experience to their guests and all who find themselves on its premises.

GGOH became the preferred lodging place for staff of International Organisations and pleasure seekers because of its unique brand of Chalets and Water Front standard rooms.

SERVICES

GGOH provides the following services: Rooms, Bar and Restaurant, Conferences and Meetings, Fitness Centre, Health Spa, Business Centre and other services.

Rooms
There are two (2) exquisite executive deluxe with each consisting of 3 bedrooms and two bathrooms, including a master suite bathroom with Jacuzzis/shower combo. There are also two (2) Apartments available to clients.

There are Nine (9) fully furnished business executive rooms or Villas and each consists of 3 bedrooms, 2 bathrooms, guest washroom, spacious living area, modern open-plan appliance-fitted kitchen, formal dining area, basement garage, combined laundry & storage room, and backyard space for relaxation and entertainment.

The Upper Level of each fully furnished business executive wing has a porch, a walk-in closet with full-length mirrored doors, a spacious end suite sky-lit bathroom, with a two-seater Jacuzzi, and a separate shower. The upper level houses a storage facility, and also features a vaulted ceiling, with wood beams, elegant chandelier lighting, and a beautiful balustrade staircase leading to the lower level.

Each fully furnished Business Executive house has broadband Internet, as well as terrestrial, satellite and pay-per-view television. A telephone and an intercom system, independent air conditioning, water storage and a prepaid utility system (electricity and water) are part of the standard features in each house.

There are 18 serviced suites consisting of 4 standard suites, 4 superior suites, 2 executive suites, 4 deluxe and 4 premium deluxe suites. All suites have appliance fitted kitchenettes, a closet with full length mirrored doors, writing desks, wired and wireless internet and terrestrial, satellite and pay per view flat screen television.

The GGOH Food & Beverage team assist guests who need groceries for self-catering. They help guest prepare a list of items they require, within their advised budget, and have the items delivered to their suite, apartment or executive house. The complete grocery shopping service includes preparation of ingredients by a member of the cuisine team, to make self-catering session truly hassle free.

Bar and Restaurant
This 40 seater restaurant overlooks the picturesque swimming pool. The Restaurant provides an intimate atmosphere for lunch and dinner experience. With an array of delectable dishes, sumptuous salads and divine desserts, it offers food for every mood and occasion.

Notable among the menu are Shrimp Cocktail – a hors d’oeuvre of spicy shrimps in an aromatic cocktail sauce, sublime Chicken Aurora – a delicately spiced serving of boneless chicken, in a creamy mushroom and carrot sauce, served with sauté potatoes or curried rice and an unforgettable Fish Menuniere – fish fillet in a garlic-lime sauce, together with pineapple rice. Another unique feature is a rich menu called Black Lives Matter – a rich chocolate dessert that takes clients on another journey of culinary and gastronomic discovery.
The Restaurant also provides Buffet services for the working class who want a change to a reasonably priced luxury location.

Conference and Meeting
The meeting room is set up to accommodate up to 20 people for board meetings, but is also easily reconfigured for other uses. The 2 Conference rooms with seating capacity of 40 each have audio-visual facilities and Internet services.
GGOH Courtyard is used as a Car Park. Outdoor events are therefore not possible and as such request for such services are turned down.

Fitness Centre
With industry-leading fitness equipment, GGOH’s state-of-the-art fitness facilities provide the perfect opportunity to get in shape, and stay in shape. Opened 7 days a week, the gym has membership plans varying from individual monthly to corporate annual memberships. Residents of GGOH have complimentary use of the gym.

A team of experienced fitness coaches guide clients through a systematic regime of training, advice on the most effective weight loss, muscle toning, muscle gain and cardio programs. They monitor client’s progress carefully, and vary the regimes accordingly to fitness expectations.

Health Spa
GGOH’s Spa provides a distinctive combination of beauty services and body therapy. The tranquil spa environment offers guests an opportunity to pamper both body and senses. Experienced beauty therapists provide guidance to help clients choose the appropriate therapy.

Clients can take a relaxed bath in a Jacuzzi, and enjoy Swedish massage to feel energized. It’s full body super scrub, followed by a thermal clay mud with foam wash and body butter massage leaves a client in a blissful state of relaxation. The signature Facial treatment combines double cleansing, double exfoliation and extra extractions with a blissful micro-buff back polish, and is great for clogged pores, dull lifeless skin and fine lines. Manicure and pedicure treatments, together with styling by hair stylists, nail technicians and make-up artists give clients a dazzling appearance and blooming radiance.

