The principal activities of the Laura Ashley Holding Group are the design, manufacturing, sourcing, distribution and sale of clothing, accessories and home furnishings. The Group acts through tow divisions: Retail, which reflects sales through Laura Ashley managed stores, Mail Order and Internet, and Non-retail, which includes licensing, and franchising, although the retail sector represents the bigger one. The company operates in the UK, Ireland and Continental Europe and to some extent in the US market.
Although the former CEOs of Laura Ashley Holdings plc have conducted several cost cutting and restructuring strategies, Ng Kwan Cheong, who took over as chief executive of Laura Ashley Holdings in February 1999, faced declining sales and increasing operating losses. Despite the increase in equity through the injection of 43. 5 million pounds of the Malayan United Industries Group (MUI – a diversified Malaysian corporation) that acquired 40 % of the Laura Ashley Holdings in 1998 and the sale of 13 % of Laura Ashley Japan to Laura Ashley’s Japanese partner Jusco, which brought in 7. million pounds, the Laura Ashley Holdings couldn’t improve the financial stability as most of this equity was absorbed by debt payment, restructuring and closure costs, and continuing operating losses. Problems which were faced by the new CEO Ng Kwan Cheong: Although the problem of delivering a single and unique message concerning the brand of Laura Ashley products was resolved by consolidating design, buying and merchandising, the principle areas of their business into their head office of Fulham/London, there was still the problem with the garment brand.
As Laura Ashley Holdings is trying to reach new customers by modernizing its fashion/design, it may confuse core/key customers who associate with Laura Ashley the traditional clothing. So the reputation of Laura Ashley Holdings as a traditional clothing company suffers as it has moved too far towards the younger market. The new CEO faced furthermore the challenge of the North American market. This market may provide quite a lot of potentials and profit for the company, but it has suffered a lot in exploiting the market efficiently.
Moreover, the closure of small retail shops, the opening of larger shops and the closure of inefficient large shops may not only provoke increasing costs but also makes employees afraid of losing their jobs, which creates an overall bad reputation of the company and thus an possible reduction of sales. Another matter that should be analyzed and improved is the supply chain. Solution to the mentioned problems The company should conduct a consumer survey among its key/traditional/principal/loyal customers to meet their needs.
It should focus on their core competences, which is the design, manufacturing and retail of traditional clothes, accessories and home furnishings and franchising and licensing. Thus they are able to formulate a mission which signals a clear and straight message towards traditional design. In this way the loyal customers but also new customers may have more trust in the product and (continue) buying from the company, which would provoke an increase in sales.
Maybe it would be wise to outsource some of the clothing manufacturing to a subcontracting firm to save costs but to keep control over this subcontracting firm. Furthermore, an orientation towards the traditional AND the youth/modern market, in this way a diversification through an expansion towards a new market (the youth market), would be very costly (loss of consumers, but also a lot of investment) and should be planned and analyzed intensively over the long run before set into action.
According to the US market, an intensive strategic analysis of the North American market conditions has to be conducted to take the necessary steps to enter this market. Factors like growth rate of the market, number of potential buyers/women, tastes etc. should be strategically analyzed in order to see, if this market is attractive to the company. Furthermore, it would be wise to contact or even to employ an external expert who is familiar with the North American market conditions and can give advice how to enter this market in the best possible way.
In this way, before opening (more) retailer shops/stores the company should focus first of all more on franchising und licensing at the beginning. However, to finance the entry in the US market for the long run, the company has not only to reduce costs but has to secure an increase in sales to create an positive operating income and in this way to show a high liquidity to attract shareholders (like the MUI) to inject more equity.
This increase in sales should be secured by tying loyal consumers and attracting new consumers through a clear mission of traditional design and job security (see below), which improved the reputation of the company. The bad reputation of the company as a reason of job insecurity because of shop closures has to be reduced by convincing the workers/consumers/society that the workers who lose their jobs because of an closure will find a job in the new opened job for sure.
According to the supply chain it is important to create a tight relationship to the suppliers, which then may be more reactive to the changing needs of the company. Maybe it would be wise to reduce the number of suppliers to some main/principle suppliers in order to agree some special terms of payment and delivery. In this way the whole business process could be coordinated and managed more efficiently and cost-effective.