Question 2 Can Wilke Ashley make HOF the Harrods of the High Street? Department stores typically operate from large retall premises In areas of high foottall and provide a wide array of goods and services, for example from cosmetics to electrical goods to clothing and fumiture, toys and food via many different spec allsed departments across many floors. Although this makes the business more complex than speciallet retail stores, It also offers risk reducing economles of scale and scope. Key names In the UK and often overseas In this sector are Marks and Spencer, John Lewis, Debenhams and House of Fraser. Harrods department store positions Itself as a premler retail outlet selling premium brands and offering premium locations and levels of customer service. Harrods' operating margin Is the highest In the sector and Its main department store located In Knightsbridge, London, offers a full range of products and services. Customisation and personalsation of products Is available across various product areas and the Harrods store In London Is the largest In the UK with over 300 different departments occupying nearly 75,000m . Harrods Is a popular tourist destination In London as well for those who can only afford to window shop. The Rise of The House of Fraser It all began with one drapery and haberdashery shop In the centre of Glasgow In October 1849, and the group's main period of expansion began In the 1920s when Hugh Fraser Ill became managing director at the age of just 21. At its height it became a retall empire with more than 100 high end department stores, Including one of the most famous In the world. Luxury London store Harrods was added to the House of Fraser empire In 1959, when Hugh Fraser Ill outbid Debenhams to take control of the Iconic name. On his death In 1965, his son, also called Hugh, continued its expansion by buying out more than 50 companies, with 112 In total by 1980. Sadly, the playboy retaller's lifestyle finally caught up with him In the late 19706 when he was found to have been selling stocks to fund his gambling addiction. In 1985, the Fraser dynasty came to an end after a bitter, personal and hotly contested takeover battle between British businessman Tiny' Rowland and Egyptian tycoon Mohamed Al-Fayed, the eventual victor. Al-Fayed continued Its expansion and opened big new stores In out-of-town shopping centres such as Meadowhall In Shemeld and the Lakeside In Essex but In 1994 Al-Fayed sold off House of Fraser but retained Harrods. The business was now subject to almost constant change and takeover bids leading to uncertainty with many stores sold off, leaving precious few In Scotland, surely a key part of the store's Identity. Other attempted takeovers ensued until In 2006, It was sold to an Investment consortium Including Hunter, HBOS, Kevin Stanford and led by Iceland's Baugur group's Icelandic retall tycoon Jon Asgelr Johannesson more famous for the low-cost stance of his Iceland supermarket chain. The financial crisis was survived much better than other department stores apart from Harrods and In the first six months of 2009, House of Fraser Improved Its sales performance by sixteen percent compared to the same period the previous year. The Fall of the House of Fraser The Baugur consortium (as In many other similar buy outs of that perlod) seemed to view House of Fraser as little more than a short-term money-making vehicle and seemed to show Itile Interest In Its long term future. Much needed Investment funds did not materialise and 60 36 far back as 2004, the chain was being described by the Interactive Media In RetallGroup, a trade body, as one of the "online laggards" that "falled to embrace Internet trading opportunities". Meanwhile House of Fraser continued to buy lots of smaller department store conceme, such as Amy & Navy, Dickins & Jones and DH Evans and rebrand them under the HOF name. This greatly confused older and local customers who has used their shops for years! Worse still, a lot of the goods sold within were not even House of Fraser's they were being Gold by more than 600 third-party concession owners. The chain's own brand was taking a back seat and the store was referred to as the "House of Brands'. Offen brands nobody knew! There was yet more takeover talk In 2013, this time with luxury French department store Galeries Lafayette as a bidder. However, In 2014 House of Fraser was sold to Chinese group Nanjing X]njlekou, part of Sanpower which controls 100 companies In sectors Including banking, retall, media and property, with assets worth E4.8bn, according to Its website but was practically unheard of In Europe. Led by Yuan Yafel, It talked boldly about his plans to pump In capital and take the chain global and most Importantly a push Into China