Case Analysis Format

Background ( The Case itself )

I. Time Context – period when the problems started or originated

II. Viewpoint- person or officer responsible in finding solution to the problem.

III. Central Problem- statement of the major problem.

IV. Objectives:
a. Must Objective – intervention that should be done.
b. Want objective- status the company is aiming or would want to maintain.

V. Areas of Considerations:
Strength – internal positive aspects a company has over other or its competitors.
Weaknesses- internal negative aspects the company cannot overcome.
Opportunities – external factors awaiting which may put the company on top and
maintain its status as a leader.
Threats- external factors considered as challenges that must be overcome otherwise
these may affect the company’s status as a leader.

VI. Alternative Courses of Actions ( ACA ) –prepare at least 3 ACAs

Give advantages and disadvantages of each ACA

VII. Recommendation. (Choosing the best ACA and give your rational or reasons why choosing
such ACA)

VIII. Plan of Action- steps or detailed things to be done or considered in implementing the ACA as
solution to the problem.
 SAMPLE CASE STUDY

Case Analysis of “ Kmart Corporation. Seeking Survival in a Changing Marketplace (2002)

Summary of the Problem:

On January 22, 2002, Troy, Michigan- based Kmart Corporation became the largest retailer
in the history of the United States to seek bankruptcy protection. In its voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code, Kmart management announced that
it would outline a plan for repaying its creditors, reducing its, restructuring its business, and
emerging from court protection in July 2003. “ After considering a wide range of alternatives, it
became clear that this course of action was the only way to truly resolve the company’s most
challenging problems”, Kmart Chief Executive Charles C. Conway said in a prepared statement.

On March 11, 2002, Kmart announced that Charles Conway had resigned. He was replaced
as Chief Executive Officer ( CEO ) by James B. Adamson, who also would continue as Chairman
of the Board of Kmart, a position he was elevated to just prior to the bankruptcy. Upon assuming
the position, Adamson indicated that Kmart would emerged from bankruptcy protection “ as strong
and healthy competitor, with a clearly defined place in the discount retail sector. On his first day as
CEO, Adamson said he would initially be focusing on basics, such as cleaning up stores and making
sure selves were full of merchandise. He knew that he must develop a strategic plan of action that
would guide the long run performance of the organization following bankruptcy protection.

The early years of the 21st century were problematic and difficult ones for Kmart and the
entire retail industry. Sluggish consumer spending, rising unemployment, the energy crisis,
increased competitive pressures, battle for market share, a dismal holiday season, halts in shipments
from wary vendors, problems in the securities and bond market, liquidity issues and the events of
September 11, 2001, all came together to make this period a very challenging time in which to
operate. Several historic retail chains had also filed for protection and had either been reorganized
or liquidated. Some analyst doubted if Kmart could survive in a changing market place and felt it
would face eventual liquidation. Others felt that the firm needed an entirely new strategy that would
reorganize and reposition the company in an extremely competitive marketplace. Retail analyst
agreed that Kmart management had a huge task to undertake in the immediate future and the years
ahead….

I.TIME CONTEXT: September, 2002

II. VIEWPOINT: James B. Adamson

III. CENTRAL PROBLEM: Strategy that would reorganize and reposition Kmart Corporation
in the extremely competitive discount retail sector of the
U.S. Market.
 IV. OBJECTIVES:
Must Objectives:
1. To formulate and implement a strategy that would reorganize and reposition Kmart
Corporation as the third- largest discount retailer in the United States by July, 2002.
2. To make Kmart Corporation a stronger, more dynamic, more profitable enterprise with a
well- defined position in the discount retail industry sector by July, 2003.
3. To generate an annual net income of $ 2.5 billion from operations for the year 2002.

Want Objectives:
1. To be the leading discount retail store and emerge as the leading mass merchandize
retailer in the U.S. in 10 years time.

V. AREAS OF CONSIDERATION:

STRENGHTS:

1. Kmart Corporation as one of the market leaders

2. New leadership: Experienced CEO
3. Capability of Kmart to grow despite a mature retail market.
4. Kmart continue to acquire business operation including interest in other businesses to
establish itself.
5. Proving its capabilities as a market leader and continue growing in the mature market.

WEAKNESSES:

1. Kmart Corporation’s lack of definable niche in the discount retailer industry

2. Poor financial performance.
3. Lack of clearly defined turnaround plans.

OPPORTUNITIES:

1. Broad customer base.

2. Bankruptcy of other big retailers such as venture, Ames Department Inc., Montgomery
Ward and Company, Jacobson’s Son’s store Inc. and others.

