Case analysis

CASE 2

The following case study reflects a classic example of issues that new venture/entrepreneurial firms experience when the growth is big and quick. Of course, growing beyond means is almost always harmful to the business. Read the case carefully and work on the following.

1. Identify all the issues/problems in the case. Explain why you think that these should be classified as problems. Every issue/problem should be titled (for example, “Location Issues”) and separately discussed under the title. Do not write all the identified issues in one paragraph.

2. Identify all the opportunities in the case. Explain why you think that these should be classified as opportunities. Every opportunity should be titled (for example, “Computer Networks”) and separately discussed under the title. Do not write all the identified opportunities in one paragraph.

3. Based on issues and opportunities identified, conduct a comprehensive SWOT (strengths, weaknesses, opportunities, and threats) analysis.

4. Propose strategies to overcome all the issues and pursue opportunities identified above. Strategy proposals should include probable outcomes.

5. Write a detailed conclusion based on your strategy suggestions. How your proposals will help the company in short and long run.

Athlete's Warehouse (B)

Colin Power, majority owner of Athlete's Warehouse and a number of other companies in Greenville, and a human resource consultant from the Small Business Centre were seated in Colin's office in the back of Athlete's Warehouse. Cohn was speaking to his brother Ed on the phone. "'Sorry I can't run with you today, I'm all tied up. How about tomorrow morning at 7:00?" Hanging up the phone Colin exclaimed to the Small Business Centre consultant "for the last year I haven't had time to turn around. Every day it is just a rush from one store to another, phone calls all day long and never enough time to do the things that need to be done. I need someone else to help run things, but I don't know whether to promote someone from within the businesses or to hire from outside. Not only that, I'm not sure what the job should be."

Background

Colin Power started in business full-time when he opened Athlete's Warehouse, a sporting goods store, in Greenville. For the first two years that the business was in operation, Colin supplemented his personal income by teaching computer courses at a local private school. With the initial success of Athlete's Warehouse, and with the support of his wife who was employed full-time as a teacher, Colin had the financial resources to take on additional challenges. Hence, he began to extend his business undertakings in many directions and opened a printing store (Print Plus), a computer store (EduComp), and acquired a Panera Bread franchise.

To help him in his analysis of the situation Colin prepared a review of the factors influencing the expansion of his business interests and he drew up a list of the job duties for three of his businesses (Athlete's Warehouse, Print Plus and EduComp) included as Exhibit 1. He did not include job duties for the Panera Bread's store because these were part of the franchise package and there was no overlap of duties with the employees of the other businesses.

Athlete's Warehouse

Athlete's Warehouse is a 900 square foot location with Colin and his brother in-law, Mike Wade, as the only full-time staff. The store carried sporting good products centered around Colin's interest in running and included shoes and sporting outfits. First year sales exceeded the forecast level of $135,000 and amounted to approximately $180,000. Colin attributed this success to the changing fashions and the acceptability of using sporting clothes as daffy wear. Basketball shoes now became street shoes, and jerseys with team names on them became the fashion for school wear.

With the growth of sales, Athlete's Warehouse required additional space. The business moved to another location consisted of two floors. Although not ideal, because there was now a need to always have two employees working, Colin relocated. Business continued to grow and in addition to hiring a second full-time person, Darlene Little, Colin hired two part-time employees.

The business expanded to include many different product lines and services. Included in these were skate sharpening, ski binding installation, and racquet stringing. In addition, Athlete's Warehouse offered printing services which initially consisted of putting transfers on T-shirts and printing team logos or numbers on clothing purchased from Athlete's Warehouse. Training in all these areas was provided to Mike and Troy Pierce (a part-time employee who became full-time later).

As his other business interests grew, Colin was not able to spend much time at the Athlete's Warehouse store; therefore, he appointed Mike Wade, the brother in-law, as manager. Darlene was the only other full-time employee at the store as Troy was shared between Athlete's Warehouse and Print Plus.

Print Plus

One of the first offshoots of the athletic wear business was a growing demand for custom-printed or numbered sportswear. This led Colin to invest in transfer and screen- printing equipment.

After operating in the same location as Athlete's Warehouse for five years, the printing end of the business required too much space and a new location was sought. A new space was rented about one mile away from the Athlete’s Warehouse location and Troy began to work most of his time at the new location periodically returning to Athlete’s Warehouse to provide lunch-time relief, when Athlete's Warehouse was very busy or when there was no printing to do.

The printing business was closely related to Athlete's Warehouse sales, especially to the sale of the sports uniforms and school clothes. As a former high school physical education teacher, Colin had a lot of contacts at the schools. These contacts were the source of approximately 25 percent of the sales of Athlete's Warehouse and at least 50 percent of the printing business. Because of his commitments to the other businesses, Colin no longer spent as much time visiting schools to sell his line of clothes and that part of Athlete's Warehouse and Print Plus business began to decline.

