Case Study Course-learned concepts and theories covered: Essential Elements of an Organization's Strategy and Change Management Using the required course reading by Lussier, R., Achua, C. (2015), Leadership: Theory, Application, 8: Skill Development (6th Edition), Texidium version, students are to apply the essential elements of an organization's strategy and change management concepts and theories learned in this course, TEMOC Stores Inc. began life as a woman operation named TEMOC Batteries in 1548 by its founder, Ethan Gilchrist, an engineer, as a business charging up batteries for customers' bulky wireless radios in Melbourne, Australia, With an eye for spotting upcoming trends in electronics, in a very short time, Gilchrist outgrew this start-up position, He shifted the business into radio rentals, then capitalized on early televisions and opened the rst store in the 19505. TEMOC expanded during the 19605 and 19705 and became a publicly listed company in 1972. The company sold consumer electronics and white goods along with related products and services and pioneered the concept of the out-oftown discount warehouse in Australia. In the early 19505, demand for wireless radios grew fast, and founder Ethan Gilchrist changed the name to TEMOC Radio, opening his rst retail store. More stores followed quickly. Following the Consumer Prices Act (1964), TEMOC expanded beyond its Victoria state heartland, becoming a national discount retailert TEMOC was indeed the unrivaled champion of the outvof-town discount warehouse market, Predominantly a mail-order business, TEMOC advertised stockand prices 45% lower than the manufacturers' recommended retail prices. Few pure-play electrical retailers could compete. Expansion In 1968, the rst TEMOC superstore opened in Sydney, making TEMOC the rst company to launch a warehouse style store for selling electricals, such as televisions and radios. Considered a trailblazer, TEMOC beat a path subsequently followed by Do-itVourself (DIV) stores and supermarkets. TEMOC has developed from selling sofa-sized radiograms to iPods, digital cameras and laptops under the grammatically dubious slogan "we live electricals". TEMOC went public in July 1972 and expanded its range by purchasing Evoenergy Gas, a discount retailer ofgasappliances. By the end of 1976, the group had grown to 50 outlets. During the 1970s and 19805 the company had competition from several growing companies also providing electrical goods, One such company was BiRite which TEMOC bought out in 1989. Under Ethan Gilchrist's leadership and vision, and for much of the '805 and the 905, TEMOC was booming, with 460 stores and 10,000 employees and mind-blowing profits, Ethan felt condent that this success would continue because of his vision and leadership, and resulting strategy. Gilchrist developed a program where TEMOC gave away its own brand of batteries in exchange for getting people hooked on their brand of batteries yielding TEMOC a nice annuity in the form of 80% of the market for batteries for small electrical personal and household appliances, Inside TEMOC, this was known as the \"nickel\" strategy named after one of the chemicals in its batteries. It was a fantastic success story. This business strategy was similar to Gillette's or that of printer manufacturers: give away razors or printers to make money on blades and ink cartridges. TEMOC gave away batteries to make money on service and replacement batteries. TEMOC's marketed its batteries under the private brand \"Spartan" and due to the lower pricing and relatively good quality, many consumers purchased Spartan batteries for other needs. As a result, TEMOC enjoyed a 39% share of the battery market; slightly behind the battery giants Duracell Inc. and Eveready Company, Wal-Mart Enters the Scene In 1594, WalMart entered the Australian market with the takeover of Appliance Giant. The world's (then) largest retailer effectively wiped close to US$1,500m offthe value of Australian chain stores with its announcement that it would discount some goods by around 60%, To survive, retailers had to - at least match WaI-Mart's like-for-Iike discounts. The consumer appliance retail business was relatively secure and profitable, and TEMoc's market dominance was so secure throughout the 19805, the electrical retail chain barely batted an eyelash when Wal-Mart entered the Australian market. In 2001, the consumer electronics and white goods sales peaked worldwide. But in a weekly senior executive meeting, Noah Harrison, TEMOC's Executive Vice-President of Marketing told the other executives in the meeting that, "although sales are at an all-time high, a peak always conceals a treacherous valley." He went on to say, \"Reve nue growth is different than strategically positioning ourselves for the future. We need to