978-1259278211 Case 10 Solution Manual Part 1

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Teaching Note: Case 10 – Ann Taylor: Survival in Specialty Retail

Case Objectives

1. To investigate the choices of business and corporate-level strategies in a highly turbulent

industry.

2. To examine how external and internal forces affect competitive strategy.

3. To discuss how leadership can use strategic control and organizational design concepts to

See the table below to determine where to use this case:

NOTE: This case can be used as a COMPREHENSIVE CASE, covering almost all the chapters

in the textbook. However, since the primary focus of this case is Corporate-Level Strategy, the

Chapter Use Key Concepts Additional Reading

and/or Exercises

1: Strategy

Strategic management; vision, mission,

Optional Exercise,

2: External

Industry competition five forces; general

NOTE web links,

3: Internal

Value-chain analysis; tangible and

4: Intellectual

Assets

Intellectual and human capital

5: Business-Level

Strategy

Competitive strategy; generic strategies

PRIMARY

6: Corporate-Level

Strategy

Corporate strategy; diversification; synergy;

NOTE additional

9: Strategic

Strategic control; informational vs.

NOTE optional

10: Organizational

Design

Organizational structure

11: Strategic

Leadership NOTE additional

Case Synopsis

The Ann Taylor Case provides information about both ANN, Inc. (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 continued to face increasing competition and a challenging

economic environment. ANN had experienced significant growth in the past, but was now

ANN was not the only retailer suffering in a poor economic climate. News

reported at the beginning of the case conrms that the entire retail industry

was still facing an unpredictable environment in the aftermath of the

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

It was clear that Krill was firmly committed to long-term growth. However, although profitable

in 2014, ANN was just beginning to return to the sales profile of 2007. The basic question of the

case is whether Krill was doing what she should do to regain and retain profitability. Was she

Teaching Plan

The Ann Taylor case is a candidate for a “comprehensive” case that can be used to illustrate

many facets of strategic management. Ann Taylor Stores Corporation (ANN) was a large

specialty retailer facing an extremely competitive environment. Economic conditions had further

complicated competition from rivals. ANN faced a variety of challenges, offering the reader

several strategic options to consider. The addition of the industry and current competitors’

information makes the case a good one to use for strategic analysis and formulation. Information

on ANN’s multiple divisions and operational overview makes it a good candidate for a

discussion of internal resources and capabilities, and the strong presence of CEO Kay Krill leads

to a discussion of strategic leadership and implementation.

For those instructors who like to include a discussion of marketing concerns as part of an overall

business policy course, the branding challenges outlined in Ann Taylor make it possible to use

the case to augment a discussion of marketing strategy.

ICEBREAKER/UPDATE

Since almost every student has shopped for clothing at some point, it might be illustrative to ask:

How do you choose where to shop for clothes? Do you shop based on price, or based on fashion

trends, or based on other factors?

What stores or venues have you frequented during the last year in your search for things to

wear?

Men may find this case hard to swallow, focusing as it does on women’s fashion. Point out that

the challenges in women’s specialty retail are not that different from those faced by Abercrombie

To help identify the challenges in this industry, the instructor may want to put a list on the board

of how students decide where to shop: Price? Fashion or Quality? Location/Quick In & Out?

And what stores they frequented. Any online shoppers? Students might be surprised at

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

back to the Case Objectives Table to identify any additional readings and/or exercises so they can

be assigned in advance.

1. What are key forces in the general and industry environments that affect Ann Taylor’s

choice of strategy?

2. What internal resources and assets did ANN have that gave it a competitive advantage?

3. How did ANN compete?

4. What has Kay Krill done to implement strategy, and what challenges remain?

Discussion Questions and Responses

Prior to answering the specific case questions, the instructor might want to position the

discussion by reviewing what strategic management really is:

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter

1, Exhibit 01: Strategic management consists of the analyses, decisions, and actions an

organization undertakes in order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

Leaders face a large number of complex challenges. Leaders must be proactive, anticipate

change, and continually refine changes to their strategies. This requires a certain level of

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision,

mission, and strategic objectives. Leaders must communicate their initial vision of the

The organizational mission also needs to be considered: a mission encompasses both the purpose

of the company, as well as the basis for competition and competitive advantages. In writing a

Organizations must respond to multiple constituencies if they are to survive and prosper, and the

mission provides a means of communicating to diverse organizational stakeholders. Although

Anticipating that things might change, an organization’s leadership must then establish strategic

objectives to operationalize the mission statement. That is, objectives help to operationalize the

The original Ann Taylor brand was based on the image of a classic black dress and woman’s

The mission was to serve as the wardrobe source for busy, socially upscale women; professional

women who had limited time to shop and who were attracted to the Ann Taylor stores for their

The company’s strategic objectives revolved around the need to continually evolve and elevate

the brands so they remained “compelling” to ANN’s target audience of fashion-conscious women

These vision and mission statements, with the resulting strategic objectives, have implications

for how to analyze opportunities, manage innovation, and provide leadership to encourage

growth. It requires doing an analysis of the external environment, both relative to general factors

Here is where students can be reminded how the chapters in the book are linked. See Chapter 1,

Exhibit 1.3 for a depiction of the strategic management process. During strategic analysis, the

leader does “advance work” to anticipate unforeseen environmental developments, identify

In strategy implementation, depending on the type of organization structure, the leader might

include key individuals in a discussion around selecting which strategies might be best to

implement at which level within the organization. The leader must ensure proper strategic

The basic question strategic management tries to answer is: How can we create competitive

advantages in the marketplace that are not only unique and valuable but also difficult for

competitors to copy or substitute?

