978-1259278211 Case 10 Solution Manual Part 3

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NOTE – ADDITIONAL READING, WEB LINKS:

Visit the websites of Ann Taylor and Ann Taylor LOFT. Do you see any difference in the

fashions?

http://www.anntaylor.com/

http://www.loft.com/

A new competitive strategy to compete in the high-end women’s clothing space was

announced by ANN in September 2007:

http://online.wsj.com/public/article/SB118972474680527004.html

Given the potential customer confusion over how Ann Taylor differentiates itself from

In 2009, Ann Taylor joined Banana Republic and others in discontinuing their size 16

clothes. Citing the extra cost of creating “larger size” fashions, AT will sell these items

only online. Is this a good move, considering nearly 70 percent of women are size 12 and

up, according to retail sources? See

http://www.crainsnewyork.com/article/20090508/FREE/905089980

On the other end, Ann Taylor and LOFT are one of the few specialty retailers who offer a

Is this a good strategy?

Regarding the redesign of the physical retail spaces for AT stores, the stated intent in

2012 was to retool the image of AT merchandise as consisting of “boring basics in an era

when people want to mix it up and accessorize.” As noted, AT needed to attract the right

customer: “Anne Elwell is the kind of shopper Ann Taylor wants to win over. The 42-

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

Referencing Chapter 9: Strategic Control and Corporate Governance

Strategic control involves the process of monitoring and correcting a firm’s strategy and

performance. Strategic control focuses especially on the roles of informational and

ANN needs to make sure enough information of the right kind is available to monitor

activities – this is where things such as financial, quality control, and customer feedback

Chapter 9 emphasizes the importance of aligning both informational and behavioral

control systems with organizational strategy. The information gained from the internal

and external environment is reviewed against the firm’s strategy and goals to make sure

Both the informational and behavioral components of strategic control are necessary, but

not sufficient, conditions for success. What good is a well-conceived strategy that cannot

ANN appeared to have information controls in its inventory management, financial

systems, and customer feedback mechanisms. Retailers need to have this critical

information in time to make decisions about clothing designs and procurement for the

upcoming season (fall fashion decisions are made at the beginning of the year), and

For advanced students, assigned reading of Michael Porter’s 1996 HBR article “What is

strategy?” and his 2007 interview in Fast Company provides more clarity regarding the

issue of trade-offs, especially in retail. In the Fast Company interview, Porter says:

The essence of strategy is that you must set limits on what you’re trying to

accomplish. The company without a strategy is willing to try anything. If all

One can argue that ANN did not seem able to set limits. Only one specialty retailer in the

case, Limited Brands, appeared to have taken Porter’s advice to heart, divesting itself of

brands that had the potential for good performance (Abercrombie & Fitch, Lane Bryant),

In addition, this chapter discusses the importance of a strong, positive culture and reward

systems that rely more on achievement of jointly created and internalized goals and

As previously noted, the history of a revolving door at top management, the residue from

layoffs that happened in 2008 (not in the case) and the strategic restructuring and

(See an article from 2009 about how Krill received a raise while sales fell and employees

were laid off: http://www.crainsnewyork.com/article/20090403/FREE/904039971 )

Referencing Chapter 10: Creating Effective Organizational Designs

Strategy consists of analysis (setting goals, assessing the internal and external

environment of the firm), formulation (deciding which industries to compete in and how

to compete in those industries), and implementation, where organizational leaders

Chapter 10 stresses that organizational strategy has implications for a firm’s structure.