focus on the long-term game to continue to enjoy the growth we have had for these so many yea rs." Many of the other senior executives viewed Wal-Mart as a formidable competitor and voiced their concerns about how critical they thought It was to focus on the long-term game as well. Harrison was pleased that his other colleagues had brought this up. He knows that Wal- Mart's behaviour elsewhere could help them understand how the company will likely operate in Australia. Harrison pointed out that Walmart has stated publicly that it is committed to its implementation of its cost~cutting model in every market where it operates. He made the following passionate statement: "Wal-Mart is particularly relevant because compared to other large international retailers; it has the largest footprint in Australia and is therefore poised to expand rapidly. Wal-Mart executives emphasize the need to build scale in existing markets in order to achieve profitable returns, as soon as the company enters a new market, rapid growth is a priority. I believe without adequate safeguards put in place, TEMOC may not survive.\" As founder and Chairman of TEMOC, and the largest shareholder in the company, Ethan Gilchrist disagreed and downplayed the situation, pointing to historical market trends where sales peak, slow and pick-up again, l'It is a cyclical phenomenon, and we need to stay focused on the direction we're headed. It has stood the test of time, and made the company very prosperous, and the leading electrical retailer in Australia.\" Since TEMOC is a public company and a highly visible one, Ethan Gilchrist comments came under fire by analysts, pundits, and the media. The stakes for TEMOC's fourth-quarter earnings report were high. For the past year, analysts and investors have demanded that the consumer appliance company clarify its vision and strategy and explain what it is doing to combat the entry of Wal-Mart into the Australian market, Calls for a change in leadership intensified, A well-respected industry analyst commented in her recent report about the retail consumer appliance market, \"The problem, it seems, is that as the world has changed, TEMOC hasn't\Technology expert Jonah Dundee told Business First Magazine: \"TEMOC is failing to understand the importance of multichannel retail and failing to invest in e-commerce.\" Storm Clouds on the Horixon Customers had become dissatised with TEMOC's instore experience and lack of customer service, One customer wasinterviewed on a local radio show during a segment about Wal-Mart and its online shopping store. One of the listeners calledin, and the radio show host asked her what she thought of TEMOC. She answered: \"Unfortunately, with stores like this and the overheads they have - renting premises and paying sta' they can't compete. A lot of people prefer the internet shopping, especially the younger age group. Everyone's now just conscious of money and it's all about price.\" Also, from the outside was peer pressure. Several Australian retailers such as Wesfarmers, Coles Group and Ampol Limited were already on a track to develop new strategies including e-commerce to compete with Wal-Mart and its low pricing, cost-cutting model and online shopping store. Another, slightly bilarre, problem emerged, With similar-sounding names and both companies' logos blue on a white background, consumers confused TEMOC with TAMOC (owned by rival Wesfarmers), Despite a USSZOm rebranding campaign in 2005, TEMOC continued to lose market share. The internal triggers were clear, There are, In the end, two generic marketing strategies: cost leadership and differentiation. Operating in a fiercely competitive market characterized by very low margins, TEMOC was never going to be able to sustain a cost-leadership position. Yet it continued to focus (almost solely) on price. Global Economic Crash The global economic crash of the 2007 was the final straw, The turbulence emerging from the nancial sector passed over into the real economy, and back from the real economy to the nancial sector. Economic activity was paralyzed in practically the entire world with unprecedented synchronicity. TEMOC and other electrical retail companies were facing challenging times, with unprecedented decreases in sales and profits, but with strategic cost-cutting, were able to stay relevant. However, those cost-cutting measures Included cuts to service that customers expected, and as a result, service levels dropped. When the service levels dropped, consumers stayed away, and worse, became street-savvy and avoided dogged selling of extended and expensive warranties. TEMOC was severely damaged, more so than its competitors because of its brick-and mortar strategy and the added pressure to reduce costs by re-structuring stores and laying off staff. TEMOC's prot before tax tumbled from USSISOm to US$56m. In successive years it posted losses of US$Bm, US$3m and finally US$39m in 2011. In 2012, it is reported to have lost a similar amount. Turnover peaked in 2008 at a fraction over US $2bn and declined steadily to a reported US$1.2bn in 2012, Scott Morrison, a full professor and researcher at the Economic Department of the Australian National University said: \"Increasing levels of unemployment, wage freezes and stagnation in the property market combined to keep consumer spending on discretionary purchases rock bottom. It was simply impossible for struggling TEMOC to improve its appeal to customers whilst closing stores and axing staff.