THREATS;

1. Increase competitive pressures.

2. Discount department stores were being challenged by several other retail format.
3. Some retailers were assortment oriented, with a much greater depth of assortment within
a given product category.
4. Based from industry competitive analysis, Kmart is quite far below other competitive
stores in U.S.

VI. ALTERNATIVE COURSES OF ACTION:

ACA # 1: RESTRUCTURING
 The firm should implement reorganization and restructuring of the corporation. The
following can be implemented:
1. Disposition of non- core assets.
2. Closing of underperforming stores.
3. Clearing of aged and discontinued inventory.
4. Conversion of stores to other formats.

Advantages:
1. This will increase the cash inflows due to proceeds in disposition of assets.
2. Reduction in cost of maintaining non- performing stores.
3. New formatted stores may recapture the customers. It may also serve as a test ground for
the future Kmart stores format.
4. Clearing of inventories not only pleases the store managers and staff but the customers
as well.

Disadvantages:
1. Untimely or unwanted disposition of assets do not generate the correct or justifiable
value of the asset to b implies that some workers will have to be sold.
2. Closing stores are anti-labor which implies that some workers will have to lost their jobs
if the company cannot accommodate them in other stores.

ACA # 2 – BACKWARD VERTICAL INTEGRATION

The backward vertical integration alternative will move Kmart to speak to their
suppliers. Kmart can invest in the suppliers or be part owners of such business , if not
establishing his own.

Advantages:
1. If Kmart will invest in its suppliers, price of the products or commodity will be reduced
because it is directly sourced from the suppliers of which Kmart has an interest.
2. If Kmart will invest in putting up its own product businesses, there will be a definite
decrease in the retail prices since the supplier, a channel of the market has been
eliminated.

Disadvantages:
1. Converting in business of suppliers will entail cost. It may also endanger same
investments due to lack of technical know-how or expertise on the business of such
suppliers.
2. Investing in production of goods and products will be another business that Kmart may
not be of interest. This will entail cost and will be an expansion, or even addition of
activities of the Kmart Corporation.

ACA # 3 - HORIZONTAL DIVERSIFICATION

 ( The idea of seeking ownership or increased control over the direct and indirect
competitors of the business.
Advantages:
1. The corporations can execute policies that will be both beneficial to the corporations.
2. Should any of the corporations or both agree to acquisition or merger, such action will
be easily discussed and agreed upon by parties.
3. If a company has direct control or ownership over its direct or indirect competitors, it
may benefit to the performance of the better company. ( This will increase profits or
reduce losses for the other company.

Disadvantages:
1. Agreement of parties may be limited since they are competitors in business.
2. If someone agrees to selling partly, or wholly to its competitor, it will be very costly to
the side of the buyer.

VII. RECOMMENDATION:

ACA # 1 - RESTRUCTURING

Kmart Corporation should restructure, reorganize, and consolidate its resources.

They done this before sometime in 1995 and survived. Restructuring will also leave the
corporation with good performing assets; reorganization will also help Kmart Corporation
select better manpower complement to its operation. Kmart will also have the effort to
consolidate its resources to plan and emerge a better corporation.

VIII. PLAN OF ACTION:

1. Board of Directors approves the recommendation of restructuring and instructs CEOO to

implement the decision.
2. CEO prepares a Plan of Action to include the following:

2.1 Audit of all assets and performance of the assets of the corporation.
2.2 Review of performance of all stores and recommends appropriate action such as closure,
or
reformatting.
2.3 Evaluation of employees to determine who have to retained or retrenched.
2.4 Instruct all store/ department managers to clear aged and discontinued inventory.
2.5 Review pricing policy of goods sold.
2.6 Prepare an environmental scanning of Kmart.
2.7 Submit plan of action to the Board for approval.
2.8 Implement the plan.
( Work for this case to be submitted – Prelim: soft copy) . You may submit also hard copy at
the end of the semester.

Case Analysis of Krispy Kreme Doughnuts, Inc

Company Background

In 1933, Vernon Rudolph bought a doughnut shop in Paducah, Kentucky, from Joe LeBeau.
His purchase included the company’s assets, goodwill, the Krispy Kreme name, and rights to a
secret yeast-raised doughnut recipe that LeBeau had created in New Orleans earlier. Several years
thereafter Rudolph and his partner, in order to look for larger market, moved their operations to
Nashville, Tennessee. Other member of the Rudolph family joined the enterprise, opening doughnut
shops in Charleston, West Virginia, Georgia.

