Skadurz Pro Case - Essay Example

1. Identify the primary case participants The primary case participants include Joel St. Marseille, the founder of Skadurz Pro, and his mother, Connie, who is a full-time manager of Skadurz’ New Sudbury outlet.2. Identify the organization and industrySkadurz Pro is a skateboard, snowboard, and clothing store located in Sudbury, Ontario. The company has two retail stores. It belongs to the retail sports equipment and clothing industry.3. In order of importance (most critical first) list the problems facing this organizationa.

Connie will be retiring as full-time manager, leaving both stores to Joel to manage, something he foresees he may not be able to do.b. West 49, a large national competitor, will soon open a franchise in the New Sudbury Centre mall, directly in competition with the outlet Connie manages.c. Aside from just closing one store or transferring location, Joel is reconsidering his continued proprietorship, possibly to shift to other interests. 4. What is the most critical problem and why is it the most significant problemThe most critical problem is to decide whether or not to close down one outlet or continue with both.

This is most critical because it involves a reduction in the company’s capacity to half of its former capacity, a permanent decision. It is also important because the loss of one store is a fundamental strategic change, since the company foregoes its market already developed in the location to be closed, and will concentrate only on the market in just the remaining location. Finally, there will be a material change in the cost-income profile of the company – cost, because overhead will be reduced, and income, because of the loss of sales.5. What caused these problems?

Start with that you believe was the initial cause and describe the progression through which the problems advancedThe initial cause is the decision of Connie to retire. A secondary cause was the opening of West 49 in a location in direct competition with one of the stores.6. Describe the industry in which this organization operates. Which industry-specific characteristics contributed to the problems over time?The industry belongs to the hobby/sports equipment and clothing retail business targeting the youth.

Skateboarding and snowboarding used to be fads, but they have matured into mainstream sports events. At the same time, they have maintained their following as a hobby for many amateurs. Both as a sport and a hobby, the patrons of this activity are either adolescents, teen-agers or young adults, as the activity is too strenuous for older adults. Also, it may be assumed that the clothing lines carried by the stores are those that cater to the youth’s tastes and preferences.Greater safety consciousness has prompted the use of mandatory safety gear, including helmet, elbow and knee pads, items which could be included, as it most likely was, in the goods for sale in Skadurz.

This would have added to potential sales in the stores.The products – skateboards, snowboard and clothing – are not exclusive to Skadurz, therefore more open to competition.7. Describe sources or methods that give the organization a competitive advantage. Are they being effectively employed to differentiate the organization from competitors?Location: Sudbury is a relatively young city, with the median age at 39, and about one-third of all the residents are below 25 years of age. There are also a dozen high school in the are, two colleges and one university, indicating that young people residing outside the city would certainly be visiting it on a regular basis, because they would be enrolling and studying in these academic institutions.8. What are possible solutions to the problems you have identified?

Maintain the status quoMaintain only one of the two present locations and close the otherSouth EndNew SudburyMove the New Sudbury store to more accessible, larger locationMove the store a few blocks westMove the store one block eastMove the store to Montrose MallSell the business9. What are the advantages and possible disadvantages of your solutions?Maintaining the status quo would entail no extra expense, but store performances may suffer if Connie retires and Joel takes over management of both stores.

Hiring a new manager may be needed. Also, this does not address the threat of the new competitionShutting down one store: If South End were shut down, the advantage is that New Sudbury accounts for approximately 60% of the sales and the profits (see Table 1), and thus has a stronger market. The disadvantage is that the existing market may weaken because of the new competition in the area (West 49), and if this store fails, then Skadurz would have lost both South End and New Sudbury markets.

If New Sudbury were shut down, Skadurz would immediately lose 60% of its sales and profits. On other other hand, concentrating efforts in South End may develop the market there further, inasmuch as there is no strong competition there like West 49, and Skadurz could dominate the market there.Moving to a new New Sudbury location (whether or not South End is maintained):If the store were moved a few blocks west, the rent is cheap, and the landlord is a good Skadurz customer and accommodating to the company.

However, the store is located at a distance from the present market and former customers may prefer to go the shorter distance to West 49. Also the store is less accessible to customers and offers little parking.If the store were moved just one block east, it is still accessible to its present market, as well as other customers due to its parking and access to a major Boulevard. It is likewise closer to potential new markets in the schools that were closer to it. Rent is higher, however at $3,500 a month.

If the store were moved to Montrose Mall, it would be less accessible to its present clientele who may simply opt to go to the nearby West 49, was not visible from the street, and had no signage nor access on the front. However, the space was large and the rent was low at $2,300.If the business were sold, Joel could move to other ventures and earn on the increased value of the business. This means, however, that Joel must find other things to do.Table 1: Store contributions Year ended March 31, 2003South EndNew SudburyConsolidatedSales40.5%59.5%100.

0%Cost of goods sold40.5%59.5%100.0%Gross profit40.5%59.5%100.0%Operating Expenses Rent 39.3%60.7%100.0%Other operating expenses40.4%59.6%100.0%Total operating expenses40.0%60.0%100.0%Net earnings before tax41.3%58.7%100.0%Income tax expense41.3%58.7%100.0%Net earnings after tax41.3%58.7%100.0%10. Are there any possible problems with your suggested recommendations? What contingencies need to be accommodated?My recommendation is to maintain both stores, and at the same time transfer the New Sudbury store to the new location one block east of the present location.

Both locations should be kept as a form of diversification, so that if the New Sudbury sales falter because of greater competition, South End still maintains its usual sales. A new manager should be hired for this store, and Connie should stay on as consultant to help provide advice and oversight (representing Joel) of the new manager. Joel should take over the New Sudbury store and pay the additional rental for the new location. After all, they used to pay close to $3,000 for the present location; an additional $500 appears to be attainable with the higher sales expected.

The transfer is a good strategic move to address the threat posed by West 49, and their competitive advantage would be their easier accessibility. Those looking for the equipment on purpose would prefer to go into a store by the roadside with good parking, rather than entering the mall and going through the mall traffic and maze with the other mall goers, just to reach the store.