Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
The CASE Journal
Volume 5, Issue 2 (Spring 2009)
www.caseweb.org
Article Ref # TCJ 05-02-02im
ANN TAYLOR: SURVIVAL IN SPECIALTY
RETAIL
Instructors’ Manual
Pauline Assenza
Manhattanville College
Alan B. Eisner
Pace University
Jerome C. Kuperman
Minnesota State University Moorhead
ecch the case for learning
Distributed by ecch, UK and USA North America Rest of the world
www.ecch.com t +1 781 239 5884 t+44 (0)1234 750903
All rights reserved f+1 781 239 5885 f+44 (0)1234 751125
Printed in UK and USA eecchusa@ecch.com eecch@ecch.com
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
Instructors’ Manual
Ann Taylor:
Survival in Specialty Retail
Pauline Assenza
Manhattanville College
Alan B. Eisner
Lubin School of Business, Pace University
Jerome C. Kuperman
Minnesota State University Moorhead
CASE USE AND OBJECTIVES
This teaching note provides:
• Suggestions for case use and objectives
models.
The Ann Taylor case is a candidate for a “comprehensive” case that can be used to illustrate
many facets of strategic management. AnnTaylor Stores Corporation (ANN) was a large
specialty retailer facing an extremely competitive environment. The slowing economic
challenges outlined in Ann Taylor make it possible to use the case to augment a discussion of
marketing strategy (Aaker, 2007).
This case is primarily intended for use with graduate or advanced undergraduate students in the
Ann Taylor can be used to compare and contrast Porter’s (1985) generic strategies and the
advantages and disadvantages of those strategies. One challenge facing ANN is how to balance
differentiation and focus among several different product lines, especially given ANN’s internal
TCJ05-02-02TN
2
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The CASE Journal Volume 5, Issue 2 (Spring 2009)
and value chain configuration (Porter, 1985), including the concept of core competence
(Prahalad & Hamel, 1990), is possible here.
terms of relatedness and potential synergies.
Ann Taylor provides an opportunity to discuss growth strategies (Ansoff, 1957), strategic
positioning (Porter, 1996) and the importance of a market orientation (Day, 1998) within the
context of a discussion of issues affecting brand strategy/brand extension decisions and the
(1996, 2007) concept of “trade-offs”.
The Ann Taylor Case can be used with popular strategy textbooks such as:
• Wheelan & Hunger’s Strategic Management and Business Policy
• David’s Strategic Management: Concepts
organizational structural decisions.
Further assigned reading is possible depending on the instructor’s specific objectives. See Table
1, below, and suggestions within this teaching note, with full citations in the References section.
Section 1: Review of Ann Taylor’s history
Section 2: Information on the overall apparel retail industry environment
Section 3: Challenges specific to growth and branding in specialty retail
Section 4: Information about ANN’s direct competitors
Section 5: ANN operational information
Section 6: ANN’s branding strategies
Section 8: Presentation of new corporate initiatives
TCJ05-02-02TN
3
The CASE Journal Volume 5, Issue 2 (Spring 2009)
• Revisions to the product lines of different divisions
• Expansion of existing divisions
• Further diversification into new businesses
• Better maintenance of distinct brand identities across different divisions
• Executing a proposed restructuring plan
• Stabilizing the top management team
following set of questions:
• What should Krill have done to unleash what she believed was the firm’s “significant
untapped potential”?i
• Had Krill’s new strategies been well considered, given the ongoing challenges of AT and
initiatives?
In order to help students reach a more thoughtful and informed conclusion to any or all of the
above, we present the instructor with a variety of potential discussion prompts. These questions
should help move students through all of the required steps of a comprehensive strategic analysis
also be assigned as an additional assignment.
TCJ05-02-02TN
4
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The CASE Journal Volume 5, Issue 2 (Spring 2009)
Ann Taylor Stores Table 1. General Discussion Questions
General Discussion
Questions
Case
Sections
Textbook
Component
Strategic Theory
or Model
Additional Suggested
Reading/Exercise
1. Has ANN been
successful? Be sure to
provide support for your
response.
All Processes of strategic
analysis, formulation,
implementation, &
evaluation
Have students compute
ratio analyses. Refer to the
Ratio Analysis, TN Exhibits
A & B.
2. Identify key changes in
the general environment.
How will these trends affect
retailers in general and
ANN in particular?
Sections 2-
4
External
environmental
analysis
General environment
(PEST): political-
legal, economic,
sociocultural/
demographic,
technological
Have students reflect on
their own recent shopping
experiences, or interview
others who are frequent
shoppers for specialty
goods.
3. What industry is ANN
in?
