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CHANGE MANAGEMENT (MGMT625)

Assignment 2 (Case Study)

Marks: 10

Due Date: July 21, 2010

This assignment is a short case study. Read it carefully and answer the questions given at the end.

Note:

􀂾 Each question carries 5 marks

􀂾 Be very specific and focused on the issue while answering a question

􀂾 You should complete the answer within 5-6 lines

􀂾 No marks will be given for extra/ irrelevant details

􀂾 As this case is meant to apply your knowledge, so do not give any definition nor explain theoretical concepts in answers

WOOLWORTH

The company that invented the five-and-dime variety store evolved into an international specialty retailer to survive economic hard times – but hard times press again. Woolworth chairman and CEO Harold E. Sells knows from his days as vice president for store development and corporate development that creativity is required to design successful store formats. Sells hopes that changes in planning process will pull Woolworth through its latest difficulties.

Frank W. Woolworth built a retail empire on small change. After a false start at Utica, New York, he moved his great Five Cent store to Lancaster, Pennsylvania, and was so successful selling toys, whistles, kitchenware and other items costing five cents or less that he raised the price limit to a dime, moved headquarter to New York, bought up rival dime-store chains and expanded into Canada in 1897. Twelve years later, Woolworth opened a chain of stores in England. The company added a 20-cent line of goods in 1932, abolished price limits in 1935, and stayed competitive after World War II by offering credit and by increasing merchandise selection. In the early 1960s, Woolworth began to diversify, opening a chain of Woolco discount stores to compete with stores such as K Mart and moving into specialty retailing by acquiring the family-shoe-store chain Kinney.

During the recession of early 1980s, profits evaporated and Woolworth undertook a major restructuring, shutting down all 372 Woolco stores in the United States, selling off Woolworth interests in England, and shifting corporate strategy away from general merchandising towards specialty stores. Some 1400 Woolworth variety stores are still in business, but more than the corporation’s operating profit come from 7000 specialty stores selling shoes, clothes, athletic equipment, custom jewelry, discount drugs, and home furnishings. 43% of profit comes from international operations. Highly successful specialty stores like Foot Locker reversed the company’s fortunes, and earnings grew at a rate of 15 percent a year for much of the decade. Unfortunately, the 1990s also opened with recession; net income declined slightly to $317 million on sales of $9.8 billion, and in first nine months of 1991 it plummeted 55 percent.

In the 1980s, Woolworth sought flexibility by decentralizing store operations. The company adopted a mission of providing customers value through distinct but complementary retail stores, and it opted to do that by encouraging creativity in the development of such stores. As a former Kinney assistant manager in Fort Smith, Arkansas, Sells knows that store managers have keen insight into customer needs and organizational strengths, so he reaches to the lowest level of the organization to find ideas for specialty stores. Managers encourage creative ideas from employees, and no one is penalized if these ideas fail.

Another change Sells made was to standardize space requirements for all stores so that unsuccessful units can be closed and switched to a new format in a few months, making failure less painful. However, even more creativity is needed to deal with current difficulties: the US market is structures, and Foot Locker’s annual growth has fallen from 23% to ten percent. Among other woes, Woolworth’s 428-store Kid Mart is being battered by a children’s clothing price war with Kids ‘R’ Us and with department stores.

In response to these environmental forces, Sells is expanding aggressively and relying on revenues from general merchandise operations to support specialty stores. Athletic footwear is just catching on in Europe and Sells thinks he can increase Foot Locker’s presence there from 61 to 1000 stores by the year 2000. In the United States, Sells want to put five to ten stores in each of the nation’s 14000 shopping malls. He plans expansion for Foot Locker and may quadruple Champs Sports’ 250-store sporting goods chain.

Questions:

1. How has Sells made planned changes in Woolworth’s strategy, culture and structure to encourage creativity?

2. Should an organization change its structure when it changes its strategy? Discuss in the light of Woolworth.