The Spa also offers male grooming services. One can expect a look that is sharp and refined from barbers and stylists. The Groom Facial, with its customized double mask, exfoliation, steam treatment, and face and neck massage, is an absolute must before that once-in-a-lifetime occasion, all in all- a truly royal spa experience.

The Spa Boutique retails skincare, make-up and hair products from premium brands. Also available here are top brands in male grooming. The boutique is the reception for bookings, appointments and information on spa services. The Spa Gift Certificates are also sold at the reception. Spa assistants help clients select the appropriate spa gift treatment or customize a unique one.

Business Centre
GGOH Business Centre handles any Secretarial service from photocopying, printing (black and white and colour), lamination etc. GGOH in addition operate the following business lines: Swimming, Laundry and Patisserie.

MANAGEMENT TEAM

GGOH is managed by the following management team:

Shareholder: Asebu Amanfi
Asebu Amanfi, a self-styled successful businessman, studied Civil Engineering at KUMASI LEGON. He started his career with an IT Consulting Company in the United States after securing an opportunity to work in an exchange programme. He later joined an IT Company in India before branching into IT accessories dealership. He successfully owned and managed this business and made good money until he met his friend, Asebi Boakye. In a conversation with the friend, he realised that they both have a passion for the hospitality business.

Shareholder: Asebi Boakye
Asebi Boakye is a highly successful entrepreneur and business mogul who studied Graphic Designing at KUMASI LEGON. He left for the USA just after school and started a car export and import business. He also undertook short courses on entrepreneurship and mentorship in a business school in the United States.

Marketing Manager: Abdulai Alhassan
Abdulai Alhassan is an experienced Business Development/Marketing professional with several years of Service and Product development experience gained in Multi-national organisations with increasing level of seniority. He has a Bachelor of Science degree in Economics and also holds an MBA in Finance. He also has expertise in Trade valuation/classification of goods and general cargo surveys, customer service training, motivation, research and development, resource planning, performance monitoring and review.

Finance Manager: Nutifafa Amenuveveye
Nutifafa Amenuveveye is a Chartered Accountant (CA) and has obtained professional experience from both public practice and industry. He managed the day-to-day activities of the accounting and finance department of a key player in the IT business sector. He also spent five years in an International audit practice, where he obtained an in-depth understanding of both internal and external auditing procedures and issues, both locally and on the international sphere. He is a seasoned trainer and teacher with a track record of delivering excellent training courses.

HOSPITALITY INDUSTRY IN GHANA
Ghana’s hospitality industry is 4th in ranking for profitability in Africa. Ghana is located on the West Coast of Africa between Cote d’Ivoire and Togo. Although the country has a good economy, aspects of the hospitality industry are rather expensive, especially hotel accommodation and internal and external flights. The reason they are expensive is due to the cost of electricity and water and Investors need to recoup their investment as soon as possible. However, since there are a lot of international travelers who fly into Ghana for training and meetings, this has become a serious market for Ghana.
One of the main reasons for the growth in the hospitality business is the growth of the mining industry in Ghana. Workers who come into the country to work in the local mines and galamsey (illegal mining) business are starting to look for food and entertainment in these areas, which is creating a spin-off business boom. The natural resource mining has brought wealth domestically, creating a larger middle class, which is rare in Africa. Other reasons why this industry has taken off are the stable government and economy, which infers more safety, and the growing middle class in Ghana. Due to the tourism potential and the ability for growth, large hotel chains opened hotels in the year 2016 in Ghana, with other chains opening hotels in 2017. The government has intensified its efforts to clamp down on illegal mining due to environmental concerns and with the support from Civil Society Organisations, this economic activity has seen a downturn in outlook.
The advantages right now for Ghana are that the economy is in a serious growth trajectory. New hotels are being built, investments are being received, and domestic and international travels have been on the rise. All of these aspects are conducive for a large hospitality future. Ghana earns almost the same amount of business from international travellers as it does from domestic travellers. This means money is being spent and earned equally in Ghana, which is a positive sign.
Additionally, Ghana has a variety of tourist attractions such as natural attractions, parks and waterfalls, and they also have castles that can be visited. For foreign travellers, Ghana is also a safer way to visit Africa, since it is not known for high levels of corruption or violence, and the Ghanaian people are friendly and outgoing in helping others. They have love for foreigners. Ghana’s democracy has been stable since 1992 and the country practise multi-party democracy.

The hospitality industry in Ghana covers a diverse range of establishments providing hospitality services in the form of accommodation, food and beverage, conferencing and entertainment. The industry is a vital and important component of the Ghanaian economy. It has gained popularity over the past decade when Ghana became the gate way to Africa and has contributed immensely to the Ghanaian economy.

