CONFIDENTIAL BUSINESS REVIEW

CONFIDENTIAL BUSINESS REVIEW

PREPARED BY GLOBAL CONSULTANTS, INC FOR MR S CLAUS

As instructed, we have conducted a root and branch review of your business to ensure it remains competitive now that the Chancellor has approved plans to end your monopoly on the magical distribution of Christmas presents by 2010.

Over the last five years, we have undertaken on your behalf a major international benchmarking exercise, which conclusively proved that there is no one else who delivers presents using magical reindeer. We also undertook a series of focus groups, which supported empirically the theory that children like to receive gifts which cost them nothing. We then undertook a major competency assessment, which demonstrates that your elves are highly skilled at making anything in the world. The overall conclusion is you are in the right business for you, and are very good at what you do. This is the first time any of our studies has produced such a result; we therefore assume it is a mistake, and are recommending some radical changes in the nature of your business to ensure your competitive survival.

1. Streamline stock control through SAP

We recommend implementing a computerised order processing system to eliminate inefficiencies. In the short term, during a five year transitional period, you will need to recruit 4,000 additional elves to enter all received letters to Santa into the system; it will then print them out again so the elves can see which presents have been asked for by which child. In some cases the system may not precisely match the child’s name to the correct present list, so we suggest recruiting another 5,000 elves to cross check the printouts with the original letters. This will reduce complexity.

Inventory levels remain a concern. You manufacture throughout the year, but items are not despatched until December 24^th. To improve working capital, we suggest you stagger deliveries through the year.

2. Change to a Matrix Structure

It is critical to distinguish your operational lines (present manufacture, magic power generation, reindeer husbandry etc) from your service lines. Unfortunately you don’t currently have any service lines, so we strongly recommend that you create some with names such as Strategic Interfacing, Boundary Scanning and so forth. This will ensure that the main objective of the matrix reorganisation (that every elf has two managers) is achieved.

3. Develop a Mission and Values Statement

We suggest branding yourself with the strapline, “Making Our Presents Felt”. To help unite the workforce behind this inspirational phrase, we recommend putting posters up in the elves’ workshop saying:

“Our mission is to create shareholder value by bringing the warmest possible glow to the cherubic cheeks of children at the lowest possible cost. We will achieve this through rigorously monitoring behavioural standards of customers throughout the year, using state of the art benchmarking to be sure that presents are delivered only to the truly deserving (“Right child, Right behaviour, Right present”).

In all this, we are guided by our core values:

- Warmth

- Jollity

- Rotundity

- Teamwork.”

5. Improve marketing and PR

We applaud your sophisticated use of viral marketing techniques, resulting in a high level of top-of-mind awareness without any need for advertising.

However, reports in some newspapers claim that you are operating a sweatshop, forcing elves to work in cramped and freezing conditions for no wages. If you wish to counter these claims officially, our team of Elfin Resource specialists can provide you with statistics to prove that elves love nothing more than to work for no money surrounded by their little elf friends. You clearly have a highly motivated workforce and, in our view, the fact you are the only employer at the North Pole has no bearing on this at all.

4. Demonstrate Environmental Responsibility

Our research confirms that in avoiding reliance on fossil fuels, Magic Power is the way forward. It is clean and cheap, and produces minimal waste (small amounts of sparkly powder). We are concerned, however, about the level of methane produced by the team of reindeer, and suggest you look at ways of reducing it (corks, possibly).

5. Tighten Corporate Governance

You operate as both Chairman and Chief Executive, which is not advisable in the current regulatory climate. We suggest that you concentrate on the Chairman role, which requires you to sit and say “ho ho ho” at regular intervals, leaving the day-to-day running of the workshop and delivery of presents to a newly appointed chief executive, who could also take care of the point-of-sale activities in department store grottoes. Candidates with the necessary strategic competencies (i.e. a beard) include Sir Alan Sugar and Sir Richard Branson.

Our invoice is enclosed. Please may we also have a Scalextric and a Robo-Raptor. (Sorry, we can’t leave you any sherry out this year as our Tax Department has advised against it.).