Section 2 External
analysis
Industry
segmentation,
competitive scope
Have students list all the
different types of retail
environments.
4. Using Porter’s Five
Forces model, identify the
key issues in the
competitive environment
that affect ANN and its
rivals. Identify and evaluate
the competitive forces that
shape the industry structure.
How much opportunity
exists for industry players?
Sections 3-
4
External
analysis
Porter’s Five Forces
analysis
Read: Porter, 1980,
Competitive Strategy;
Porter, 2008, The five
forces that shape strategy.
Assign: visit to the Internet
to update current financial
data - see TN Handout A &
B
5. Does the industry
structure make one generic
competitive strategy more
attractive and attainable for
ANN than another?
Sections 1,
2-6
Business level
strategy
Porter’s generic
strategies:
differentiation, cost-
leadership, focus
Porter, 1985, Competitive
Advantage
6. To what degree do
ANN’S internal resources
and capabilities provide an
advantage not available to
potential or current rivals?
On which of these resources
and capabilities should
ANN concentrate?
Sections 1,
5-8
Internal
environment of
the firm
Internal resources &
capabilities, resource-
based view of the
firm, VRIN,
intangible resources,
value chain, possible
core competencies
Barney, 1991, Firm
resources & sustained
competitive advantage;
Grant, 1991, Resource-
based theory of competitive
advantage; Prahalad &
Hamel, 1990, Core
competence; O’Riordan,
2006, VRIO framework
7. Assess the branding
strategy that created AT and
LOFT. Can ANN increase
sales and improve financial
results in all its brands and
formats at the same time?
Sections 1,
3-4, 6
Strategic
formulation
Life-cycle theory,
branding, brand
extensions and
possible
cannibalization
Aaker & Keller, 1990,
Consumer evaluations of
brand extensions; Mason &
Milne, 1994, An approach
for identifying
cannibalization within
product line extensions
8. Assess the level of
relatedness in ANN’s
strategic decisions. Does
ANN have a corporate
strategy?
Sections 1-
8
Corporate level
strategy
Related
diversification, value
proposition
Aaker, 2007, Strategic
Market Management
9. Assess ANN’s growth
strategy moving forward.
What do you think Krill
should do?
Sections 1-
8
Strategic
Implementation
& Evaluation
Strategic fit,
positioning, trade-
offs, market
orientation, product-
market growth
matrix, managerial
conceit
Read: Ansoff, 1957,
Strategies for
diversification; Porter,
1996, What is strategy?;
Day, 1998, What does it
mean to be market-driven?;
Porter, 2007, Porter’s Big
Ideas. Assign: Earnings
Conference Call, May 08
TCJ05-02-02TN
5
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The CASE Journal Volume 5, Issue 2 (Spring 2009)
CASE SYNOPSIS
The Ann Taylor Case provides information about both Ann Taylor Stores Corporation (ANN)
and the overall retail environment. The case depicts ANN, a women’s specialty clothing retailer
that had been successful in creating a complete product line that appealed to its target
demographic of socially upscale professional women, but that in 2008 faced increasing
competition and a challenging economic environment. ANN had experienced significant growth.
However, success had been very uneven between the original Ann Taylor Stores (AT) division
that sold updated classics and the company’s newer Ann Taylor LOFT division that carried
lower priced casual merchandise. Specifically, sales data (see Case Exhibit 1) shows that in both
2004 and 2005 LOFT sales grew by over 12 percent, while the flagship AT Stores had a sales
decline of almost three percent. However, from 2006 to 2008, differences between the two
divisions were minimal, with AT doing slightly better than LOFT. Going into 2008, ANN sales
growth had declined in each of the two primary divisions, with only Ann Taylor Factory and
Internet sales increasing.
ANN was not the only retailer suffering in a poor economic climate (see Case Exhibit 7). The
news reports quoted at the beginning of the case confirm that the entire retail industry was facing
an unpredictable environment. Retail businesses were encouraged to take a close look at
operations to see what changes might have to be made. ANN’s current CEO, Kay Krill, was
already doing so. She had already begun to implement a variety of initiatives and was
considering several more.
To generate growth, Krill had identified several distinct areas of opportunity. She continued her
ongoing efforts to revitalize the flagship Ann Taylor (AT) store brand, while not dampening
LOFT’s recent growth. In addition, ANN had recently launched a beauty business as a
department within the AT and LOFT stores, was testing a maternity section in selected LOFT
stores, had expanded the high end fashion offerings in AT as a separate Collections line,
announced the opening of LOFT Outlet stores to complement Ann Taylor Factory, and was
considering a new concept store specifically targeting the “older” segment of women ages 55-64.