In 1937, Rudolph quit the family business, and left Nash Ville taking with him a Pontiac, $
200 in cash, some doughnut-making equipment and the secret recipes, after efforts of finding other
location, he settled on opening Krispy Kreme doughnut shop in Winston-Salem, North Carolina.
Rudolph chose Winston-Salem because the city was developing into a tobacco and textiles hub in
the Southeast and he thought that a doughnut shop would make a good addition to the thriving local
economy. Soon afterward, Krispy Kreme doughnuts became highly popular in the area.

In the early 1950’s Rudolph met Mike Harding who was then selling powdered milk to
bakeries. They became partners and they believed that the key to Krispy Kreme’s expansion was to
have contact over each step of the doughnuts baking process and he able to deliver hot doughnuts to
customers as soon as they emerged from the frying and sugar-glazing process.

In 1976, Beatrice foods bought Krispy Kreme and proceeded to make a series of changes.
The recipe was changed and the company’s script-lettered signs were altered to produce a more
modern look. Customers reacted negatively to the changes and business declined. A group of
franchises led by Joseph McAleer, bought the company from Beatrice in 1982 and the new owners
quickly reinstated the original recipe and the original script-lettered signs.

To grow revenues, the company relied mainly on franchising “associate” stores and opening
a few new company-owned stores. Associate stores operated under a 15 years licensing agreement
that permitted them to use the Krispy Kreme system within specific geographic territories.

In the early 1990’5, with interest rates falling and much of the company debt paid down, the
company began experimenting with expansion. Under the new president and Chief Executive
Officer, Scott Livengood, expansion was done because the company’s exclusive focus on the
southeastern US market was not working for the company.

By mid- 1990’s, company executive determined that it was time for aggressive expansion,
for repositioning of the company and for shifting the focus from a wholesaler bakery strategy
to a specialty retail strategy that promoted sales of the company and emphasized the “hot
doughnut experience” another strategy was to expand the number of national stores through
franchises and company-owned stores.

In late 1990 and early 2000, the company prepared an initial public offering of the
company’s stocks. The old corporate structure of Krispy Kreme Doughnut Corporation was merged
into a new company- the Krispy Kreme Doughnuts, Inc. Krispy Kreme was the second best
performing stock among all initial public offering in the United States in 2000. In fiscal year 2001,
Krispy Kreme reported sales of $ 301 million and profit of $ 14.7 million.

As far as Krispy crème is id concerned, its long term debts including current maturities were
paid out as of 2001. The company had a chain of company- owned stores which were doing good on
the business. It has developed a vertically- integrated supply chain which generated a
substantial fraction of both revenues and earnings. The company has good distribution line/
system of its products. The company had the model of selling in wholesale channels and less
on brand which contributed to stagnant sales. The company’s exclusive focus was on
southeastern U.S. market which hand cuffed efforts to leverage the company’s brand equity
and product quality in the rest of the U.S.

However, the company had a great potential for growth to become the industry leader in the
U.S. and internationally where its sores were welcome because its appeal extended across all major
demographic groups including age and income. It has the potential to develop its products and be
competitive with industry leaders. However, the company was faced with stiff competition from
industry leaders, Dunkin Donuts and other competitors who were operating and known
internationally and have already acquired markets abroad.

By some estimates, the Doughnut industry in the United States was a $4.7 billion market in
both 1998 and 1999. Americans consumed an estimate 10 billion doughnuts annually- just over
three dozen per capita. There was a little indication that the health consciousness craze and had
swept the United States in recent years had cut much into sales; industry observers and company
officials attributed this in part to doughnuts being an affordable indulgence and the tendency of
many people to treat themselves occasionally.

The dominant and longtime industry leader was Dunkin’ Donuts, with worldwide 2000 sales
of $2.32 billion, 5,200 outlets, and close to a 45% U.S. market share based on dollar sales volume.
Aside from the doughnut product the company was also the largest coffee- and- baked- goods chain
in the world, selling 6.4 million donuts and 1.8 million cups of coffee daily.

Compare to Krispy crème, Dunkin’ Donuts put more emphasis on coffee and convenience.
According to one Dunkin’ Donuts executive, “ People talk about our coffee first. We’re food you
eat on the go. We’re part of your day. We’re not necessarily a destination store.”