Case A12: Simon and Smith

Background information

The partners of Simon and Smith, a medium‑size specialty store for women in Brookline, Oregon (population 250,000) were having their annual after‑Christmas heart‑to‑heart talk about their store's direction. They had just completed their best year ever, their bank balance was high, and the two men were looking forward optimistically too more prosperous years.

Bill Simon said to partner Phil Smith, "We seem to be doing everything right. Our customers have been loyal to us these past 15 years, there's no competition around that can touch us, and we have the best location and best reputation in the area. I think we can look forward to another year of the same formula--hard work, careful planning, intelligent merchandising, and good employee practices. We've got a real winner."

Smith was less sanguine. "You know, Bill, the population of Brookline is growing. I just heard a big high‑tech firm is planning to open a plant near here, and that food processor in Eugene is planning to consolidate operations here. That's going to bring a lot more people to this area, and I wouldn't be surprised if before long some shopping center developer discovers our area. We've had it pretty easy all these years, and I'd hate to see us get too complacent and then have to give business away to a competitor. Our customers are getting older, and we're not doing anything much to attract younger people. Our customer profile is between 35 and 50, and next year, it'll be between 36 and 51. I suggest we give some serious thought to attracting younger women, so we'll be prepared when the competition comes."

Simon said, "Why play with a successful formula? Our misses departments produce 60 percent of sales and nearly 80 percent of profits. If we try to expand our junior business, we'll get killed. We don't understand that business, and if we start in with loud music and gaudy displays, we'll drive our loyal customers away."

"Bill, don't be an ostrich. We could easily take part of the store and wall it off, maybe even break through a separate entrance. Those old ladies won't even know there's anything else going on. If we don't, I guarantee you that our population will age as the market is increasing, and we'll lose out."

 Discussion Questions

1.           Analyze each partner's position. What additional information might be useful to justify each opinion?

2.           What are the alternative courses of action Simon and Smith can take? Give advantages and disadvantages of each alternative.

3.           Make a recommendation for Simon and Smith's future