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CASE UPDATE – ANN acquired by Ascena:
Given the overall turmoil in the specialty retail industry, and ANNs struggles, it was not
surprising that in May, 2015 Ascena Retail Group purchased ANN for about $2.16 billion.
According to one analyst, “The takeover unites the Ann Taylor and Loft brands with Ascena’s
Ascena Retail Group, Inc. (NASDAQ – ASNA) is a leading specialty retailer offering clothing,
shoes, and accessories for missy and plus-size women under the Ann Taylor, LOFT, Lou &
Grey, Lane Bryant, Cacique, maurices, dressbarn, and Catherine’s brands, and for tween
The following is a quote from the article:
Ascena has built an empire through acquisition of brands that sell clothing to real American
women – those on a budget, and who might not wear size eight. [Ascena Chief Executive David
Jaffe has built] Ascena into a holding company that handles back-end operations like sourcing
and distribution for a growing stable of brands. He has focused on chains in underserved but
[According to one story,] Ann Taylor brings the company a venerable line popular with suburban
moms and career women, while Loft sells more casual sportswear. But it is also a bet on a
segment of retailing that has been among the most troubled. A number of women’s clothing
Perhaps he is right? See story at http://www.wsj.com/articles/ann-inc-agrees-to-sell-itself-for-2-
2-billion-1431949557
NOTE: THE TEACHING NOTE DOES NOT REFLECT THIS RECENT NEWS. Instructors
1. What internal resources and assets did ANN have that gave it a competitive advantage?
Referencing Chapter 3: Assessing the Internal Environment of the Firm
If one firm wants to outperform others by a wide margin over a long period of time, it’s
important to figure out how this could be done. The answer may lie in how that firm arranges its
Remember, value-chain analysis is a strategic analysis of an organization that uses value-creating
activities. Value is the amount that buyers are willing to pay for what a firm provides them and is
measured by total revenue, a reflection of the price a firm’s product commands, and the quantity
Every activity should add value. Take a look at Exhibit 3.1 to see the value chain activities.
The case, of course, is obviously focused on ANN. However, it may be fruitful for the instructor
Value chain activity How does a specialty retailer create value for the
customer? What challenges did ANN have in its value
chain?
Primary:
Inbound logistics
(distribution facilities,
material control systems,
warehouse layouts)
Certainly, it is always important to maintain stock of
necessary items both in the warehouses and the stores. It also
helps to do that efficiently. Still, beyond meeting minimal
requirements, this area would not appear to be critical.
Operations (efficient work
flow design, quality control
High-end specialty stores have limited space & merchandise.
The shopping experience in the store is critical to the
Outbound logistics
(consolidation of goods,
efficient scheduling,
Specialty retailers have one logistics location, appropriately
noted as inbound. They do not have finished goods
warehoused like manufacturers do. Outbound logistics is
Marketing and Sales
(motivated sales people,
innovative advertising &
This area seems to be absolutely critical for a specialty
retailer. There is no room for error in identifying the market
and effectively promoting to it. ANN uses multichannel
Service (ability to solicit
customer feedback &
Throughout the modern economy, all companies in all
industries are increasingly recognizing the value of this
Secondary (or support):
Procurement (win-win
relationships with suppliers,
reduced dependence on
Relying on international partners for international production
reduces dependence on centralized structure. Department
stores must do more of this activity as they not only purchase
Technology development
(state of the art hardware &
software, innovative culture
& qualified personnel)
All retailers invest in IT upgrades and innovations, especially
regarding the Internet, logistics, inventory and store
management. However, this area is not as critical for ANN as
it might be for others with a cost leadership strategy. Given
Human resource
management (effective
Ann has had high turnover in the past among the senior
management team. However, it isn’t clear that human
General Administration
(effective planning systems
CEO Krill appeared to have the longevity with ANN and
therefore the credibility to create effective planning systems
Primary Activities
In terms of primary activities, the key to ANN’s ability to differentiate itself in the market
seemed to reside in its operations and marketing. As was critical for any specialty retailer, ANN
Support Activities
With regards to support activities, a competitive advantage can be achieved by developing a
strong general administration that is built around visionary leadership and a culture that pushes
In addition, see the concept of the resource-based view of the firm, and the three key types of
resources: tangible resources, intangible resources, and organizational capabilities. A firm’s
strengths and capabilities – no matter how unique or impressive – do NOT necessarily lead to a
An important issue to focus on here is the importance of intangible resources like innovation and
reputation. Especially in mature brands, sustaining reputation is essential. Look at resources that
Tangible Resources:
Financial: ANN appeared to have sufficient assets available to handle cash flow needs going into
