Walker Books Profit Planning Exercise 2 
MAB Lecture Illustration: Walker Books Profit Planning Exercise
Walker Books1
Along with his brothers, Ramsay Walker ‘inherited’ Walker Books (Walkers) from his father. Neither
Ramsay nor his brothers had worked full-time in the business. He has spent the last few months becoming familiar with the business. Exhibit 1 highlights Walker and Company’s organizational structure. Ramsay held meetings with the senior staff as well as studying the state of the industry, in general. Ramsay knew the industry was undergoing change: larger publishing houses getting larger through acquisitions and dominating the market; the rapid impact of technology through developments like e-readers; and the financial difficulties confronting some of the major retailers such as Borders2.
Moreover, the size of the United States market seems to have stalled with total US sales estimated at
$23.9b in 2009 compared to $24.3b in 2008; while over the last seven years the industry had experienced a compound annual growth rate of 1.1%3. As a result of his investigations Ramsay developed the corporate strategy and operational plans as follows:
1. The need for a new overall corporate strategy to drive the business combined with a small number of key financial targets
2. The need to develop a number of targeted business strategies to facilitate the execution of the corporate strategy
3. A better planning and budgeting system to facilitate financial analysis of alternate action plans, that when developed, will serve as a management accounting control and evaluation tool.
Each of these is briefly outlined below:
1. Corporate Strategy and Key Financial Targets
Ramsay was clear, that as a niche operator in the book industry, the focus had to be on differentiation. He knew Walkers lacked the economies of scale of the larger publishing houses.
High quality books supported by strong marketing and sales support would be paramount. Ramsay decided to set the following financial targets:
a. Achieve Free Cash
Walker Books1
Along with his brothers, Ramsay Walker ‘inherited’ Walker Books (Walkers) from his father. Neither
Ramsay nor his brothers had worked full-time in the business. He has spent the last few months becoming familiar with the business. Exhibit 1 highlights Walker and Company’s organizational structure. Ramsay held meetings with the senior staff as well as studying the state of the industry, in general. Ramsay knew the industry was undergoing change: larger publishing houses getting larger through acquisitions and dominating the market; the rapid impact of technology through developments like e-readers; and the financial difficulties confronting some of the major retailers such as Borders2.
Moreover, the size of the United States market seems to have stalled with total US sales estimated at
$23.9b in 2009 compared to $24.3b in 2008; while over the last seven years the industry had experienced a compound annual growth rate of 1.1%3. As a result of his investigations Ramsay developed the corporate strategy and operational plans as follows:
1. The need for a new overall corporate strategy to drive the business combined with a small number of key financial targets
2. The need to develop a number of targeted business strategies to facilitate the execution of the corporate strategy
3. A better planning and budgeting system to facilitate financial analysis of alternate action plans, that when developed, will serve as a management accounting control and evaluation tool.
Each of these is briefly outlined below:
1. Corporate Strategy and Key Financial Targets
Ramsay was clear, that as a niche operator in the book industry, the focus had to be on differentiation. He knew Walkers lacked the economies of scale of the larger publishing houses.
High quality books supported by strong marketing and sales support would be paramount. Ramsay decided to set the following financial targets:
a. Achieve Free Cash