Brand Paring in Changing Economy - Case Study Example

Brand Paring in Changing Economy Background and Outcomes Relevant facts of the case This case involves Sears Roebuck that is faced with the challenge of changing its strategy in marketing and organizational management. It has come to the notice of management through the company chief executive Alan J. Lacy that the apparel strategy pursued in the last decades had a dismal financial outcome. Sears Roebuck has a plan of reducing the number of career merchandise lines, focusing casual lines that are better, and also wants to remodel 580 of its largest full-time stores. The company has a plan of introducing a private “mega brand” and also has to emphasize on classifications. The strategy to restructure the company operations is estimated to last a period of three years. The plan involves laying-off twenty-two percent of the total salaried workforce which is 4,900 salaried employees. The store’s legendarily complicated chain of command and the selling floor has to be reconfigured to give it a new face or outlook that will be more productive and manageable. The apparel initiatives that are to be introduced comprise of reduction of career merchandise and directing the assortment on casual lines that are better. The company is targeting on splitting the apparel assortment less or more equally between private label and national brands. In so doing, the brands the company carries are expected to decrease significantly. A majority of casual private brands are expected to be replaced with a private-label “mega brand” across women’s, children’s and men’s. The company wants to focus more on classifications as opposed to collections. The strategy of being a moderately priced departmental store seems not to be working for the company and according to the company’s Chief Executive Officer there is need to change to a new level of operation (Gilmore, 2003). The company has to change the mode of operation and curve its on identity on the market to be able to fit into the current systems of operation. The future of the company is hazy and there is no clear definition of the path to follow. The company does not want to be just a department store or a discounter, it wants be something different according to the statement of Lacy, the company’s chief executive. Kotler (2000) points out that the future of the company may not be well or clearly defined but it is determined to depart from the old order of doing things. The recommendation of the division head of the 860 full line store emphasizes on the need of the company to build its own brand name as Sears and not operating just like any other store in town. This is strengthening the name of the company through strategic positioning so that the customers can identify with the company as Sears and not just like a store like any other. The company has considered discarding its $9 billion soft-line business and focusing on becoming an exclusive hard-lines store. The company is considering Kohl’s as a model for its software business. The company is geared towards becoming; and it has the potential to be a force to reckon with in the apparel world. According to Lacy, the company chief executive, the changes have been recommended following significant shifts in the market of the past year: department stores have gotten more promotional and discounters have become better. Consequently the company management is compelled to adjust in order to fully address the changes occasioned by the shifts. The chief executive explains that the company has to be more competitive since it has been left to compete with discounters and low-margin. The rent paid to mall-based retailer is more reflective of department stores (Sadler 2001). The strategy for correcting the situation involves beefing up price points in hard lines while at the same time raising many price points in apparel. Concerning the selling floor, the company has a plan of remodeling 580 of its largest stores in the next five years and substantially reduces its prevailing uses from one hundred and thirty-two to only eleven. The store plans to offer check points that are centralized in the majority of the stores while maintaining the presence of cashiers in particular departments. Sears presently owns 860 full-time stores allover the country and a total annual sale which is above $25 billion. According to the company chief executive, around 250 of those stores have smaller locations of 65,000 square feet or less. The small stores in future are expected to focus on hard lines and some be eliminated completely (Kotler, 2000). On the management chain of command, the company is focused on flattening hierarchies in certain areas and combining or simplifying the management levels at the stores. At present, a typical store manager has eleven people reporting directly to him or her. This number is expected to be reduced to only five instead of eleven. According to Pride and Ferrell (2008), all these is being done to make sure that there are fewer employees who are salaried in the company and instead rely more on hourly workers which is a setup that characterizes discount stores as opposed to department stores. The company chief executive, Lacy says that the proposed changes will enable the company to save up to $600 million and a fifty percent improvement in the total earnings to $1 billion by 2004. The people involved The people involved in this case comprise of the salaried employees who have to be reduced by around twenty two percent totaling to 4,900 of the salaried employees. The company chief executive, Alan J. Lacy is the person who is spearheading the correction in the company in order to increase its productivity and competitiveness. Since the strategy will involve switching of brands, then the brand manager will definitely be involved in the case. The brands carried by the company are to be reduced. The division heads of the stores spread out through the country are also concern in the case. The store managers of the company are also affected since people reporting to a single manager will be reduced from eleven to five; therefore subordinate workers are also involved. With the down-sizing being imminent in the company the human resource personnel has to be informed and will participate in the proposed changes (Pride & Ferrell, 2008). How the case is related to marketing management and its concepts Marketing management is the process by which resources of the organization are allocated towards marketing activities. The case is related to marketing management and its concepts since it involves the marketing management cycle that comprise of planning, implementation, monitoring, and correction. Whatever the company is trying to do is analyzing the competitive market through environmental scanning to determine the strengths, opportunities, weaknesses and threats to the company operations. The company management has realized it can not base its competition on the ordinary discount stores or department stores, and it has to switch its operations to a new level with a redefined vision (Gilmore, 2003). The SWOT analysis is carried out to identify areas that need improvement or those that require changing completely. The company does not want just to be a department store or a discount store. The chairman says, “We want to be Sears”. The marketing management concept that is being defined in this case is the positioning strategy. Positioning is a means through which a company designs its image and what it offers so that it occupies a distinctive place in the mind of the target market or target customer. The outcome of successful positioning is the realization of customer-focused position of value and it is a cogent reason why the target market should buy the indented product. Sears Roebuck wants to be identified by its name and not just being referred to as a department store or a discount store. This can only be achieved