2015. The company had no debt, and appeared to have enough cash on hand to deal with any
Physical: ANN evidenced a consistent strategy of real estate expansion based on continual
assessment of future needs and active refurbishing program. The active refurbishing activities
Technological: One asset here might be ANN’s recognition of the need for adequate supply
chain and inventory management systems, both hardware and software (not in the case, but
Organizational: Krill’s emphasis on the need for focus on the customer may have created an
organization more capable of delivering performance. However, the reporting structure may have
Intangible Resources:
Human: Krill’s focus on restructuring may have been able to revitalize the relationships between
Innovation and creativity: Unfocused in the past, this area still needed development. One
Reputation: This dimension was ANN’s most significant strength. The company’s brand was
Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to
substitute (VRIN) can help a firm sustain a competitive advantage. See Exhibit 3.6. Applying the
VRIN concept, probably ANN’s most valuable activities would be operations (possibly
Referencing Chapter 4: Recognizing a Firm’s Intellectual Assets
See the concepts of intellectual capital and human capital, both of which are intangible assets
that a company such as ANN needs to have in order to compete successfully. Intellectual capital
is a measure of the value of a firm’s intangible assets, its reputation, employee loyalty and
Organizational Capabilities:
Specific Competencies or Skills: ANN was certainly successful at designing and implementing
focus (i.e., niche) strategies for specific target markets – first with AT and then with LOFT. ANN
Capacity to combine resources: Although ANN did have some activities and resources that
could have been assets, the intangible assets represented by human capital might have been
2. How did ANN compete?
Referencing Chapter 5: Business-Level Strategy
In order to achieve a sustainable competitive advantage, ANN had to assess its ability to contend
with other specialty retailers. In the women’s retail clothing industry, by default ANN was using
a focus strategy, targeting the older professional woman. But how else did ANN compete? The
question of how to compete in a given business to attain competitive advantage requires an
assessment of the types of competitive strategies, including the three generic strategies:
●Overall cost leadership
oLow-cost-position relative to a firm’s peers
●Differentiation
oCreate products and/or services that are unique and valued
●Focus strategy
oNarrow product lines, buyer segments, or targeted geographic markets
Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The
Cost Leadership: This strategy relies on successful procurement activities. ANN focused on
working with Asian suppliers that can produce and distribute most efficiently with very high
economies of scale. This strategy also requires the retailer to be particularly efficient in its supply
Differentiation: This strategy relies on dynamic leadership with a strong fashion sense and
marketing skills. It is critical to identify the target market and sell effectively to the buyers in that
Referencing Chapter 6: Corporate-Level Strategy
Corporate strategy focuses discussion on the questions of what businesses a corporation should
compete in, and how the businesses should be managed so they can create “synergy” – creating
Diversification is the process of firms expanding their operations by entering new businesses. In
related diversification, a firm enters a different business in which it can benefit from leveraging
●Mergers and acquisitions
●Strategic alliances
Whatever the choice, it should create value for all stakeholders – employees, suppliers,
In retail, it appears that firms need to continually assess the degree to which previous
acquisitions or internal development in related businesses, such as brand extensions like Ann
Taylor LOFT, can actually destroy synergy. In the case, Limited Brands was one example of a
Companies can achieve synergy through diversification in two ways:
Through related businesses (horizontal relationships)
●Sharing tangible resources
Or through unrelated businesses (hierarchical relationships)
●Value creation derives from corporate office
In the context of women’s clothing, ANN’s early decisions to enter stand-alone shoes, make-up,
and children’s clothing represent corporate strategy decisions to pursue unrelated diversification
into completely different businesses. The fact that ANN had pulled back from all those
Related diversification seeks to add value through synergy, though leveraging the competencies
and activities that exist in business units that have some meaningful relationships. Core
competencies reflect the collective learning in organizations—how to coordinate diverse
Sharing activities means that value chain elements are shared across business units, so that two
An argument can be made that the brand extension into Ann Taylor LOFT was a related
diversification, sharing activities and leveraging core competencies – and both AT and LOFT had
clearly different business strategies (both had a focus strategy, but focused on different segments
of the market). The fact that the ANN’s organizational chart had originally separated these
At the end of the case, Krill was seeking to create more synergy between the businesses through
better coordination of activities, using multiple channels, and, even though she had consolidated
