MEMO *This case study is for academic purposes. It’s a simulation. DATE: March, 2006 TO: Robert DiNicola, CEO, Linens ‘N Things FROM: Tina Khaladze RE: Turnaround Plan for LNT Executive Summary Maturity of the housewares fragmented industry, projected recession in the United States, changing trends in the marketplace and unclear strategy of Linens ‘N Things are some of the challenges we are facing today. We have fallen behind our competition and have not kept up with the dynamics of the market place. Time has come to reevaluate and redefine our strategy, improve efficiency, raise funds and coordinate all the activities of LNT’s value chain according to the strategy. We need to base our strategy on our competencies, such as our brand name and the quality of our products. We have to go beyond operational efficiency and differentiate ourselves more distinctively to gain competitive advantage. The best option is to choose a focus differentiation strategy, offer high quality products and service and target medium to high income families, mostly echo boomers generation, who are getting married, purchasing homes and need appliances. The best way to capture this audience is through the Internet as this segment spends the third of their time online. It is important for LNT to put our efforts in marketing at this point to raise brand awareness and loyalty. We need funds for advertisement, quality personnel and beautiful store designs. There are several ways to raise funds. First of all, we need to improve our operational efficiency. We should enhance our inventory management process by decentralizing decision- making of product distribution geographically, to customize merchandise according to various locations. Secondly, we should build more distribution centers across the United States to reduce transportation costs. We should also distribute products directly from suppliers to the stores to avoid inventory-holding costs in warehouses. Most importantly, we should retain only high- return stores and close non-profitable ones across the country. This will help us in saving maintenance costs of the stores in bad locations, in focusing on the fewer stores better and improving quality of each store.
Executive Summary Maturity of the housewares fragmented industry, projected recession in the United States, changing trends in the marketplace and unclear strategy of Linens ‘N Tings are some of the challenges we are facing today. We have fallen behind our competition and have not kept up with the dynamics of the market place. Time has come to reevaluate and redefine our strategy, improve efficiency, raise funds and coordinate all the activities of LNT’s value chain according to the strategy. We need to base our strategy on our competencies, such as our brand name and the quality of our products. We have to go beyond operational efficiency and differentiate ourselves more distinctively to gain competitive advantage. The best option is to choose a focus differentiation strategy, offer high quality products and service and target medium to high income families, mostly echo boomers generation, who are getting married, purchasing homes and need appliances. The best way to capture this audience is through the Internet as this segment spends the third of their time online. It is important for LNT to put our efforts in marketing at this point to raise brand awareness and loyalty. We need funds for advertisement, quality personnel and beautiful store designs. There are several ways to raise funds. First of all, we need to improve our operational efficiency. We should enhance our inventory management process by decentralizing decision-making of product distribution geographically, to customize merchandise according to various locations. Secondly, we should build more distribution centers across the United States to reduce transportation costs. We should also distribute products directly from suppliers to the stores to avoid inventory-holding costs in warehouses. Most importantly, we should retain only high-return stores and close non-profitable ones across the country. This will help us in saving maintenance costs of the stores in bad locations, in focusing on the fewer stores better and improving quality of each store.
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MEMO *This case study is for academic purposes. It’s a simulation.
DATE: March, 2006
TO: Robert DiNicola, CEO, Linens ‘N Things
FROM: Tina Khaladze
RE: Turnaround Plan for LNT
Executive Summary
Maturity of the housewares fragmented industry, projected recession in the United States, changing trends in the marketplace and unclear strategy of Linens ‘N Things are some of the challenges we are facing today. We have fallen behind our competition and have not kept up with the dynamics of the market place. Time has come to reevaluate and redefine our strategy, improve efficiency, raise funds and coordinate all the activities of LNT’s value chain according to the strategy.
We need to base our strategy on our competencies, such as our brand name and the quality of our products. We have to go beyond operational efficiency and differentiate ourselves more distinctively to gain competitive advantage. The best option is to choose a focus differentiation strategy, offer high quality products and service and target medium to high income families, mostly echo boomers generation, who are getting married, purchasing homes and need appliances. The best way to capture this audience is through the Internet as this segment spends the third of their time online. It is important for LNT to put our efforts in marketing at this point to raise brand awareness and loyalty. We need funds for advertisement, quality personnel and beautiful store designs.
There are several ways to raise funds. First of all, we need to improve our operational efficiency. We should enhance our inventory management process by decentralizing decision-making of product distribution geographically, to customize merchandise according to various locations. Secondly, we should build more distribution centers across the United States to reduce transportation costs. We should also distribute products directly from suppliers to the stores to avoid inventory-holding costs in warehouses. Most importantly, we should retain only high-return stores and close non-profitable ones across the country. This will help us in saving maintenance costs of the stores in bad locations, in focusing on the fewer stores better and improving quality of each store.
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Table of Contents
INTRODUCTION 3
EXTERNAL ENVIRONMENTAL ASSESSMENT – CURRENT AND FUTURE TRENDS 3 BARRIERS TO ENTRY 3 DEGREE OF RIVALRY 4 BUYER POWER 4 ECONOMIC DOWNTURN 4 MARRIAGES 5 SUPPLIER POWER 5
INTERNAL ENVIRONMENTAL ASSESSMENT 5 NEED FOR STRATEGY 5 FINANCIAL DIFFICULTIES 6
OPTIONS 6
EVALUATION OF ALTERNATIVES AND RECOMMENDATION 8 STRATEGY 8 CUSTOMER SERVICE 9 MARKETING 9 ECHO BOOMERS 9 INTERNET 10 STORE LAYOUT 10 MERCHANDISE 10 RESPONSE TO THE RECESSION 12