Liz Claiborne clothing company had a vision of rapid growth and expansion of new clothing labels, and they achieved these goals quickly. By 2006, the company had expanded to 36 different brands and experienced a 2.5x increase in revenues to reach $5 billion dollars. Despite the overall success, the company’s profits did not consistently grow with their expansion due to rising operational costs. In a bid to improve their company’s future, Liz Claiborne decided to appoint a new CEO, William McComb. His task was to reorganize and take control of the large corporation, ensuring they receive the profits they deserve.
McComb recognized that the company was excessively spread out, so he reduced the company to concentrate solely on 20 of the initial 36 brands. Additionally, he restructured the divisional setup from 5 divisions to just 2, specifically the retail and wholesale divisions. This enabled improved collaboration and communication among functional areas throughout all brands, leading to reduced operational costs. The retail division comprises the brands that demonstrate the highest growth rates, thereby enabling marketers to better address customer demands.
The Wholesale division aimed to decrease operating costs, resulting in lower market prices for products. This would give the wholesale department a competitive advantage over private labels. McComb believes that the company is well-positioned to compete and is expanding by adding 300 stores to the existing 783. He believes that the company’s profits will increase by effectively addressing environmental challenges with a stronger strategy. Previously, Liz Claiborne had an organizational structure where divisions were divided into departments based on the type of clothing line.
The company experienced financial losses due to excessive duplication of activities and coordination issues caused by individual management teams and functional areas in each division. Effective coordination is crucial in a global market with diverse demands and daily challenges. The outdated divisional structure, which was highly fragmented, created communication difficulties among divisions and hindered their ability to respond quickly to competitive pressures.
The organization’s inefficiency hindered their ability to carry out basic tasks effectively, resulting in a negative impact on profits, despite creating a desired product. In order to enhance competitiveness and eliminate brands that were negatively impacting long-term profits, McComb reduced the corporation’s portfolio from 36 to 20 brands. Furthermore, McComb restructured the entire organization.
He removed the entire top management, reducing transactional costs and eliminating duplications in areas such as marketing, distribution, and retail. High operational costs caused Claiborne’s low profit earnings. By consolidating the corporation into two product divisions, they were able to centralize functional rules, reduce costs, lower market prices, and increase competitiveness. According to Wikipedia (http://en.wikipedia.org/wiki/Liz_Claiborne), in May of 2012, Liz Claiborne changed its name to The Fifth & Pacific Companies, Inc.
They made a decision to further consolidate their clothing by exclusively licensing Liz Claiborne and Monet jewelry lines to J. C. Penney, while also licensing Dana Buchman jewelry to Kohl’s. This allowed them to completely license the Liz Claiborne name to J. C. Penney and focus more on their major global brands such as Juicy Couture, Kate Spade, Jack Spade, and Lucky Brand Jeans. McComb’s consolidation efforts appear to have been successful as Liz Claiborne remains strategically positioned to compete in the global market.