strategic management , bus

Dear Valued Shareholders,

My name is Caitlin Nicole Vazquez and I am the CFO of the Pacific Sunwear of California Inc. that you have so graciously invested in. As you may have seen, our company has been going though an economic struggle, like many other retail companies. I will be honest to you in this letter and explain what has been happening inside the company. I will also explain the mistakes we have made as well as how this company can come back to our original state.

Five years ago, our stock was at an all time high at $23. From 2009 to 2010 the economic decline in sales has affected our stock. In 2010 the stock declined to $3.05 and today it is even lower with a trading price of $2.05.

In the last quarter of 2012 Pacific Sunwear grossed $174 million in revenue, but experienced a loss of $15 million. With this loss, we had to establish a new line of credit with Wells Fargo. Unfortunately, The Pacific Sunwear Company is at a risk of going bankrupt. As of right now, the board of directors and I are analyzing our situation to avoid going into bankruptcy.

Pacific Sunwear does have strengths that set our business apart from other industries. Our target market is teenagers and young adults and we like to keep our pricing low to attract those young people. With the affordability, we also have many sales. Our customers are of high value and we pride ourselves on our high customer loyalty. Like all companies, Pacific Sunwear does have a few weaknesses. Doing some extensive research and focus groups we have discovered that we have not been as innovative as our competition. Many of our products look similar to other store brands clothing. In doing research with our branch stores, we have noticed that employees are not required to wear clothing that the store sells. As retail associates, making minimum wage, it is hard to afford the stores clothing. A great way to promote our goods is by employees and we know that is a downfall.

Lacking innovation within our company has actually brought an opportunity. We realize that other stores have similar products, so we will make a huge effort to look for more innovative designers to assist us. Another opportunity that will save us is to increase the online purchasing. We can lessen our physical stores and promote online sales of our products. This will save an increasing amount of money and make for higher profits.

Pacific Sunwear has external threats that have affected sales. One of our biggest threats would be stores like Hollister Co. and Fox. They sell similar clothing items to us and they have extensive marketing strategies. The economic slowdown has affected our sales. Styled clothing was not viewed as a necessity during the economic downfall in 2009, therefore less sales. Another external factor that has affected this company would be stylistic changes. From 2006-2009 many young people viewed the “beach look” as the best style. Today, a more of an edgy dress has taken upon the “beach look.”

Thorough our weaknesses and threats we do pride ourselves on our competitive advantage of cost leadership. With the materials that we use, we are able to keep our clothing and accessories at a low cost to increase affordability to our customers. Another competitive advantage that we have is focus and speed. Once our designs have been created, we quickly get them out to our stores. That way our loyal customers can see that we are creating new styles. We focus on the California beach style. This clothing makes perfect summertime wear or clothing for people going on a beach vacation.

As explained above, we do have disadvantages. The lack of innovation has affected our sales. We are slow to operate and come up with new ideas for clothing and accessories.

As we analyzed the company we have realized that we have made mistakes that have put us in the downturn. For one, we have made the mistake of having our stores too small. Too many clothes line the walls, and that makes stress for our customers. Pacific Sunwear only has 729 stores in the United States whereas others have more. With fewer stores, there is a lesser chance to reach new customers. Since we do not require our employees to wear the companies clothes, we are losing at a marketing strategy. An employee program has come into consideration to assist associates with buying more of the companies clothing. That way we can better our marketing strategy with associated that are familiar with the brands.

To avoid going bankrupt we have looked at many options. We are a smaller company and it could be possible to be bought by a larger company. We could also merge with another company to create an alliance. That is the last option that we are looking at. Right now we are trying as best as we can to fix this situation on our own. More innovation is critical to the survival of this company. We feel as we acquire more products and more differentiated products, that the company can begin to rise again. Shareholders, I understand that you might be worried that your investments have failed. I promise you, as the CFO, we are doing everything we can to make a comeback and maximize your investment.

Thank you for your generosity,

Caitlin Nicole Vazquez

Pacific Sunwear of California, CFO

STRUGGLING COMPANY--INDIVIDUAL	Possible	Achieved
Name of the company and a detailed description of their current situation	10	10
References used—citations not necessary—except for charts/graphs	10	8
S.W.O.T.	5	4
Analysis of the S.W.O.T. going into this situation	10	10
Competitive Advantage (CA) being pursued vs. appropriate CA Cost—Differentiation—Speed—Focus. Based on what????	10	10
Competitive disadvantages	10	10
Operational inefficiencies	10	10
Critical mistakes leading to their current situation	15	15
Recommendations for how this situation might have been avoided	10	10
Mechanics -- GRAMMAR/SPELLING/PUNCTUATION	10	10
TOTAL	100	97