Introduction

Bibby Line Group started out as a family-run shipping business. It

was founded in 1807 and since that time the company has grown
to become a global business. It has also diversified into new
business areas, such as financial services and asset management
services, as well as logistics.
Today, Bibby Line Group employs over 5,000 people in 21 countries.
It has a turnover in excess of 1 billion. Despite its size, the Group is
not a public company. It remains in private ownership. The business
is almost wholly-owned by the immediate Bibby family and its family
trust. In 2011 Bibby Line Group received the UK Private Business of
the Year accolade at the National Business Awards.
By retaining a private company structure, successive generations
of the family have maintained control of the ownership of the
business. Shares in a public company can be freely traded
(bought and sold) on the stock exchange. However, shares in a
private company can only be bought and sold with the permission
of the board of directors.
A private company structure also allows the owners to maintain
firm control over the culture and values of the business. The
culture of an organisation is described as the way we do things
around here. An important feature of Bibby Line Groups culture is
inclusiveness. It is recognised that everyone who works for the
organisation has an important contribution to make. This
emphasis on building a family-based business is reflected in the
companys main aim:
The fundamental aim of the business is to invest in and
develop a diverse portfolio of companies the diversity is
there to manage risk and create growth opportunities
which will be handed onto the next generation, and were
currently with the familys sixth generation.
Every business should be based on a set of core values. These
drive everything a business does. Bibby Line Group has defined six
values which it ensures are adopted throughout the organisation:
Positively challenging which is seeing how things it already
does can be done better
Growth through investment
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Curriculum topics covered: Growth as a business strategy
Organic growth Inorganic growth Measuring growth
Owners
Buying shares
Reporting requirements
Raising equity
Public company
Usually owned by large number of shareholders.
Shares can be bought on the stock exchange
from an authorised trader.
Public companies are required by the Companies
Act 2006 to report to shareholders each year, to
hold shareholder meetings and to publish financial
statements that are available for public scrutiny.
Public companies can raise equity through share
issues.
Private company
Owned and controlled by a relatively small number
of shareholders, often members of the founding
family.
Shares can only be bought with permission of the
board of directors.
Private companies are not required to provide so
much information, including details of financial
statements, to the wider public.
Private companies can only raise equity from the
resources of their owners or from private investors.
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Restless momentum which is focused on innovating, using the
people and equity available to develop new products, markets
and services
Making sure that all employees act with real integrity
Nurturing lifetime relationships with customers, suppliers and
employees by developing activities to ensure that they meet
each of the parties objectives
If the organisation can live the first four values then it will be
powered by people and be focused on customers.
This case study looks at the strategies used by Bibby Line Group
to grow the business, whilst retaining its strong family ethos.
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 Groups results by making a contribution
to overheads.
Bibby Line Group has achieved outstanding performance by
continually seeking ways to grow and diversify. One of the Groups
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.
1800s
Shipping line
1980s
Shipping line
Financial services
Logistics
Today
Shipping line
Financial services
Logistics
Asset management
Business services
Offshore oil and gas
project management
Retail
Woodland Burials
Bibby Line Groups growth and diversification
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 Groups business. The
subsidiaries are also expected to grow and, like the overall Group,
this can be achieved both organically and inorganically.
Organic growth
Organic growth is achieved from within a business. It can be from
winning new customers, by increasing sales of existing products
and services and by introducing new product lines. It can also be
achieved by moving into new geographic markets, perhaps by
selling more in export markets. Organic growth is often safer than
inorganic growth. Once a business has acquired a specialism, such
as transporting cargoes by sea, it can be relatively easy to expand,
for example, by sailing on new routes. It can be more difficult to buy
and integrate another existing business into the existing company.
The early history of Bibby Line Group is characterised by organic
growth. Starting with seven ships at the beginning of the nineteenth
century, the company expanded over the next 20 years to acquire
another 18 vessels. Initially it focused on routes to Mediterranean
ports, before expanding to support trade with India, China and, later
still, South America. Its ships carried many different cargoes,
including cotton, sugar, animal hides and many other commodities.
Intelligent companies grow carefully. This means they are
sometimes prepared to sell loss-making or poorly performing
businesses, or realise profits when the value of an asset has
reached its peak. The returns from selling businesses or assets
can then be reinvested in new ventures. Knowing when to sell is
an important business skill. Bibby Line Group sold its fleet of ships
in 2005-07 when the global economy was at its peak. This
provided the company with cash:
to reduce debts in some of its businesses
to reinvest in businesses that were less likely to be hit hard in a
global recession.