The accommodation subsector includes hotels, Motels, Apartments and similar places providing short-term accommodation which covers all aspects of the provision of accommodation at camping grounds, caravan parks, guest and holiday houses, flats, student residences and youth hostels.

The hotel subsector comprises hotels, resorts and serviced apartments. Hotels and resorts are establishments which are licensed to operate a public bar and which provide accommodation on a room/suite basis, with a bath/shower and other facilities in most guest rooms, but which do not have full cooking facilities (i.e. hot plates and oven/microwave) in most guest rooms.
Serviced apartments are establishments which mostly comprise self-contained units at the same location and which are available on a unit/apartment basis to the general public for a minimum of one night. The units have full cooking facilities (i.e. hot plates and oven/microwave), refrigerator and a bath/shower and other facilities. All bed linen and towels are supplied and daily servicing (cleaning and bed making) is available through the on-site management.

The subsector also includes private hotels and guest houses with facilities which are not licensed to operate a public bar and which provide accommodation on a room/suite basis, with a bath/shower and other facilities in most guest rooms, but which do not have full cooking facilities (i.e. hot plates and oven/microwave) in most guest rooms.

MARKETING STRATEGY

The Marketing Manager Mr. Abdulai Alhassan penned down the following as their marketing strategy.
GGOH will aggressively market to both international and local clients. At the moment our client base is heavily tilted towards the needs of foreign clients especially Americans who are used to the Villas and Apartment hospitality services.
Our customers are now looking for a different lodging experience that is less expensive in a beautiful ambience. There is therefore the need to build enough suites to meet the increasing demand from our patrons. GGOH will therefore like to secure funding to expand facilities to cater for the need for at least 60 suites and a 100 capacity multipurpose conference facility.
The suite will cost a little more than what is currently being charged but we will offer our customers all the services they need to make their stay memorable. We will offer a food shop that will be able to take special orders daily. Each evening, guests can gather in the GGOH’s compound where there is a swimming pool, drinks and light music.
The competitive edge of GGOH is the service. Our team is properly service oriented and some among the management team have many years’ experience in service delivery.

Each member of the management team has had training in customer service. The staff members have also been trained on all aspects of customer service to make our guest feel pampered.

Customer service is an issue of concern for visitors to third world countries like Ghana and this has been noticed by management and has been placed on a high priority. The culture of not paying attention to details sometimes upset foreigners. Giving preference to foreigners over locals also upsets the middle class.

The Restaurant will add local dishes to the menu. GGOH will also consider outsourcing the non-core business units and concentrate on rooms, bar and restaurant activities. The Car Park will be converted to an outdoor conference set up to cater for large capacity events. Customers will be asked to park outside the GGOH.

GGOH‘S FINANCIALS

Cheetah Investments Limited (CIL) in January 2017 contracted a foreign currency loan of $3,000,000 from ABSTRACT Bank Ghana Limited (ABGL) to complete the GGOH building project. This was after the initial promoters, Asebi Boakye and Asebu Amanfi, had invested $1,000,000 ($500,000 each) in the GGOH building project. However the project took two more years before completion.

Meanwhile the interest and principal payments accrued before the business could commence and also earn enough to pay back its financial obligations. This loan has accrued to a total of $3,500,000 as at December 2018 when the GGOH Project was completed. To secure enough funds to pay back part of the loan, CIL has proposed to sell three (3) of the nine (9) villas to ABSTRACT Investments Ltd (AIL), an investment wing of ABGL for $1,000,000. AIL has proposed to dispose of the three Villas to ready buyers at $400,000 per unit. CIL having the first right of purchase has negotiated with AIL to buy back the three Villas at $350,000 per unit, a total of $1,050,000 if after two years, there is no ready buyer.

Operations for the first year have been very difficult. To maintain good customer service, Management decided to purchase supplies from first class groceries and supermarkets. These are mostly purchased on cash and carry basis. The GGOH Management System has no inventory component. The store keeper uses both manual and excel spreadsheet to manage inventory items.

The Rooms, Food and Beverages components of the GGOH Management System have inadequate controls over access rights. GGOH had struggled within the year 2019 to pay salaries regularly because of cash flow challenges. ABGL in consultation with their shareholders and the promoters of GGOH, decided to freeze interest payment for the year 2019 and spread the interest payment over the remaining credit years thus extending the period from 5 years to 6 years.

