Challenges of International Marketing Essay Example

sale in its own shops. The Laura Ashley business became vertically integrated, encompassing design, fabric printing, clothing manufacture, and retailing. The design philosophy of Laura Ashley was deeply rooted in traditional English country values, serving as the foundation for the group's designs.She formed and coached teams of designers to develop her work. Tragically, Laura Ashley passed away in September 1985 due to an accident. Despite her untimely demise, her design concepts had been fully absorbed and understood by the entire company. In 1985, the company had expanded its product range to include both clothing and home furnishings. Being a vertically integrated group, Laura Ashley manufactured approximately 85% of these products itself, with direct supply to each shop in the UK facilitated by the company's own vehicles. In Continental Europe, they worked with local carriers, while clothing for North America was sent by airfreight on a weekly basis. A key aspect of the company's organization was its strong emphasis on information technology across all operations. This was evident through its three main computer centers in Carne (Wales), Helloed (Netherlands), and Amah (New Jersey, USA) which were connected through a communication network. Management saw their IT capability as vital to the success of their vertically integrated structure. Laura Ashley shops worldwide were carefully designed to uphold a cohesive look and atmosphere, serving as significant contributors to the portrayal of the Laura Ashley brand.The group was an early adopter of electronic point of sale (EPOSES) systems in its shops, analyzing daily sales figures by product line. The combination of Ashley and Laurel's design flair and Barnyard's business acumen and interest in fabrics printing transformed a cottage industry into

an international group by 1985. The group had 219 shops in Europe, the United States, and the Pacific Basin, with worldwide sales exceeding Loom. In November 1985, Laura Ashley became a public company, and the stock market flotation was oversubscribed 34 times, valuing the Ashley family's 70 percent stake at Emma. Despite positive endorsements from the business press, there were some cautionary notes about European performance and the potential loss of Mrs. Ashley. In 1986, the group started acquiring other companies, beginning with Sandbagging Leather Goods Ltd and Bryant of Scotland Ltd, a high-quality knitwear company.In August 1987, Willis and Geiger, a traditional outdoor clothing specialist, was acquired for $Mm. In November, Pentathlons Ltd, a perfumery business with five shops in London, was acquired for Elm. The plan was to expand the Pentathlon range and expand their business internationally. Since 1979, the group had also produced women's fragrances through their Swiss-based subsidiary, Paramus Laura Ashley. The group aimed to expand the product ranges and shops of these acquisitions in their base countries and eventually internationally. In March 1989, the purchase of Revere Industries Inc., a US home furnishings marketing company, was announced. Revere Industries sold designer bedridden to department stores, specialist chains, and catalogue houses across the United States. In 1985, construction began on a new textile factory in Wales and the following year work started on a vinyl wallpaper plant on an adjacent site. These facilities were a significant investment partially funded by a grant from the Development Board of Rural Wales.In the textile design studios at Newton, a computer-aided design system was installed. Additionally, a computerized garment-cutting room was opened at Carne at

a cost of El .Mm. Another investment in manufacturing was the installation of an IEEE,OHO computerized handling system for the Newton garment factory. This system aimed to reduce garment throughput times from several days to a few hours, enabling a faster response to retail demand.

In 1988, the group underwent a restructuring into seven divisions in order to facilitate its growth over the next five years. Each division had a managing director who was separately accountable to the main board for their division's profit performance. This reorganization was partly due to the group's decision to break away from its vertically integrated structure that had been a defining feature of the Laura Ashley organization since its inception.

The new divisions were as follows:
1. Laura Ashley Group Services, responsible for finance, legal work, informatics and sourcing, image protection and licensing.
2. Laura Ashley Industries, responsible for textile, wallpaper, and garment manufacture and distribution, as well as leather odds and knitwear subsidiaries.
3. Laura Ashley I-J Retail, responsible for retail operations in the I-J.
4. Laura Ashley BE, responsible for retail operations in Continental Europe.
5. Laura Ashley Inc.The Laura Ashley Group had retail operations in the USA and Canada (Laura Ashley America), Australia and Japan (Laura Ashley Pacific Basin). The group implemented cost-cutting, restructuring, and quality improvement measures in its Industries Division to reduce reliance on its own manufacturing activities. In 1985, approximately 85% of products sold were manufactured in-house, but by 1988 this percentage had decreased to 60% and continued to decline.