through successful positioning and when the company and its product occupy a distinctive place in the mind of the target customer or market. An illustration of successful positioning is when Porsche is identified as one of the best sports cars in the world while Coca-cola is the largest soft drink company in the world. These brands are in possession of these positions and it would difficult for them to be dislodged by competitors. If Sears Roebuck does a good job of positioning then it can be able to work out the rest of its differentiation and marketing planning from the positioning strategy. Without successful positioning, buyers will have a hazy idea of the brand. The brand will be viewed just like any other entry is a marketplace that is crowded. Changing the brand positioning frequently will make the customers to be confused. Over-positioning will make the target customers to over value the brands of the company and think that they are very expensive regardless of them being affordable (Rajagopal, 2007). The marketing concept is also depicted in the case. Marketing concept is where the needs of the customers are analyzed by the firm and make decisions that satisfy the needs. The store is planning the introduction of a private-label “mega brand” across women’s, children’s and men’s that will take the place of most Sear’s casual private-label brands and put ore emphasis on classification as opposed to collection. The company is using segmentation of the market to address the needs of the customers. The company is preparing itself to target a specific type of customers and not just being labeled like any other ordinary store. The management must have realized there is a problem in the existing marketing concept to the extent of mismatching the needs of the customers (Nissim, 2005). The production concept is to some extend portrayed in this case. The concept commenced during the period of industrial revolution and it is of the premise that a firm needs to focus on the products that is able to produce in the most efficient manner and production of affordable products will subsequently create the needed demand. According to Rajagopal (2007), the supply of affordable products will end up creating demand for the products. The company is this case wants to cut back significantly on career merchandise and focus more the assortment on better casual lines. The company wants also to split the apparel assortment between private label and national brands while at the same time reducing the number of brands it carries. This means that the company wants to deal with what is appropriate for the target customers and avoid any confusion through reduction of brands. The sales concept or selling concept is emphasized in this case. The concept states that a firm will not target on production alone but also in convincing the customers to buy the goods by means of personal selling and advertising. It has been realized by the management of the company that department stores have become more promotional and the discounters better and consequently the company needs to move swiftly to address the changes. Particularly, the chairman points out that the margins and expenses of Sears are out of whack which means that the store is relegated to competing with discounters and other low margins. The company intends to beef up price points in the hard lines while at the same time raise numerous price points in apparel (Pride & Ferrell, 2008). This case also involves the four Ps in marketing that stands for Product, price, promotion, and place. The company is geared towards improving its product and also changing its pricing strategy. Promotion comes in when the company looks for new ways of increasing its sales of products. Concerning place, it is reported that about 250 of full line stores are smaller location of 65,000 square feet or less. Some of these stores are to be closed while the others are to focus primarily on hard lines. The company is shifting places or location of operation. The four Ps are the ones that constitute the marketing mix. The interaction of the Ps is illustrated in the figure below: Recommendations Actions that should have been taken to improve marketing in the organization The appropriate positioning strategy should be used to make the company and its brands to occupy a distinctive place in the minds of the target customers or market. The current positioning seems to create a lot of confusion to appoint where the organization can not stand out as a specific provider of a certain brands or brand. The reduction of the brands carried about the company is a positive step towards making the positioning of the company products more distinctive. The management has chosen to focus more on downsizing rather that enhancing training of the employees. The employees need to be educated on the importance of downsizing procedure and all the benefits paid to the affected employees. The move to reduce the workforce could be positive but the marketing team has to be strengthened so that promotional activities that are intended are carried out successfully. Using pricing as a strategy, the company could price its products in a particular way so that the potential customers identifies with the company using the price. The company would also achieve a lot through enhancing the quality of the product to appeal to a huge spectrum of the target customers. Recommendations would you make to the corporate organizations in line with this case Corporate organizations in line with this case should time from time carry out a environmental scanning to determine the strengths, opportunities, weaknesses and threats surrounding the organization operation in order to get a clear picture on how well to tackle emerging challenges in a dynamic world. Promotional activities should not be forgotten since the firm needs to remind the target market of its brands. Instead of reducing only the brands the organization can also rebrand whatever products that it may be producing. Successful rebranding could be attained through re-launching of an initially existing product. As the hierarchies of such organization are being flattened and also reducing the number of people reporting to a certain manager; the management should forget to allow independent promotional activities. Vigorous promotional activities can increase the market share of the brand of the firm. Differentiation is the best thing to put in place in order to diversify the risks of the organization and reduce over-dependence on one product or brand. The distribution of the brands of the company has to be modeled according to the needs of the company in such a way that maximum profit is obtained from the business operation. Is this case worth our knowing about today? Why or why not? Who would most directly benefit from knowing about or studying this case? This case is worth knowing since it demonstrates many aspects of marketing management. It identifies key areas that should be looked at when an organization is rejuvenating its strength to compete successfully in the market. It applies most of the marketing management concepts that include production concept, selling concept, and marketing concept. These marketing concepts are the ones applied in the marketing aspect in today world. Bibliography Source: “Sears to Cut More Brands,” DNR, October 29, 2001, p. 3. Gilmore, A., 2003, Services marketing and management. London: SAGE. Pride, W.M. & Ferrell, O.C., 2008, Foundations of Marketing. New York: Cengage LearninG. Kotler, P., 2000, Marketing management. New Delhi: Prentice Hall of India. Rajagopal, M, 2007, Marketing Concepts and Cases. Boston: New Age International Nissim B., 2005, The Brand Advocate: A Strategy-Driven Workbook, Universe Publishing Company, Ney York. Sadler P., 2001, The seamless organization: building the company of tomorrow Professional paperback series, Edition4, Kogan Page Publishers, London. Read More