Year 12 IB Extended Essays 2017

Abstract

The aim of this paper is to provide a conclusion as “ to what extent did store expansion and

poor inventory management contribute to the decline of Dick Smith?” This research question

will be based off the subject Business and Management. In order to achieve this I will use the

following sources and methods to answer the research question:

-

McGrathNicol Dick Smith Report.

- News articles. For example, Channel News and News.com.au.

- Business related articles from valid sources such as, Investopedia, Smart Company and

smh.

- I will also use the company’s website as a primary source of identifying the company’s

background information

From the use of these different sources I came to a conclusion that store expansion and poor

inventory management was a large contribution to the collapse of Dick Smith due to the over

expenditure and borrowings from banks to fund the installment of retail stores which led to an

increase of $70m in debt. Furthermore, the company held stock worth circa $316m, which a

large percentage of it was made redundant due to being out of date technology and unsalable.

This issue led to stock write downs and clearance sales which in turn created a loss of cash

inflow and profit. From this, Dick Smith was financially unstable and major suppliers such as

Apple restricted them from purchasing products due to insufficient funds and large money

already owed from prior trade. Furthermore, banks disallowed further loans which were needed

to pay for ongoing costs such as lease liabilities and already existent loans from the initial

investment in retail store establishment. Consequently, it can be noted that the plan of store

expansion and poor inventory management was a large factor that triggered the decline and

overall collapse of Dick Smith.

2