In terms of retail developments, the group expanded its segmentation strategy by opening six Laura Ashley Mother & Child shops in the ASSAI in 1987. These shops offered

a coordinated range of clothing and bedroom furnishings for babies, children up to 12 years old, and dresses for their mothers. The Mother & Child collections were also introduced in the UK and Continental Europe the following year.

In 1989, 'Laura Ashley Home' shops were launched to provide a wider variety of home furnishings compared to existing Laura Ashley outlets. These shops featured furniture designed by Laura Ashley and carried the brand name, although they were manufactured externally. This expanded range, along with the home furnishing line, catered to customers who desired a complete Laura Ashley lifestyle package. Additionally, the first of 50 planned 'Units' shops opened in the UK in 1989.These stores were operated under license from a subsidiary of the J. C. Penny retailing group, and offered a range of unsophisticated women's knitted clothing items which could be co-ordinate into several different garments. In the I-J and Ireland, the number of Laura Ashley outlets increased from 87 in 1986 to 182 by early 1991. I-J turnover over this period rose from EWE. Mm to IEEE. Mm.

An enlarged Mail Order Centre was opened in Newton in December 1987. Mail order sales grew steadily over the period, increasing by 50 percent in 1988, 45 percent in 1989, and 40 percent in 1990 to overtake the turnover performance of Laura Ashley's most successful I-J store. Laura Ashley's international expansion continued, and by early 1991, there were over 500 outlets worldwide. Expansion in Continental Europe also occurred during this period. In North America, garments and home furnishing sales accounted for 70 and 30 percent respectively of the 1990/1 turnover of El 36.Mm.In the Pacific Basin,

Laura Ashley's principal markets were Australia and Japan.

The number of outlets in Japan doubled from 12 to 24 in the year to January 1990. A further 13 were opened by January 1991, and 12 more were planned for the following year. RETRENCHMENT By the end of the asses, Britain's economy was causing increasing concern in government and business circles alike. British business was bracing itself for a difficult start to the asses.The housing market came to a standstill due to high interest rates and new restrictions on Ortega interest tax relief. As a result, the construction industry, home furnishing, and home improvements markets were severely affected.

Sterling faced constant attack on foreign exchanges, leading to several well-known competitors of Laura Ashley being negatively impacted by the recession. George Davies, the retail group owner of Next, had to sell many of the group's acquisitions to reduce its debts, and Davies was ousted from his position in December 1988. At Colorful, profits suffered a significant decline, leading to chairman John Ashcroft's resignation in March 1990. In November, Sir Ralph Helper left the Burton Group after experiencing a 39% fall in profits.

Difficult times arose for Laura Ashley as well. In the year leading up to January 1989, the company reported its first profit decline to EWE.Mm from the previous year's figure of EWE.Mom. This decline was attributed to start-up losses at Willis ; Geiger, higher interest charges, and the strength of sterling. Despite exchange rate problems, CEO John James stated that the company had pursued an expansionist policy in the USA, recognizing it as their most promising market. Although sales increased across all divisions, the group still

reported a net loss of EH.M before tax for the year ending January 1990.Sir Bernard Ashley recognized the need to decrease the group's high borrowing levels, leading to the initiation of a significant rationalization program. He cautioned that this program could involve selling off businesses and imposing restrictions on new store openings. The group incurred exceptional costs for the year, including substantial management consultants' fees. Public commentary on the group's losses highlighted various issues, notably severe production difficulties, particularly regarding supplies for Exploring Corporate Strategy by Johnson, Schools & Whetting for the USA. The autumn range for 1989 arrived in stores three months late, long after people's focus had shifted to spring. Some observers expressed concerns about whether Laura Ashley was becoming outdated. The company failed to cater to discerning and sophisticated consumers aged 30 and above who desired home and clothing designs that did not resemble those found in chain stores. In June 1990, the company faced challenging refinancing and worked to strengthen its top management team. John James acknowledged that the company had stretched its executive talent too thin. The group had operated without a finance director for over a year until May 1990, when Mr. James assumed this responsibility alongside his role as chief executive. Mr. James resigned on September 1, 1990, severing his longstanding connection with the group.Press reports indicated that John Sesame's efforts to restructure the company were hindered by its insular family culture and conservative board. The Ashley family's 70% ownership raised concerns among investors about the company's ability to adapt. By the end of August 1990, Neon Group, Laura Ashley's partner in Japan, acquired a 15% stake in

