Case Number 2

What Is OUR Business?

For as long as Bill Callahan could remember, he had always worked

indeed livedin a retail store. His father had owned a small meat
market in South Philadelphia, and young Bill had played there as a
toddler and gone to work there as soon as he was old enough to hold
a broom. He had worked in the market on weekends while going to
school and college; and when he went into the army, he found himself
almost immediately running a Post Exchange. And Bill loved every
minute of itindeed, his idea of heaven was a huge supermarket in
which all the cash registers rang all the time.
Bill had known since he was eight or nine that he would own
and build a retail chainand he started on this goal the day he
was discharged from the army in the mid-1960s. But he also knew
that his chain would be quite different from any other. For Bill had
deep convictions as to what makes a successful retail business. No
retailer can carry better or even different goods, he argued. What
he can do is rst make shopping more enjoyable, friendlier, and more
fun; and secondly, make the retail store a place where people like to
work and a place the employees consider their own personal concern.
This, according to Bill Callahan, meant three things: First, no chain
could contain more than a handful of storesno more than what
one owner-manager could manage by example, by frequent visits of

inspection, and by personal control. Second, each store had to have

a center of strength, something that made it distinguished. And nally, the key people in each storethe manager and the department

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managershad to have a personal stake in the stores success. Callahans rst store was a medium-sized supermarket on the outskirts of
a metropolitan community; he got a very cheap rental, as the former
operator had gone bankrupt. Within three months, Callahans store
was ourishing. All I did, said Callahan, was to think through
the areas in which a supermarket needs excellenceits meats and
producefor everything else is packaged by the manufacturer. So I
personally ran the meat and the produce departments, until they were
outstanding. Then I thought through how to give distinction to a
small storeand I started the rst ower-and-plant department in a
supermarket in my area. This completely changed the stores physical
appearance and attraction, and the department also makes a good deal
of money. Finally, I knew why people come back to a storethey like
the way theyre treated. So I stressed being friendly, being friendly,
being friendly, until every employee got the idea. Nine months after
the rst store opened, Callahan opened the second. He moved over
to the new store as manager and gave his successor at the rst store a

substantial share in the stores prots, with smaller shares for the department managersall the way down to the women at the checkout
counters. Within three years, Callahan had eleven stores in the same
metropolitan area.
Then, instead of opening more supermarkets, he decided to start
a new chaina chain of garden centers. He repeated the pattern
thereand then shifted to home-service centers for the do-it-yourself
home owner, built around hand tools and small power tools. His next
venture was a chain of greeting-card storessmall, high-turnover,
and run by one person. Thirty years after he had started with his rst
store, Bill Callahan incorporated as Callahan Associates, with four
chains, a total of forty stores, and in excess of $150 million in sales.
Each of the chains had its own general manager who had started out
as a checker or clerk and worked his or her way up through store management. Together with Callahan, a nancial executive, and a human
resource executiveall former store managers who had started at the
bottomthey constituted the companys executive committee. The

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Case Number 2

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general managers of the chains had a small prot participation in Callahan Associates and a substantial participation in the prots of their
own chain. Each store manager under them had a smaller share in the

chains prots and a substantial share in his or her stores protsand

so on, all the way down, with every employee with more than eighteen
months of service participating in some sort of prot-sharing plan.
Callahan deeply believed that the company had to expand to give
people promotional opportunities. And since he also believed that
no one chain should grow beyond the point where one person could
easily manage it and know every nook and cranny of it, this meant
going purposefully into new businesses every six or seven years. Accordingly, he started in the fall of 1995almost exactly thirty years
after he opened his rst storeto look around for the next business to
go into. He nally picked two as most promising: a chain of outdoorwear storesblue jeans, boots, Western shirts, and so on; and a chain
of simple restaurants featuring steak, roast beef, chicken, and so on.
However, he knew that he should tackle only one of these at a time.
Callahan had learned how difcult it is to get a new venture going
and knew that he himself would have to spend most of his time on it
for the rst two or three years.
It was the policy of Callahan Associates to make all major decisions
unanimously in the Executive Committee. In the past that had been
very much a formalitythe members followed Callahans lead. But
when he brought up the new expansion plans, Callahan unexpectedly
ran into serious opposition. Everyone agreed that it was time to get a
new venture going. Everyone agreed that they had to concentrate on
one venture. Indeed, everyone seemed to agree that the two areas Callahan had picked offered excellent opportunities. But half the group

was bitterly opposed to going into anything that had to do with

fashion (the outdoor-wear business), and the other half was as bitterly opposed to going into a personal service business (restaurants).
We know a good deal about food and home products, said the
rst group. Our customers are housewives and home owners. Outdoor wearthats kids to begin with, and it is style and promotion

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and sex appealnot our bag. Restaurants, the others argued, are
not for us. We know how to sell things to people, but restaurants sell
service and atmosphere and have to cook and cater to guestsnot our
bag.
All right, said a thoroughly exasperated Callahan, you have told
me what our business is NOTbut how does one go about deciding
what it is or should be? You all agree that the market opportunities
are good in both areas. So what we need to think through is what it is
we are, we can do, we believe in.

QUESTION

How could one go about thinking through these questions?