An interesting question that the instructor can ask at this point is: What IS that “marketplace”?

What business is Ann Taylor Stores in? Students might want to say the “retail” or “clothing”

AS AN EXERCISE, a follow up on the icebreaker, have students list all the variations or types

of retail environments that they might have encountered. The Apparel Retail Industry section of

The reality of ANN’s remaining two primary businesses at the end of the case (i.e., AT and

LOFT) is that both businesses were clothing retailers – specifically, women’s clothing. By the

For advanced students, assigning Michael Porter’s 2008 HBR article “The five competitive

forces that shape strategy” will help students understand why this is an important question:

Porter (2008) uses a definition that incorporates more of an “extended competition” concept. He

points out that an industry is defined by the scope of its products or services – if products have

Answering this question is essential to proceeding with strategic analysis. Once students have

determined what business ANN is in, they can then proceed with scanning the external

1. What are key forces in the general and industry environments that affect ANN’s choice

of strategy?

Referencing Chapter 2: Analyzing the External Environment of the Firm

Organizational leaders must become aware of factors in the overall environment that might affect

their ability to create a competitive advantage. So how do managers become environmentally

Environmental scanning involves surveillance of a firm’s external environment to predict

environmental changes and detect changes already under way. It is a BIG PICTURE viewpoint

Environmental monitoring is a firm’s analysis of the external environment that tracks the

evolution of environmental trends, sequences of events, or streams of activities. Leaders need to

What factors or trends might be most important to ANN? To assess how the external

environment might affect ANN’s strategy, it’s necessary to take a look at the factors in the

general external environment. ANN must consider the political/legal, economic and global,

Political-Legal: Political-legal issues, especially potential trade regulations and supplier

disruptions, have had a potential effect not only on ANN but also on the apparel industry as

Economic: Macro-economic changes are always important. Beyond the generic issues (e.g.,

currency shifts, inflation, interest rates, national income, and unemployment), there appears to be

Demographic: Several issues stand out in this general environment segment. First, there’s the

diversity of the “misses” baby boomer market. Second, there is a changing ethnic composition in

the United States with more Latinas in particular. Third, there are more dual income households

Sociocultural: A primary issue here includes the trend towards more casual work environments.

Students can respond with insights from their own experience. For instance, TV series like “Sex

and the City” encouraged high fashion, brand awareness, but had portrayed a more playful and

individually chic consumer. LOFT was particularly well positioned to respond to this trend.

Technological: Technology, especially the growth of the Internet, has created new opportunities

for marketing of product and for promotion. Continuous innovation in supply chain management

It’s also necessary to assess the segments of the external competitive environment that include

competitors, customers, and suppliers, substitutes and new entrants. Porter’s five forces model

High

Buyers’

Power

Low

Suggested: The industry

has low concentration

Suggested: There are many

supplier firms with a lack of

differentiation between them, so

power is lowered. Some

Suggested: No real

substitutes for a

ANN, like other women’s clothing specialty retailers, was confronting some threats. There was

As the analysis suggests, the environment is challenging. Based on the external environmental

factor analysis, the U.S. specialty retail industry had many challenges to profitability, primarily

from slow industry growth. Equally balanced competitors made it difficult for any one to achieve

NOTE – ADDITIONAL WEB LINKS TO INDUSTRY INFORMATION

See this story from April of 2011:

http://www.fool.com/investing/high-growth/2011/04/28/is-ann-taylors-stock-cheap-by-the-

numbers.aspx

and an update from 2012:

http://www.fool.com/investing/general/2012/04/26/are-these-clothing-stores-a-good-fit-now.aspx

In general, the clothing retailers continually struggle with positioning, as explained in this late

2012 article about “fast fashion”, or the rush of retailers such as Forever 21 to put styles on the

shelves soon after their runway debut. The fast fashion companies tried to encourage shoppers to

Given the volatility of the apparel industry, how did ANN appear to be holding up?

Here’s opinion on the retail sector in 2011: “It’s amazing to think that for an industry that has not

experienced sourcing cost inflation in 30 years, most retailers expect to raise prices and report at

Browse some of the companies on the following list to learn more:

http://en.wikipedia.org/wiki/Category:Clothing_retailers_of_the_United_States

And here’s a link to a set of promotional videos from ANN featuring the 2012-2013

spokesperson Kate Hudson and Ann Taylor “styles”:

https://www.youtube.com/watch?v=DZP-7GLcr94&list=UUFaV3nu8asOxNIMachZ1JKg

What does this tell you about the industry and ANN’s promotional position?