exchange for a cash injection. This partnership gave Neon exclusive rights to sell and manufacture Laura Ashley products in Asia. As a result, Laura Ashley's debt decreased from over 100% to 30%, and the Ashley family's ownership decreased to 59.2%. Sir Bernard, a major shareholder, expressed openness to further reduction in his stake as the company expanded. In September, the company announced the closure of seven British factories due to an inability to compete with lower-cost suppliers overseas. The 1991 Report and Accounts highlighted efforts to strengthen the company's financial position through implementing central controls for profit and cash management and introducing new policies for capital expenditure and investment appraisal.A strict stock control program was implemented to reduce lead times, eliminate buffer stock, and dispose of slow-selling products. Net borrowings were lowered from Meme to Meme during the year, and stocks were decreased from Emma to Meme. Businesses that were not essential to the Laura Ashley brand, such as Pentathlon's, Bryant of Scotland, and Sandbagging Leather Goods, were closed or divested.

A programmer was initiated to enhance relations with the City, investors, and the financial press. The aim was to develop a better understanding of the company's plans and actions. In his 1991 report, Sir Bernard emphasized that the international brand name 'Laura Ashley' was the company's most valuable asset. To effectively develop and exploit this brand worldwide, a new corporate structure was established in February 1991.

Under this structure, the Group Marketing Division is responsible for all aspects of marketing the brand and designing and sourcing products to meet consumer expectations. The I-J and Continental Europe Retail Divisions have been merged to achieve synergies from shared

marketing and reduce overhead costs. The focus remains on regional marketing expertise within the retail divisions to maximize opportunities for Laura Ashley branded products.The Group Operations Division is responsible for coordinating the logistical aspects of the business, including the movement of product from suppliers to retail and other distribution outlets. Independent, 25 August 1990. This division houses the in-house manufacturing facilities, which consist of print factories in Newton, four garment factories in Wales, and one home furnishing factory.

New Leadership In July 1991, the company announced the appointment of a new group chief executive, DRP Jim Maxima, who was 48 years old at the time. His appointment would take effect from 16 September 1991. Jim Maxima was originally from the United States but had been living in the UK from 1964 to 1988. He had completed a PhD in Philosophy at Kings College, London, and had joined Milliner Pl after that, primarily working in marketing roles.

In 1971, he joined Leg Service Group Pl and eventually became the chief executive and joint chairman of Volvo Concessionaires I-J by 1979. In 1983, he became the chief executive of television rentals at Thorn-MI. In 1988, he relocated to Boston to oversee the acquisition of Rent-a-Center Inc. He was also appointed president of Thorn-MI Inc.

Taking Stock During his first few weeks as the new CEO, Jim Maxima visited Laura Ashley stores, manufacturing units, and offices worldwide. This visit confirmed his belief that Laura Ashley's core identity was still uncertain. No one seemed to know whether its strengths were in design, manufacturing, retailing, or primarily in its brand.The lack of a coherent strategy and organizational confusion resulted in issues within

the company. During discussions with staff, Jim Main noticed a common theme of complexity, bureaucracy, and a feeling of powerlessness among employees. They felt restricted by the group's 22 strategic business units, which prevented them from thinking globally. These units were managed separately as profit centers, with no integration of essential functions like warehousing, distribution, stock management, and financial control.

Under the heading 'Simplify, Focus and Act', Jim Maxima announced a major management reorganization program to redirect group activities. The changes involved eliminating 100 management jobs and incurring a cost of more than Meme. This also involved capital spending of Meme to upgrade and unify computer systems. Jim Maxima stated that the group would be run as a single international business, aiming to establish a clear global brand executive (GOES) that would meet monthly worldwide.