Assumptions
The Finance Manager, Nutifafa Amenuveveye has prepared the following financial projections based on the 2019 actual financial performance. The underlying assumptions are:

The year 2020 financial performance would be significantly different from 2019 financial results. This is as a result of effective and efficient internal control systems to be put in place by management. For example occupancy rates and revenue for the years 2020 to 2025 are as follows:

Rooms
The rooms are currently made up of 31 with 50 beds. To be very conservative, he used the average occupancy rate of 55% to project revenues for rooms for the years 2020 to 2025. Below is detailed occupancy rates per day used per room:

OCCUPANCY RATE

This will translate into total revenue of $1,396,656 in 2020. This will rise over the years until the expansion project becomes operational in 2025. The increase year on year will rise significantly as more rooms are added.

The above targets will be achieved through a concerted marketing strategy detailed in a comprehensive marketing plan.

Bar and Restaurant
Bar and Restaurant income is made up of Food and Beverages, Events i.e., Conferences and Meetings and Pool Bar Sales. Income from Bar and Restaurant is projected to be 17% of Room Revenue. This is because the performance of this business unit depends on occupancy. The first year 2019 figures suggests that Food and Beverages Income will be 40% of Bar and Restaurant. By the same projections, Events – Conferences and Meetings income is expected to be 50% of Bar and Restaurant income. Also Pool Bar Income is projected to be 20% of Events – Conferences and Meetings income.

Events – Conferences and Meetings income is related to income generated by Bar and Restaurant during conferences and meetings. To attract more clients, conference and meeting rooms are for free and all catering are done by the Bar and Restaurant unit. With the expansion of facilities expected to be operational in the year 2025, income from this business unit will increase significantly.

Pool Bar stock is well patronised during Happy Hour weekly event organised by GGOH on Friday evenings. Many residents in GGOH’s catchment area have made the Pool Bar a destination of choice during evenings.

Other Income
Other Income is made up of the following: Health Spa, Patisserie, Fax, Gym, Internet Cafe, Laundry, Printing, Swimming, Photocopy and Buffet. The assumptions for the above business units are as follows:

General and Administrative Expenses
General and Administrative Expenditure assumptions are based on 2019 figures.

Payroll
GGOH is expected to reduce the number of staff from 78 to 51 for efficient running of GGOH. The following are the category of staff:

AVERAGE EXCHANGE RATE:
2016 – $1 = GHS4.20
2017 – $1 = GHS4.50
2018 – $1 = GHS4.80
2019 – $1 = GHS5.60
2020 – $1 = GHS5.70
2021 – $1 = GHS5.90
2022 – $1 = GHS6.10
2023 – $1 = GHS6.60
2024 – $1 = GHS7.20
2025 – $1 = GHS7.50

Unseen material (Additional Information)
Officials of ABGL are concerned over the lack of adequate controls and proper governance structure at GGOH and have indicated that they might be compelled to take over the running of the business to ensure the loan is paid back. Key among their recommendations are:
1. Development of a binding code of ethics to be observed by all staff including management;
2. Look for an Institutional Investor to commit funds (equity and or convertible debt) that could be used to service the debt;
3. Institute good corporate governance principles and
4. Prepare a new business plan incorporating new assumptions based on the 2019 actual financial performance.

The initial promoters of CIL also intend to embark on an expansion project which involve building new hotel block of 60 standard rooms and a 100 capacity multi-purpose conference facility which provides a new videoconferencing facility to attract more corporate clients and institutions. This they believe will be an opportunity to increase the business profitability and cash flow. It will also give guests a wide range of choice from luxury apartments and suites, family stay villas and a simple standard room thus catering for the rich, middle class and low income client base. This extension project is estimated to cost approximately $3,450,000.

It is against this background that the shareholders of CIL seek a strategic partner with the financial resources to provide financing options to make it possible for their dream to be realised.

Funding Options
The following are funding options available to any investor interested in partnering GGOH to realise its dream:
a) Pay off the loan of $3,500,000 with ABGL for a 45% equity share in GGOH.
b) In addition to option (1), embark on the expansion project costing $3,450,000 for a further 45% shares in the company bringing the total to 90% controlling interest in GGOH.

NOTE: IGNORE THE EFFECTS OF COVID IN ALL YOUR ANALYSIS

SECTION B

6) As a Business Advisor, you have been contracted by Management of GGOH to prepare a Business Plan to meet one of ABGL’s recommendations. For the purpose of this examination, you are required to prepare an extract based on the following structure:

• Executive summary
• Body of the report
  o Business description
  o Business environment analysis
  o Industry background
  o Competitor analysis
• Operating plans
  o Marketing Plan
• Management summary
• Financial plan (You are expected to incorporate new assumptions based on the 2019 actual financial performance). (20 marks)