The case provides examples within the context of the larger retailing industry to show that
ANN’s strategy was consistent with growth initiatives pursued by many of its fellow specialty
retailers. ANN’s proposed focus on the older, upscale segment put it most directly in competition
with three firms: Chicos FAS, Coldwater Creek, and Talbots.
As early as 2005, Krill had begun to implement several measures focused on the improvement of
existing operations. While ANN had been growing its store base around the country, it had also
been focused on maintaining and upgrading those stores starting with 43 store enhancements.
ANN had also recognized the need to improve its margins, and recent ANN initiatives had
focused on improving supply chain speed, flexibility, and efficiency. New inventory
management strategies were focused at reducing the levels of inventory per square foot, reducing
the amount of merchandise markdowns required at the store level, and, hopefully, helping to
improve profitability.
TCJ05-02-02TN
6
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The CASE Journal Volume 5, Issue 2 (Spring 2009)
However, these investments came under review in 2008 after the downturn in sales. CEO Krill
announced a restructuring plan to focus on the evolution of ANN’s brands and channels,
reduction of the firm’s overall cost structure, and continued pursuit of growth. The reduction of
cost structure included layoffs of headquarters staff and reconfiguration of executive
performance compensation bonuses. Some analysts questioned the wisdom of Krill’s ongoing
involvement in day-to-day operations and wondered if the turnover in upper management since
2006 might be a problem. It is clear that Krill was firmly committed to long-term growth.
However, the basic question of the case is whether she was doing what she should do to unleash
what she believed was the firm’s “significant untapped potential”.
Note on the research method used to prepare this case: The Ann Taylor Case was written using
library research and public source material. The authors appreciate feedback from ANN’s
director of communications Beth Warner in July 2007. Ms. Warner specifically commented that
there was no apparent cause and effect relationship between AT sales decline and the growth of
LOFT. However, no major member of ANN’s management would comment on record.
TEACHING PLANS
As a General Discussion Business Case: The instructor can simply allow students to speculate
and discuss what they think is right/wrong with the company, their assessment of the company's
decisions, and their predictions regarding the company's future. A general discussion approach
could be based on a simple SWOT analysis.
One approach to help move students through this process is to put them in groups and ask the
groups to assess what went right and what went wrong with the AnnTaylor Stores Corporation
relative to the competitive retailing environment as detailed in the case. In smaller classes, the
instructor might have the students put a summary of the team’s discussion on the board. This
group work will allow students to see where they agree and where they disagree and, in all
likelihood, foster further discussion. The instructor's role in this scenario is to guide students
through the discussion such that they begin to realize that there are key tensions or issues in this
case that must be addressed before conclusions can be drawn. Students can then see that their
conclusions rely on certain assumptions regarding the organization's internal and external
environments.
Of particular concern is to help students understand that they cannot analyze business strategy
decisions without first defining the competitive environment in which the firm exists. As a
critical first step, students have to think about how they define the industry in this analysis. With
whom does Ann Taylor compete is an essential question for students to consider. Sections 1-4 of
the case are especially applicable to this aspect of students’ analyses. Discussion Questions 1, 2
and 3 are appropriate for this level of discussion.
As an Advanced Case: It is assumed that students at this point in the class have been exposed to
the various frameworks associated with different types of analyses. The instructor should feel
comfortable being more directive in guiding the discussion and asking students to incorporate
various types of analyses including General Environment and Five Forces analyses, VRIN
analysis, generic business strategy analysis, and a corporate strategy relatedness analysis, using
TCJ05-02-02TN
7
For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The CASE Journal Volume 5, Issue 2 (Spring 2009)
discussion questions 4 – 6 and 8. Question 7 provides the opportunity to include a discussion of
marketing strategy.
To focus students’ reading and study, instructors can pose questions such as those provided
below in the section “Analysis of General Discussion Questions”. Questions such as these are
meant to provide structured guidance to allow students to apply the various models that they see
in the textbooks to the specific context of this case. In the Ann Taylor case, we believe that
students should be especially encouraged to think about the complex relationship that exists
between the external environment and the internal environment. In particular, encourage students
to consider the extent to which specialty retailers such as Ann Taylor seem to be such complex
enterprises with constantly changing strategies as a natural response to a particularly turbulent
and uncertain external environment.
ANALYSIS OF GENERAL DISCUSSION QUESTIONS
NOTE TO INSTRUCTOR: Here is a list of the suggested general discussion questions. You
can decide which questions to assign, and also which additional readings or exercises to include
to augment each discussion. Bear in mind that the first three questions are best for a general
business case discussion, and may not require that students read the entire case. Refer back to
Table 1 to identify any additional readings and/or exercises so they can be assigned in advance.
