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Eulah Beulah de Espadaña took over when Mr.Summary of Facts y A family enterprise established in 1984 by Don Bienvenido Ducot y Engaged in manufacturing and marketing of high-fashion ladies footwear. y Mrs. y Have an exclusive merchandising agreement with Rustom s y Created downmarket private labels for Rustom s y Saddled with low sales. Mrs. Ducot died. y In 1990. Ducot s vision was to become the premier Filipino exporter of high quality footwear to Europe. marketing and operational problem y Planned Php 12-million cash settlement . Espadana wasn t much interested in managing the business y Mr. debt burden.

what turnaround strategy can the management consultant suggest the owner. to improve her family business performance? . Mrs. Espadaña.Time Context: December 1992 Viewpoint: Management consultant Statement of the Problem With the present crisis that Les Miz Shoes is facing.

Statement of the objective This study aims to provide the best turnaround strategy to improve the performance of Les Miz Shoes. .

and low budget shoes for the low priced shoes . Rustom·s imposed its own SRP. French for the Les Miz designer shoes Good quality imported dress shoes.Areas of Consideration Internal Environment Task External  (Cust           Company Vision as seen by Mr. Espadaña Efficiency of production and operations High product quality Workers craftsmanship Negative financial status Pricing dictated by Rustom·s No marketing effort except from the place of distribution Acquired high-tech production machineries and equipments Local market sales is up r) Local affluent female      market (Suppli r) Imported raw materials (Channel f Distributi n) Rustom·s has a lot of subcontractors. other Rustom·s franchise prestige brand. mass market shoes. (Competitor) Imported Italian. local brands. Ducot Un-experienced leadership of Mrs.

General Environment  (Technological) Available ass r cti ac i eries     and e i ents (Economic) Dollar fl ct ations. (Political-legal) Higher interest rate brought about by the olitical environment (International) Strong barriers to entry in the uropean mar et . leading to nstable i ortation costs (Socio-cultural) The ili inos entalit that anything that is i orted is better that locally roduced ( olonial entalis ).

Alternative Courses of Action Basically. Espadaña. this will focus on the different generic turnaround strategies that the management consultant suggests to Mrs. The strategies are arranged according to the degree of changes it brings to the company (from least to most changes). .

This will also lead the company to sell other assets to increase li uidity. Applying this strategy to the case. Advantages This releases es i from long-term debt and place the assets bac as e uity. This does not entail additional cost other that the cash settlement. isadvantages This could lead to selling the company in the long run. This does not improve the business per se rather it only makes the business afloat for a short period of time. only settlement to spin the financial status to bac to normal.Course of Action Financial turnaround  This refers to financial restructuring with a view to strengthen the balance sheet and/or provide funding. the company will resort to cash I. .

It can give rise to legal battle with Rustom·s. This will also entail terminating the agreement with Rustom·s to reach a larger market. es i II. It addresses the shortterm survivability allowing the company to get out of negative cash flow. cost reduction. thus forgoing the designer shoes production. In this specific case. The company will be able to market and sell the product to a wider hori on. . will opt to focus on producing the lower-priced footwear which are generating income for the company. The firm can focus on a single product. This does not answer the uestion of longterm sustainability. This will eventually lead to downsi ing. and asset reduction.  It is often a choice between revenue enhancement.Operational turnaround  This means increasing its demand generation capability and its demand fulfilment capability.

hange in leadership can mean a fresh perspective. To use this in the case would mean letting someone more knowledgeable and e perienced manage the business operation.    ¥ ¥ ¥ Turnaround through Reorganization  It deals with the people issues in the business. management. The sense of family legacy will somehow be jeopardi ed. establishing separately the different functions in the organi ation (i. an be very beneficial to long-term objective and sustainability.         ¢ ¡     ¤ £ . organi ational structure.  It entails organi ational revitali ation to yield improved leadership.e arketing. inance. This would also mean a restructuring in the organi ation itself. be limited to leadership alignment. It improves efficiency. however. better management systems for planning and control of the company. and III. This will not however address directly the problem of short-term survival. and organi ational alignment. That is. roduction).  It can. reating a clear structure will enable the company to simultaneously and harmoniously utili e all its functions. This will entail additional cost given that the company is facing financial troubles as well.

IV. ¨ ¨§ ¦ . It entails a lot more money. There will be revisions in the mission and vision statement up to organi ational structuring.  It may do so by either growing. Simply stated. the company will practically start from the top. It can mean more years of negative cash flow. It can be very beneficial to long term sustainability.  It entails a complete rethink of why it is in business and how it is to achieve a sustainable competitive advantage. and Highly organi ed carefully planned businesses are most likely to succeed. In relevance to the present case. shrinking or refocusing the business. ¨ ¨ § Strategic Repositioning turnaround  Strategic repositioning changes the mission and customer value proposition by changing what products are offered to what markets and in which fashion. (short term) It is offers the greatest risk. It offers the greatest potential for growth. Organi ational resources can be put to better and efficient use. this strategy will entail a complete review of the es i as an entity. ajor changes can bring new perspective to the company.

At large.Recommendation After careful analysis of the four (4) alternative courses of action. Espadaña is evidently inexperienced and unknowledgeable in business management. . . In this part the original owner can regain control. It will be done in a series of activities. A constant control and evaluation mechanism will be implemented throughout to ensure that the plan is on track. This can be turned over to an interim leadership such as management consultancy. this recommendation will give much emphasis on the turnaround through strategic repositioning. the team recommends an integration of the strategies. Once achieved. the strategic repositioning plan is implemented. The next milestone is to achieve a positive cash flow and stabilize the financial status of the company as soon as possible. This will start with an alteration in leadership as Mrs. She will be advised to undergo training in management.

It will start with the domestic stage of implementation. the team recommends to undergo the stages of globalization. Once established.For strategic repositioning. . it will move to exporting to Europe thus fulfilling Don Ducot s vision in the long run. In short term. the company will focus on establishing a name in the country.

Situation Analysis (assess the current situation and do December 1992 planning) 1.Action Plan Below are specific milestones that the company wishes to achieve given time frame and the point person. Activities Time Context Person Responsi le 1. Start with marketing activities to promote the shoes Management consultant March 1993 Management consultant .

Re-evaluate the product offering and restructure to December 1993 target new market tend the reach of the product especially the high fashion shoes (offer in other distribution channel) 1. Production and Marketing Department March 1994 Marketing Department June 1994 CEO . reate formal organi ational structure to June 1993 delineate functions Management consultant 1.1. Start analyzing possibilities for international e pansion (through e porting) 1.

The company should also think of an organizational restructuring especially by adding different functions/departments in order to facilitate decision making.Contingency Plan y As a contingency plan. The team believes that only through a minimum of such initiative can the management expect a positive outcome. the team recommends to at least implement a reorganization scheme to sustain the business. Espadaña regarding business management. . There is a need to replace or educate Mrs.

com/strategy/turnaround/ .com/turnaround%20strategy/turnaround%20strate gy.turnaround- sa. http://www.netmba.y y Online sources and reference y y Turnaround strategy. http://www.php y y Turnaround Management.