Please answer below questions in brief after reading the below article
What makes the study of strategic management so interesting?
Things can change so rapidly! Some start-ups can disrupt industries and become globally recognized names in just a few years. The rankings of the world’s most valuable firms can dramatically change in a rather brief period of time. On the other hand, many impressive, high-flying firms can struggle to reclaim past glory or even fail. Recall just four that begin with the letter “b”—Blackberry, Blockbuster, Borders, and Barings. As colorfully (and ironically!) noted by Arthur Martinez, Sears’s former Chairman: “Today’s peacock is tomorrow’s feather duster.”1 Consider the following:2 • At the beginning of 2007, the three firms in the world with the highest market values were Exxon Mobil, General Electric, and Gazprom (a Russian natural gas firm). By early 2017, three high tech firms headed the list—Apple, Alphabet (parent of Google), and Microsoft. • Only 74 of the original 500 companies in the S&P index were still around 40 years later. And McKinsey notes that the average company tenure on the S&P 500 list has fallen from 61 years in 1958 to about 20 in 2016. • With the dramatic increase of the digital economy, new entrants are shaking up long-standing industries. Note that Alibaba is the world’s most valuable retailer—but holds no inventory; Airbnb is the world’s largest provider of accommodations—but owns no real estate; and Uber is the world’s largest car service but owns no cars. • A quarter century ago, how many would have predicted that a South Korean firm would be a global car giant, than an Indian firm would be one of the world’s largest technology firms, and a huge Chinese Internet company would list on an American stock exchange? • Fortune magazine’s annual list of the 500 biggest companies now features 156 emerging market firms. This compares with only 18 in 1995! To remain competitive, companies often must bring in “new blood” and make significant changes in their strategies. But sometimes a new CEO’s initiatives makes things worse. Let’s take a look at Lands’ End, an American clothing retailer.3 Lands’ End was founded in 1963 as a mail order supplier of sailboat equipment by Gary Comer. As business picked up, he expanded the business into clothing and home furnishings and moved the company to Dodgeville, Wisconsin, in 1978 where he was its CEO until he stepped down in 1990. The firm was acquired by Sears in 2002, but later spun off in 2013. A year later it commenced trading on the NASDAQ stock exchange. Targeting Middle America, companies like Lands’ End, the GAP Inc., and J. C. Penney have had a hard time in recent years positioning themselves in the hotly contested clothing industry. They are squeezed on the high end by brands like Michael Kors Holdings Ltd. and Coach, Inc. On the lower end, fast-fashion retailers including H&M operator Hennes & Mauritz AB are applying pressure by churning out inexpensive, runway-inspired styles. To spearhead a revival of the brand, Lands’ End hired a new CEO, Frederica Marchionni, in February 2015. However, since her arrival, the firm’s stock price has suffered, same store sales declined for all six quarters of her tenure, and the firm kept losing money. It reported a loss of $19.5 million for the year ending January 29, 2016—compared to a $73.8 million profit for the previous year. (And, things didn’t get better—it lost another $7.7 million in the first half of 2016.) LEARNING FROM MISTAKES PART 1: STRATEGIC ANALYSIS Final PDF to printer 4 PART 1 :: STRATEGIC ANALYSIS des13959_ch01_001-033.indd 4 01/04/18 10:03 AM So, what went wrong? Lands’ End was always known for its wholesome style and corporate culture. Its founder, Gary Comer, who liked to dress casually in jeans and sweaters, had fostered a familial culture. However, things dramatically changed when Ms. Marchionni arrived. Prior to taking the position, she had struck a deal to only spend one week a month in Dodgeville—preferring instead to spend most of her time in an office in New York’s garment district. Also, unlike her predecessors, she had private bathrooms in both of her offices—such perks didn’t seem to fit well with the firm’s culture. Given Marchionni’s background at high-end names like Ferrari and Dolce & Gabbana, she tried to inject more style into the maker of outdoorsy, casual clothes. She added slimmer-fits, stiletto heels and a new line of activewear. In presentations, according to those attending, she derided the company’s boxy sweaters and baggy pants as “ugly,” asking “Who would wear that?” A photo shoot for a line took place in the Marshall Islands—a very costly location, according to people familiar with the situation. She overhauled the catalog, hired celebrity photographers, and hired a Vogue stylist for input. She also added new price points—including the Canvas line which sells for as much as 30 percent more than the traditional Lands’ End collection. At the end of the day, it appeared that Ms. Marchionni was never able to get Lands’ End employees to buy into her vision. And as losses piled up quickly, the board became concerned that she was trying to make too many changes too quickly. Perhaps, she was not given enough time to turn things around—but her approach to re-invent the apparel brand may have been too much of a shock for its customer base as well as the firm’s family culture and wholesome style. Maybe Lee Eisenberg, the firm’s former creative director, said it best: “It doesn’t look like Lands’ End anymore. There was never the implication that if you wore Lands’ End you’d be on a beach on Nantucket living the perfect life.” Marchionni resigned on September 26, 2016—underscoring, as noted by Fortune.com, how futile it must be to take such a Middle American brand upscale.
1. What actions could Ms. Marchionni have taken to improve Lands’ End’s prospects for success in the marketplace?
2. Did Lands’ End make the right choice in selecting her for the CEO position? Why? Why not?
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