Organizational leadership and its impact on business operations

. Introduction and description of the organization - If based on real company names and people should be renamed and add disclaimer

The retail industry is undergoing fundamental change within its business operations and resulting profitability. Technology has heavily disrupted the industry caused a large amount of change in consumer purchasing habits. Technology has also significantly reduced the amount of information asymmetry within the market, thus help consumers better capitalize on deals and other bargains. This disruption has created both adverse and positive impacts on the industry. For one retail has allowed for a reduction within information asymmetry. It allows consumers the opportunity for true price discovery. Companies such as Ebay for example provide millions of consumers and sellers the opportunity to arrive at a “fair” price for goods and services. Others companies also have a better opportunity to reach consumers without necessarily requiring a physical store presence further aiding in the purchase of goods and services. Amazon also provides a platform of both consumers and markets participants to properly engage with one another on a very fundamental level. More pure-play brick and mortal firms do not have this flexibility and often have large amounts of overhead within their overall cost structures (Abrahamson, 2000).

The retail organization for this report will be “Marty’s”, a fictional name based off of the dominate retailer “Macys.” Marty’s has a long a storied retail history. It has been around for over 5 decades and has developed very strong brand equity within the United States and abroad. It has also garnered a large following through its creation of the “Marty’s Day Parade” during the holiday season and the “Marty’s Fire Works Show” during the fourth of July holiday. The company occupies the middle niche within the retail market space with a combination of premium products at affordable prices. It is not the low-cost producer and its brand does not cater to this market. Likewise, the brand is not ultra-premium although it does have a few products that can address this market. Typically speaking the organization caters to shoppers making between $55,000 and $90,000 a year with a relatively large amount of discretionary income. The organization is currently undergoing a fundamental shift in its operations as it looks to better compete with small, nimbler, internet companies. It is also shifting operations to better compete with the larger online retailers that have come to dominate the retail sector. To accomplish this the company is embarking on a digital transformation of its own along with strategic partnerships with logistics firms designed to help provide a compelling value proposition to shoppers (Alvesson, 2002).

2. The internal or external driven needs for change - Could be week 2 -PESTEL then SWOT or Burke Litwin

The internal and external needs for change are driven by a litany of factors. First, the external factor is heavily centered around changing consumer sentiment, purchaser behavior, and buying power. New competitors have entered the market and are willing to sacrifice short term profitability and margin to erode the market share of “Marty’s”. To do so, they are often offering products at much steeper discounts than Marty’s which ultimately forced the company to respond with lower prices themselves. However, due to Marty’s large overhead, it has limits in its ability to properly lower prices and compete. Many of the online retailers do not have these same restrictions which ultimately empowers the consumer. Consumers, due in part to globalization and the internet have a much more robust consideration set. These external factors of intense pricing competition, globalization, more market participants, and high consumer power all negatively impact Marty’s. Likewise, internal needs related to the companies high fixed cost structure, high overhead, and lower flexibility in operations negative impact the company (Barnard, 1938). As a result, the company needs to shift its operations to become much nimbler while also leveraging its strengths within its internal store portfolio. By creating a omni-channel strategy the company can better compete in all facets of the retail landscape. It can compete with retailers who don’t have a brick and mortar presence by leverages its vast store footprint to accommodate online orders. Elements such as “Buy Online, Pick-up in store” allows Marty’s to add a value proposition that online only retailers cannot. In addition, shifting the company’s stores to become quasi-fulfillment centers also helps to provide logistics capacity to the store operations. This can aid the company compete with retailers who now offer 2-day and on some occasions same-day shifting. Marty’s benefits from having a very strong store footprint built over many decades. The company can thus leverage this store footprint as a logistical advantage. Finally, the company must combine both online and off-line experiences to help integrate both within the operations of the business (Anastasiou, 1998).

PESTEL Analysis

Risks

Factors

Political

· Tax policy related to corporations can adversely impacts Marty’s ability to reinvest into its online operations as it will have less cash flow to do so

· Trade wars between China and the United States can significantly increase product costs for Marty’s who requires inventory for its brick and mortar stores

· Minimum wage legislation can increase labor costs for the company at a time when margins are shrinking due to competition.

Economic

· Economic growth rates as COVID-19 is being controlled is a positive for Marty’s. Consumers are confident in the future, have higher incomes, and large discretionary income.

· Accommodative monetary and fiscal policy has kept interest rates low, allowing Marty’s to borrower funds from the capital markets to initiate its online transition

· Inflation rates are very high as supply chain disruptions, and accommodative monetary policy has created upward pricing pressure. This is a negative for the business as these costs increase are difficult to pass to consumers.

· Unemployment rates are low which is both a positive and a negative for Marty’s. For one Marty’s is finding it difficult to hire competent employees and must thus increase wage rates further. One the positive side, with higher employment rates, consumers are better able to spend during the critical holiday shopping season.

Social

· Population growth rates have declined as a result of COVID-19. The impact on Marty’s is neutral to negative as consumers are less likely to purchase baby products.

· Consumers are now looking to move into single family homes to be closing to work and to family members. This bodes will for the home furnishings department.

Technological

· Technological change is become very rapid in the retail industry with new market participants occurring every day. Not only can companies participate in this revolution but individual consumers selling their own items can also participate.

· Automation is also going to impact the company as many warehousing and back office functions will become automated. This is critical for the company to help expand margins and reduce labor costs

Environmental

· Climate change is becoming a major issue for consumers who are willing to pay more for health-conscious products

· In addition, governments are expected organization to help in reducing waste associated with packaging and carbon emissions related to logistics.

Legal

· Industry regulations related to online consumer data, logistics, and other important elements for the company are constantly evolving.

SWOT

Strengths

· The company has a strong brand

· Strong and established store footprint that can be leveraged for logistical purposes

· Strong balance sheet which can be used to help the company access the capital markets to finance its transition and operational change

· Strong leadership team with ample experience and vision to help oversee the strategic change

· Strong relationships with vendors and other suppliers in the market

Weaknesses

· Bloated cost structure with its store footprint

· Lack of online expertise which is causing the company to lose market share

· Deteriorating pricing power as its products can now be found cheaply over the internet

· High labor costs are expected to negatively impact margins.

Opportunities

· Online retailing

· Strategic partnerships with vendors and suppliers to sell exclusive products

· Omni-channel experience

· Improvement in logistics operations

· Acquisition of other strong online operators

Threats

· Globalization and international competition

· Government regulation and trade wars increasing input costs

· Monetary policy increasing inflation and thus input costs

· The ease in which competitors can enter the online retailing market

· Strong and very well entrenched online retailing companies.

3. The optimization outcome to be achieved - Needs to be efficiency cost cutting strategy as week 3 delayering,

The optimization outcome to be achieve is first relates to a fundamental shift in culture. Here, retail has traditionally been a very stable business. The change was primarily centered around products but not the overall industry structure. Now, the overall industry structure has changed requiring a shift in leadership and employee mindset. The culture of the organization must shift to one of constant change. The organization must therefore be willing to accept this change and the employees must be willing to execute on organizational change. Once this is accomplished, the optimized outcome will be lower the cost structure of the organization through the sell of unproductive stores and assets. The proceeds from these sales will then be used to help establish the companies online operations. The optimized outcome will be a smaller nimbler organization that has a compelling value proposition for consumers. This value proposition will include the ability to have consumers shop in store and online. It will also give them the opportunity to integrate logistical operations as allowing stores to serve as fulfillment centers. This strategy will ultimately help cut costs, improve profitability, and improve customer retention (Balogun, 2008).

4. The readiness of the organization to change