Students should relate concepts from Chapter 10 such as the differences between various

structures and the effectiveness of each possible structure for ANN’s possible choices of

Structure identifies the executive, managerial, and administrative organization of a firm

and indicates responsibilities and hierarchical relationships. It also influences the flow of

An effective organizational design can encourage the flow of information and enhance

working relationships between functional departments and activities. However, achieving

the coordination and integration necessary to maximize the potential of an organization’s

One confusing thing about the ANN case is the lack of consistent structure at the top of

the organization. Since Krill was elevated to CEO of the corporation, it appeared that she

had had difficulty letting go of control of the LOFT division. With only a minor

Referencing Chapter 11: Strategic Leadership

See the concept of leadership, the process of transforming organizations from what they

are to what the leader would have them become. Leadership is proactive, goal oriented,

and focused on the creation and implementation of the creative vision. This definition

implies dissatisfaction with the status quo, a vision of what should be, and process for

bringing about change. Leaders are change agents whose success is measured by how

effectively they formulate and implement a strategic vision and mission. See Exhibit

11.1. This involves:

●Setting a direction

The interdependent nature of these three activities is self-evident. Consider an

organization with a great mission and a superb organizational structure, but a culture that

implicitly encourages shirking and unethical behavior. Often, failure of today’s

Leaders need to set the direction for the organization by continually scanning the

environment to develop knowledge of all stakeholders, and knowledge of salient

Krill had been proactive in the past, as witnessed by the success of LOFT. She was also

very clear about the direction both AT and LOFT should take regarding their separate

Leaders are responsible for designing the organization: a strategic leadership activity of

building structures, teams, systems, and organizational processes that facilitate the

Krill was not so effective at designing an organizational structure and management team

that could implement her strategic objectives. Krill had proposed many new initiatives.

Did ANN have the resources and capabilities necessary to succeed at all of these, at the

Leaders play a key role in changing, developing, and sustaining an organization’s culture.

An excellent and ethical organizational culture is an organizational culture focused on

In nurturing a culture dedicated to excellence and ethical behavior, managers and top

executives must accept personal responsibility for developing and strengthening

appropriate behavior; consistently demonstrate that such behavior is central to the vision

Difficulties in implementing the leader’s vision and strategies include a lack of

understanding of responsibility and accountability among managers, reward systems that

As previously discussed, Krill’s actions were suspect regarding her ability to institute

reward systems that effectively motivated, and her ability to appropriately delegate

decision-making to trusted subordinates. In the case, toward the end, there’s a telling

Did Krill truly understand how her actions might affect ANN’s ability to implement her

chosen strategies? At the end of the case she appears upbeat and positive about the future,

NOTE – ADDITIONAL READING, WEB LINKS:

Krill hinted at a new upscale strategy in 2007, with a further beauty business and

maternity line proposed for 2008:

See http://www.fool.com/investing/general/2007/09/17/ann-taylor-goes-for-gold.aspx

and

http://www.fool.com/investing/general/2007/08/13/quick-take-more-change-at-ann-

taylor.aspx

None of this actually materialized except the maternity line at LOFT. Was that because of

the economic downturn, or was Krill being unrealistic about ANN’s ability to tackle new

initiatives?

ANN has also had considerable turnover in management ranks in recent years. See this

report from 2012 about the “revolving door” in the executive suite at ANN, specifically

the leadership of AT vs LOFT. As this report says, “Over the years, Ms. Krill has become

disenchanted with the leaders of both brands, often taking over herself to right foundering

ships… She’d basically go back and forth between whichever concept was struggling, and

then the other one would end up struggling”:

http://www.crainsnewyork.com/article/20120415/SUB/304159981

Here is a profile of Kay Krill over the years: for instance, “In 2008, she launched a multi-

year turnaround that includes store closings, scaled-back headquarters staff and other

cost-saving programs.”

http://www.wwd.com/people-companies/people-profile/kay-krill-1591217

What does this say about ANN’s intangible resources and their capability to execute

strategy going forward? Will the move to Ascena create the needed synergies for future

profitability? There’s no word as of the publication of this note as to Krill’s fate –

whether she will remain at ANN or not.

Teaching Note References (and possible additional assigned readings)

Porter, M.E. 1996. “What is strategy?”, Harvard Business Review, 74(6): 61-78.

Porter, M.E. 2007. “Michael Porter’s Big Ideas”, Fast Company, 44, (December 19),

available at http://www.fastcompany.com/magazine/44/porter.html

Porter, M.E. 2008. “The five competitive forces that shape strategy”, Harvard Business

Review,86(1): 78-93.