\" Best Buy Puts the Pressure On In April 2010, Best Buy launched an online shop in Australia to take the tight to its competitors Amazon Australia, Bunnings and Woolworth Corporation. The online move by Best Buy was intended to shake up the lucrative online consumer electronics market. However, one year later, Best Buy's efforts to win over Australian consumers were an expensive failure, costing some USSZOOm to set up just 11 big box stores. According to Roger Taylor, CEO, "We were a bit late to launch them and, in that time, clearly consumer condence has fallen significantly, the product cycle is quite tough to be trying to launch a big box model." Although Best Buy failed, it still placed serious pressure on TEMOC. Smartphones Eating Into TEMOC's Sales With every passing day, more and more customers are buying smartphones like never before. This has been fueled bythe increasing number of cheap smartphones that are being introduced in the market by all major smartphone makers. Smartphone owners are downloading thousands of applications to watch movies, television shows, listen to radio broadcasts, sports broadcasts, news events and so much more. As a result, television and computer and related consumer product sales dropped dramatically. These consumer goods sales are TEMOC's bread and butter. TEMOC continued to make a loss. Meanwhile, TEMOC's stock has plummeted by roughly 50 percent since its post-IPO peak about a year ago. While TEMOC'sfirst quarter revenue came in at $436 million, an increase of 74% over last year, the amount fell below analyst expectations and the companVs guidance. The company lost $162 million during the quarter, Calls for New leadership Calls for a change in leadership were being demanded. The Board of Directors of the Page 10 of 10 company said the company needs a CEO with "a defining vision" for the company. Finally, Ethan Gilchrist was forced to step down. In April 2013, Nicole Gibson, was announced as the new CEO and President of TEMOC Stores Inc. On her first day, Gibson was sitting at her desk, and looking out the window and said to herself, "where do I start?' 10Preview File Edit View Go Tools Window Help G O Q Sat Apr 2 3:04:11 PM Group Case Study W2022.pdf v A Q Search Page 3 of 10 Case Study Report Format and Structure of the Written Report The body of the report is to be 10 pages (minimum); 12 pages (maximum) in length (does not include title page, contents page, appendices, reference page, etc.) and must have the following sections in this order: Executive summary - brief summary of the case Issues - Identify five issues/symptoms Problem statement - short statement summarizing the primary problem(s) of thecase; to be a series of well-constructed sentences (no more than two paragraphs) Decision criteria - Clearly define the criteria that provides the basis for evaluation Analysis of Alternatives - three alternatives; strenghts and weaknesses Recommendation - describe the preferred option and provide a justification or thesolution you choose Implementation/action plan - briefly discuss what short-, medium- and long-termaction steps you would take (one action step for each) NOTE: As discussed in class, a more fulsome case study report format is to be utilized for the Group Case Study Assignment. To receive a first-class grade, student(s) must submit a document that demonstrates and supports your analysis and ideas with reading, concepts and theories from the course and is well organized, well written, accurate, and complete in its analysis. The deeper the analysis, the better the grade. For example; 0% - 50% Failure to complete the assignment per instructions 51% - 59% Accurate summary of the various concepts but showing little or no depth of analysis 60% - 69% Some analysis provided in addition to the summaries 70% - 79% Good analysis, some connections to course ideas and theories 80% - 89% Good analysis, good connections to course ideas and theories 90% - 99% Clear, concise analysis with examples. Relevant connections to course ideas and theories. Insightful summary. 100% Outstanding work containing all of the above - and then some 3 6 APR 2