1. Has ANN been successful? Be sure to provide support for your response.
general and ANN in particular?
3. What industry is ANN in?
4. Using Porter’s Five Forces model, identify the key issues in the competitive environment
that affect ANN and its rivals. Identify and evaluate the competitive forces that shape the
industry structure. How much opportunity exists for industry players?
attainable for ANN than another?
6. To what degree do ANN’S internal resources and capabilities provide an advantage not
should ANN concentrate?
strategy?
1. Has ANN been successful? Be sure to provide support for your response.
Here the instructor could have students form teams to argue whether ANN was successful or a
company in a state of constant struggle. A table with headings “Success Indicators”, “Problems”,
“Ongoing Challenges” would help focus the discussion on why firms need to engage in some
form of strategic management. We would expect students to generally note a turbulent history
with constant change and seemingly a never ending series of crises.
TCJ05-02-02TN
8
The CASE Journal Volume 5, Issue 2 (Spring 2009)
OPTIONAL EXERCISE: Instructors can assign a financial ratio analysis at this point, to
encourage students to use data to illustrate their arguments here. The results of various ratio
analyses, and the method used to compute these, is available at the end of this teaching note as
Exhibits A & B. Students can also be encouraged to take a look at a current financial analysis
using the Internet, perhaps Yahoo! Finance at http://finance.yahoo.com/q?s=ANN, to see how
the industry is faring (also see the Competitor Comparison Handout A at the end of this teaching
note.)
As seen in Section 1 of the case, almost every year since Ann Taylor went public the company
has made some type of significant change. These changes have been of two primary types. First,
there is ANN’s constant movement into and out of a variety of businesses. Examples include
their failed attempts at selling cosmetics and fragrances as well as the failed attempts to open
Ann Taylor’s Studio Shoes and Ann Taylor Petites. Second, there is the top management team
appears to characterize the industry.
Finally, as another sign of turbulence, if not actual change, students might note the highlighted
tension between AT and LOFT as a sign of potentially unhealthy or dangerous internal
competition. This tension seems to have caused concern about stability and a lack of consistency
On the other hand, many students will want to point to ANN’s bottom line and conclude that the
company has been very successful. The case notes a 1996 loss due to a fashion misstep. Beyond
that, there is only evidence of growth and financial success, at least up until 2007. Following the
1996 difficulties noted in Case Section 1, the stock price moved up without any major
5). Thus, overall, students can validly conclude that ANN has in fact been very successful. The
downturn in 2007, going into 2008, is caused by macro-economic forces and is not specific to
ANN. Students can take a look at a current financial analysis, perhaps using Yahoo! Finance at
http://finance.yahoo.com/q?s=ANN, to see how the industry is faring (also see the Competitor
The contrast between a company that is growing and financially profitable and a company that
has many business transitions and top management team changes may be the most interesting
aspects of ANN’s situation. Most students will find it difficult to see how a company that seems
TCJ05-02-02TN
9
The CASE Journal Volume 5, Issue 2 (Spring 2009)
so internally “unstable” can also be so successful. One key point lies in the recognition that the
external environment is fraught with uncertainty for specialty retailers and they experience
change as normal. Indeed, ANN’s situation may be the norm. In the general environment, socio-
cultural fashion tastes change significantly every year. The competitive environment is difficult
teaching note).
The case notes several examples of other retailers’ struggles as they respond to their unstable
external environment. Section 3 of the case points out that most specialty retailers create brand
divisions to meet specific market segment demands, even though this strategy can be risky.
In Section 7 of the case all students should readily identify the significant turnover in ANN’s top
management. Average students will conclude that the management turnover is a sign of internal
weakness and will not push their analysis further. Better students will delve into the financials
and thus be able to see that there is a lot of success even while there is high turnover. Similarly,
Average students will draw conclusions based on one or two pieces of evidence. Better than
average students will note the conflicting evidence and suggest that, in spite of the turnover, the
company has achieved considerable success for its shareholders. The more advanced and cynical
students might note that the increase in EPS (Earnings Per Share) in spite of the drop in income
Plans and Initiatives. This information is also available if students are encouraged to look at a
current financial analysis, such as the one provided as Exhibit A at the end of this teaching note,
or via the Internet at Yahoo!Finance, for instance.)
• ANN has no long-term debt, however the company might have problems funding new
activities given its decline in short-term liquidity measures such as Current Ratio, Quick
Ratio, and Working Capital per Share.
TCJ05-02-02TN
10