EduComp

At the same time that he moved the printing operation, Colin had decided that there was room for a computer company in Greenville. His experience at Athlete's Warehouse in setting up a computer system to control inventory, his knowledge of computers from his teaching, and his general interest convinced him that there was an opportunity here. He began selling computers and hired Pamela Horwood, a graduate of the local community college computer programming course to rim the store. Initially, this job involved computer sales and customer service.

It was soon apparent that there was not much profit in just selling computers, so Colin undertook to train Pamela and himself in the installation and service of computer networks. This broadened the base of the business considerably, In order to further use his resources, Colin became the local Xerox distributor and EduComp became the sales agent.

Things got busier and busier. One of the requirements of offering network services was the fact that if a customer's network goes down, it must be fixed. This task fell to Colin for a couple of reasons. Pamela's strengths were not in the technical aspects of computer systems, and Colin did not have to pay himself overtime.

Panera Bread

Just as Colin was starting to get a handle on his businesses, he was successful in a bid to obtain a Panera Bread's franchise for the city. While this appeared to add considerably to his workload, Colin stated that the existing businesses were not big enough to provide the level of income that he wanted to support his desired lifestyle.

In order to minimize his involvement, Colin made sure his two brothers (Eric and Ed who owned 49 percent between them) were trained in the baking end of the business. Because the business was open 24 hours a day there could be no interruption of the supply of product. If an employee did not report to work, the owner had to fill in at a moment's notice.

To further lighten his load, Colin was in the process of training a manager for the Panera Bread's store. This would hopefully reduce his daily involvement with the store, which during startup and up to this point had been well over four hours a day

Colin's days were now packed going from store to store dealing with the day-to-day problems of the four businesses. There were lots of things that he wanted to do with the businesses but did not have time to implement nor did he have the confidence to delegate.

One step that Colin did take was to construct a building next to his Panera Bread's store and he planned to relocate all his other businesses under one roof. This would certainly cut down on travel between the businesses and improve communications between Colin and the staff. Exhibit 2 shows the organizational structure of the businesses.

Sitting in his cluttered office in the back of Athlete's Warehouse, Colin outlined his concerns for the business to the Small Business Centre consultant.

I haven't been able to visit the local high schools for a couple of years and although we are still getting a few phone-in orders, we are losing business in this area. I really need someone to go visit these schools, but it is not a full-time job."

"I've tried letting Mike or my brother Ed do the ordering for Athlete's Warehouse, but this hasn't worked out. They don't seem to have the same feel for what will sell as I do and I have ended up with a lot of slow-moving merchandise. I am in full agreement with the saying that 'goods well bought are half sold.' For the last year when I was unable to go to the athletic goods show, I ordered from a catalogue. This hasn't given me the chance to see the products and I don't have the same feel for good sellers."

"Bemuse of my lack of involvement and also this recession, sales at Athlete's Warehouse have been dropping."

The computer side of the business is doing well, however there are avenues I wish to pursue but can't because I don't have enough time. Pamela has been getting out on the road and has been doing reasonably well selling the computers, networks and Xerox, but we need more coverage for our territory."

"To try to respond to this problem I hired a sales person on a three-month trial basis to sell half-time for Athlete's Warehouse and the other half for Xerox. This hasn't worked out mainly because of personality problems and I am not going to keep this person."

“I still have a problem because I am the only one who can fix most of the technical problems for our computer network customers and this certainly wrecks any sort of schedule I try to run. I must admit that this is the part of the businesses that I enjoy the most."

“I am no longer getting called to Panera Bread as much as I used to be and I am now trying to get around to managing the other businesses, but things keep happening."

"As far as Print Plus is concerned the business is working well. Troy is a good worker and fairly well trained although he still calls on me to do the difficult printing jobs. Maybe he doesn't want to ruin some products, but he has to realize that at some time he must take responsibility and I am sure that he will do a good job. Troy is also valuable because he started out with Athlete's Warehouse and can fill in there when needed giving lunch breaks to the staff."

“I realize that I need help, but I really don't know what type of person to hire even if I could get what I wanted. I need help with the network service because it is now the one aspect of the business that I have to attend to regardless of what else is happening. But for the business to grow I need someone to get out and sell."

Sitting back in his chair he answered the phone again. Putting down the receiver he said to the consultant, "Troy just quit."

Exhibit 1

Job Duties

Source: Company records

Source: Company records

Exhibit 2

Organizational Structure

Source: Company records