Liz Claiborne clothing company had a vision of growth and expansion of new clothing labels, and had achieved these goals very quickly. In 2006 the company had expanded to 36 different brands and saw revenues climb 2. 5x to 5 billion dollars. While the company as whole showed great signs, their profits had not consistently grown with their expansion do to an increase in operational costs. Weary of her company’s fate, Liz Claiborne hired a new CEO, William McComb, to reorganize and take control of the large corporation in order for them to receive the profits they should be earning.
McComb saw the company was stretched far too thin, he cut the company down to focus only on 20 of the original 36 brands, and reorganized the divisional structure from 5 divisions to only 2, retail and wholesale divisions. This allowed for functional area across all brands to collaborate and communicate much faster and smoother in order to cut down on operational expenses. The retail division is made of those brands that are the fastest growing to allow marketers to focus on customer demands more effectively.
In the Wholesale division, the idea was to cut down operating costs allowing for a lower market cost on products, thus creating a competitive edge for the wholesale department against private labels. McComb believes he has set the company up to be very competitive and is adding 300 stores to its existing 783 stores as he sees the company advancing its profits by facing environmental forces with a much better strategy. 1. Liz Claiborne’s old organizational structure was a divisional broken into departments based on the nature of the clothing line.
Each division had its own set of management team, along with all the functional areas creating a lot of duplication of activities and coordination problems. Coordination is major factor for corporations who are involved in a global market with different demands and problems arising on day to day bases. The old divisional structure was far too separated leading to communication problems between each division causing them to be slow to react towards competitive forces. This is where the company was losing profits.
They had been very successful on creating a product that consumers wanted, but the organization was so messy they couldn’t execute simple tasks effectively creating a negative impact on profits. 2. McComb cut down the corporation’s brands to the ones he felt were at their core competencies. From 36 they became 20 brands, in doing so McComb believed the firm would be more competitive and cut out brands that were hurting long run profits. He also re-arranged the whole structure of the organization.
He removed the entire top management which in turn cut down on transactional costs along with cutting duplications in areas like marketing, distribution and retail areas. The main reason for Claiborne’s low profit earnings was due to high operational costs, by condensing the corporation to two product divisions enabled them to centralize their functional rules thus cutting down costs, creating lower market prices and becoming more competitive in the market. According Wikipedia (http://en. wikipedia. org/wiki/Liz_Claiborne), in May of 2012 Liz Claiborne switched their name to The Fifth & Pacific Companies, Inc.
They had decided to consolidate their clothing even further down to Juicy Couture, Kate Spade, Jack Spade, Lucky Brand Jeans and serves J. C. Penney, via an exclusive license for Liz Claiborne and Monet jewelry lines, and Kohl’s with a license for Dana Buchman jewelry. They did this to completely licence the name Liz Claiborne to J. C. Penny and focus more on their major global brands to Juicy Couture, Kate Spade, Jack Spade, Lucky Brand Jeans, the consolidation planned by McComb seems to have been effective as Liz remains to strategically consolidate to compete in the global market.