with up to 50 new stores under the name "Oriental Fraser". However, this was not the best time to be a department store. Sales and profits were under pressure from the seemingly Inexorable rise of Internet shopping and fickle consumer spending. Amazon now seems determined to sell anything to anyone and has moved upmarket and organic and Into bricks and mortar with the purchase of Wholefoods In 2017. Costs are also spiralling with minimum wages and living wages to pay and business commercial rates rising fast and forcing many off the high street. Enter Mike Ashley With the outlook pretty grim, and no sign of much-needed capital from Sanpower, the company collapsed Into administration In 2018 and planned to cut 6,000 jobs and close 31 of Its 59 stores before Sports Direct owner and accomplished master of Intemet Sales, Mike Ashley, Gald it had acquired all of the UK stores, brand and stock of House of Fraser even though he had faced serious competition to buy the business from Phillip Day, the billionaire behind Edinburgh Woollen Mill Group. The deal represented a stunning coup for Mr Ashley, who has harboured a long-standing desire to move his retall empire upmarket by acquiring one of Britain's leading department store chains. He has held an 11%% stake In the business since 2014, and also owns close to 30%% of Debenhams Its main rival which also has a strong emphasis on fashion clothing unlike the other department stores. Ashley has Sports Direct concessions In many Debenhams outlets. Mike Ashley founded the now 750-strong sports fashion chain Sports Direct In 1982 when he 36 18 and It Is the UKs largest sports goods retaller. As of August 2018, according to Forbes Billionaire list, he was the 629th richest man In the world. Ashley has made his money by buying brands and most of these brands were bought cheaply from distressed sellers and out of administration. The first major brand he bought was Donnay. In February 2003, Ashley bought the Dunlop Slazenger brand for $40 million, followed up by acquiring outdoor gear manufacturer Karlmor In March 2003, Kangol for $10 million, boxing brand Lonsdale. Among the other brands It owns Is the sports retaller Lillywhites. He also has a varled portfolio of Investments, Including In the retaller French Connection. He also owns the Ingerle chain Agent Provocateur, as well as the clothing chain Flannels, which sells brands such as Burberry London, Fendl and Sophia Webster. 7Mr Ashley Is also the owner of Newcastle United FC, buying it at a time when It was In severe financial difficulties and without due diligence to the annoyance of his Board. The BBC documentary, Mike Ashley Uncovered, detalled his dealings at Newcastle United with It being announced that he only discovered upon purchase of the club how much debt the club were In, and that it cost him another $100m upon purchase to steady the club's financial security, having not viewed the account books prior to purchase. Ashley and his representatives refused to comment, claiming the film produced a majority of Inaccuracies. He made several subsequent attempts to sell the club. Many fans argued he had had little ambition for the club and had consistently falled to provide much needed Investment In quality players. Many fans wanted him out and there was a constant vocal protest against his ownership. In July 2021 he finally sold out to a Saudi consortium to the joy of fans. Mike Ashley and Sports Direct has also encountered controversy over poor pay and conditions, often ploneering zero hours contracts to keep down costs and being subject of a documentary of conditions and pay In a factory he was using In Thalland. A report by the Business, Innovation and Skills commitee In 2016 concluded that the company did not treat Its workers like humans, but Sports Direct sald its policy was to treat all people with respect The Future of Hof: Harrods of the High Street? Mr Ashley sald on his purchase of Hof from administration "We will do our best to keep as many stores open as possible. It Is vital that we restore the right level of ongoing relationships with the luxury brands" "Our deal was conservative, consistent and simple. My ambition Is to transform House of Fraser Into the Harrods of the high street." Scott Lennon, of the union Unite, sald: "Sports Direct Is a leopard that has not changed Its spots and we hope that its poor record on pay and employment practices are not transferred to the House of Fraser". "We fear for jobs and employment conditions at the House of Fraser going forward. The staff are entering a period of great uncertainty and worry." Required: Use the process model to evaluate Mike Ashley's proposition that he can 'transform House of Fraser Into the "Harrods of the high street." [Total 100 marks]