This meant that when the global recession occurred in 2008 and
2009, Bibby Line Group was in a healthy position. It was debt-free
and had money available to invest in growth opportunities. Taking
advantage of lower prices of vessels during the recession and
cheaper loans, Bibby Line Group purchased six new ships in
2010-11 as well as diving support vessels. Using its maritime
expertise, the company has been able to develop new businesses
in more specialist sectors of the industry:
Bibby Maritime specialises in providing and operating shallow
water floating accommodation vessels. For example, the
company is providing a vessel that is supporting the
exploitation of natural gas reserves found off the coast of
Australia by housing workers at the onshore terminal.
Bibby Offshore provides dive support vessels for the offshore
gas and oil exploration and production industry. These are used
by divers who are installing, repairing and maintaining sub-sea
oil and gas platforms and pipelines.
These businesses are examples of how the Group has been able
to maintain organic growth in its maritime businesses during a
difficult economic period.
Inorganic growth
Inorganic growth occurs when a company grows by merging with
or acquiring other businesses. Mergers and acquisitions are a
much faster way of growing a company than organic growth.
The company immediately gains the customers and sales of the
acquired businesses, as well as its assets and market position.
However, inorganic growth is a more risky strategy than organic
growth because it involves taking over a new business, which may
have a different culture and way of doing things. It can also be
expensive profitable businesses cannot be acquired cheaply.
The acquisition strategy of Bibby Line Group has enabled the
business to diversify into new product and service areas. As an
example, the Groups distribution business recently expanded its
product and service range by taking over two companies one in
the returnable packaging market and the other providing logistics
to the food manufacturing industry. Logistics involves all the
processes required to move goods from a point of origin to an end
point, such as from a factory to a retailer.
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Merger
Two companies of similar size
join together to create a new
company with new shares.
This is often described as a
merger of equals.
Acquisition
One company takes over
another company by buying
up 51% or more of the
shares in the target
company.
Another example of inorganic growth was Bibby Line Groups
acquisition of Garic Ltd in 2008. Garic is a plant and equipment
hiring company to the construction industry. This is a relatively
young and dynamic company with lots of growth potential.
In 2007, Bibby Line Group entered the convenience retail industry
when it acquired a 51% stake in Costcutter. It later took full
control of the convenience store retailer in 2011. Bibby Line Group
views the convenience retail sector as an excellent long-term
prospect. It plans to support the Costcutter management team in
continuing to put retailers at the heart of the business.
The strategy of diversification has enabled Bibby Line Group to
move into industries with strong growth prospects. For example, in
1982 the company moved into the rapidly growing financial services
market. There were real opportunities in this market. Today, Bibby
Financial Services is the UKs largest independent (i.e. non-bank)
debt factorer. This business provides finance to companies to help
with cash flow. It offers a service to companies that conduct a
substantial number of transactions on a credit basis. Bibby Financial
Services provides finance to these companies against unpaid sales
invoices. The company can use this finance to buy in more
products to sell. Bibby Financial Services now factors over 6 billion
of debt in 14 countries. Since the business was set up by the
Group it has grown organically, expanding into Hong Kong, Sweden
and New Zealand in 2011, and inorganically by acquiring
businesses in the UK and Europe. More recently it has created
new financial products in Australia and Poland.
Measuring growth
There are many measures that a company can use to measure
growth. For example, it can measure it by increased market share,
greater volume of sales or larger profit. Bibby Line Group uses
several ways of measuring the companys growth.
Each of the businesses within Bibby Line Group measures growth
in a way that is relevant to the type of business. For example:
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%).
At a Group level, the growth is measured in terms of its
shareholder funds. The shareholder funds of any business are
simply the value of what a business owns (its assets) minus what
it owes (its liabilities) at any one time.
As a business grows, so too do its shareholder funds. Shareholder
funds at the Bibby Line Group have been increasing for over 10
years and most recently have been growing by 15% annually (over
the most recent three years).
Conclusion
Growing a business is about taking opportunities when they
arise. Historically, Bibby Line Group grew through its expertise in
shipping and carrying out international operations. Over time, this
business expertise was applied in new contexts and the Group
diversified into new products and markets.
As a family company, Bibby Line Group has very strong
traditions and values. At the heart of these values lies a belief in
trusting employees and enabling them to make decisions. This
company culture has enabled it to be creative in looking for new
opportunities. The company focus is on being close to
customers. Armed with this understanding of customers and
their requirements, Bibby Line Group has been able to grow
organically - building on core expertise. Just as importantly it has
been able to engage in inorganic growth moving into new
and exciting lines of business at opportune times.
Bibby Line Group | Growth through investment
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www.bibbylinegroup.co.uk
1. What do you understand by the term business
strategy? (2 marks)
2. Explain the main differences between organic and
inorganic growth. (4 marks)
3. How has the process of acquisition enabled Bibby
Line Group to diversify? (6 marks)
4. Measuring performance helps a business to measure
the effectiveness of its growth strategies. Which of the
measures in the case study do you think are the most
useful? What other ways of measuring growth can you
think of? (8 marks)