bc,Compiler:,Reviewer:,Retail Co.,Created: August 26, 1999,Copyright 1998 Bain declining market share, low relative operating margins,Ireland,Declining market segment, poor position, little opportunity for sale, potential for savings by folding into Hong Kong,France,Overcapacity in segment, losing market share, below average profitability,Sweden,Large overall market but requires substantial investment to develop new products and achieve scale to improve cost position; business has poor fit with Retail Co skills,Spain,Small segment, low growth, high volatility, and seasonality,Division,Conclusion,Strategic Position,Market Attractiveness,Fit,Conclusion,12,RetailCo2,Business Unit Recommendations,Division,Strategic Position,Market Attractiveness,Fit,Grow(Spin Off),North*,Holland,Italy,Hong Kong,Luxembourg,Hold,Britain,Divest,Ireland,France,Sweden,Spain,*SpinOff,Conclusion,13,RetailCo2,Strategic Alternatives,Long-term vision:,Corporate profile:,The leader in selected business lines chain drug apparel footwear home toys,Business line competencies,Cost and experience sharing in the groups,Acquisitions to achieve business line dominance,Group-based organisation,A balanced portfolio of speciality retailers,Resource allocation competencies Lean corporate structure,Decentralised management,Grow and keep successful businesses. Divest the unsuccessful,A leading developer of targeted growth-stage retailers,Selection and expansion competencies Corporate expertise in critical growth functions business development (R there is little cost-sharing among North and the other divisions Market timing is attractive Norths value is not being fully recognized in the marketplace,Conclusion,Example: Rationale For an Independent North,16,RetailCo2,Planned capacity additions will result in industry-wide negative comp store sales through 1998 Consolidation is essential to eliminate excess capacity lowers costs allows comp store sales growth Retail Co is better suited to be a seller than a buyer synergy is equal whether France chooses to acquire or be acquired leading competitors market value is higher management group at France has several significant holes,Conclusion,Example: Rationale for the Sale of France,17,RetailCo2,Continue to pursue opportunities to consolidate and reduce over-capacity Fill key executive openings Restore the historical bargain edge with core customers increase the mix of opportunistically-purchased goods deliver values averaging 20% below department store sale prices Reduce costs to support price reductions reduce overhead costs by approximately $60MM reduce investment cost for new stores and remodels Close unprofitable locations and exit several markets which France cannot dominate,If the sale of France takes longer than anticipated, several actions will be taken to improve Frances performance:,Conclusion,Example: France - Strategic Imperatives,18,RetailCo2,Vision:,To consolidate our position as the leading widget retailer to our target customers (high-volume purchasers of trendy widgets in their 20s and 30s) To be recognized by our target customers as the leader in product assortment and customer service for widget retail (our unique positioning) To reach a 10% share of the national widget retail market by the year 2000,Financial Goals:,To reach and maintain ROIC levels of 20% To grow sales by 5% per year and net earnings by 10% per year 1998 sales objective: $1,225MM 1998 net earnings objective: $47MM,Strategy Summary (1 of 2),Conclusion,19,RetailCo2,Key Imperatives,Initiatives,Develop our new concept, Widget Factory, into the second-largest non-mall based widget retailer,Retail Co Real Estate audit of potential new sites Widget Factory rapid deployment initiative (opening of 30 new stores per year,Close non-performing stores,Closing of the 10 worst performing mature stores (both XYZ and Widget Factory) each year,Improve margins by changing mix and reducing costs,Mix change based on GMROI approach Implementation of 4-Walls system Redesign of logistics flow based on Retail Co study Improve density of markets by backfillling five markets,Modify our image in the eyes of the customer,Assortment redesign based on demand and profitability Sales force training initiative on customer service Launch of a new advertising campaign,Focus new stores in Southern geographies,Acquire and integrate Southern Widget by end of 1996 Retail Co Real Estate audit of potential new sites Proposed partnership with Southern Malls, Inc.,Strategy Summary (2 of 2),Conclusion,20,RetailCo2,Fit with Retail Co clear opportunity for value creation potential to maximize sharing with related divisions Market attractiveness substantial market potential dominant market position opportunity concept in early stages of a long lifecycle Financial opportunities affordable within target capital structure meets minimum return and growth hurdles Limited risk factors existing management talent or supplementable low to moderate volatility,Conclusion,Criteria