eToys, Inc., had been one of the leading Internet-based retailers of children’s toys. However, in 2001 it generated a large loss, its stock price plummeted, and it declared bankruptcy. KB Toys purchased the company’s Web site, a warehouse, and its customer list for $15 million. The following table summarizes some of the causes of the eToys financial disaster.

Lesson Provide the best service to customers by keeping the work in-house Solution Opened two additional warehouses, staffed entirely by eToys employees Problem Loss of control over shipping and late shipments resulting from outsourcing some order fulfillment Severe seasonal peaks and drops in revenue Expanded into baby supplies, party goods, and hobbies Diversify while staying true to the target market Serious doubts on Wall Street Held first-ever analysts’ Communicate with the people that the company can turna conference, committed to who hold the purse strings profit and survive profitability by a specific even when the news is not target date positive Required

a. In your opinion, what types of employees and what specific skills should KB Toys develop and maintain if it is to avoid the fate of eToys?

b. Write a memo outlining the steps you think KB Toys should take, including the development of leading indicators of employee capabilities.