As part of the marketing initiative, Group Marketing was replaced by Global Collection Development (GOD). Its mission was to focus on single global image marketing instead of multiple separate campaigns. Prior to Jim Main's appointment, Glenn Gibson from Coopers Library & Dolomite had been hired as a senior retail consultant to develop the Laura Ashley marketing strategy.She established a comprehensive survey for Laura Ashley's customers, which was the first of its kind and included both quantitative and qualitative market research. This survey received a tremendous response from approximately 57,000 customers in the United Kingdom and the United States. The research's primary finding was the brand's strong customer loyalty. Additionally, various findings from the research were utilized in the design process and the marketing of products in stores. Jim Maxima commented that he perceives Laura Ashley as a brand rather than a retailing,

fashion, or manufacturing company. He believes that the management's role is to unleash the inherent strength of this remarkable brand. The chief executive's main objective was to swiftly implement and explain the change program to the staff in order to minimize speculation and concern. Senior managers were presented with a series of meetings and presentations worldwide, including locations in Holland, the United States, Japan, and the United Kingdom, to effectively communicate the changes. Staff members were informed using a video and reinforced through a special edition of the staff newspaper, LA News, which was distributed to all employees globally. Jim Maxima emphasized that this change is not a one-time occurrence.Our business revolves around communication, including internal communication between staff members and external communication with our customers. We also prioritize listening to people's opinions and feedback. All staff will be kept informed of any decisions that will impact the company's operations and future.

Jim Main, the manager, has been described in different ways. Some see him as an enthusiastic and highly active marketer who focuses on target customers. Others view him as someone who relies on market research, financial disciplines, and management consistency. His management style came as a surprise to Laura Ashley staff.

Maxima, on the other hand, believes in empowering employees to enhance customer service. Incentive schemes were implemented to encourage employees to provide suggestions for improving customer service. Additionally, all managers were asked to spend at least one day each month working in a Laura Ashley store, in order to better understand the demands placed on shop staff.

In November 1990, a new five-year finance facility was agreed upon with Laura Ashley banks. This new arrangement

replaced the previous three-year agreement and was seen as a strong vote of confidence from the banks. It reflected the success of putting the business on a solid financial footing. Later that month, Laura Ashley announced the appointment of Denies Lincoln as the global human resources director.Recruited from Grand Metropolitan Pl as a group management development erector, she became the first woman to join Laura Ashley's main board. This appointment was a reflection of Jim Maxima's emphasis on developing people to build a world-class business. Additionally, a management development programmer was implemented to enhance integration and understanding among the senior team.

The company also made significant changes to how it recruited, trained, and managed its shop staff. Older store managers were specifically recruited to better align with the age profile of Laura Ashley customers.

On March 19, 1992, Laura Ashley and Federal Express Business Logistics announced a strategic alliance – reportedly the first of its kind. Acknowledging the complexity, cost, and inefficiency of Laura Ashley's existing logistics, this partnership was seen as a critical step in their "Simplify, Focus and Act" programmer.

The benefits of this alliance for Laura Ashley included savings of 10-12% in total distribution costs (based on like-for-like service levels) through simplifying the supply chain. It also provided access to Federal Express' global systems, which would enable Laura Ashley to have leading distribution systems in a short timeframe.Laura Ashley Mm is expected to save a minimum of planned system development costs. The goal is to improve customer service by delivering worldwide within 24 to 48 hours by September 1993. The alliance with Jim Maxima provides access to management systems and logistics capacity, allowing Laura Ashley

to simplify and focus operations. This partnership presents an opportunity to develop a global mail order business with the objective of 48-hour delivery anywhere in the world. The alliance also brings benefits such as lower costs, enhanced delivery performance, higher stock turn, and improved customer service. The company's results for the year 1992 show a recovery from a loss of EH.Mm to a profit of EH.M before exceptional items.The Daily Telegraph commented that what is extraordinary about Laura Ashley is not just that it was able to recover from a financial crisis, but rather that it happened in the first place. This was due to a combination of management failure, over-ambition, and bad luck. In the year leading up to January 30, 1993, pre-tax profits were El .Mm, but the group suffered significant losses of EH.M due to stock problems in the USA. Jim Maxima mentioned that rebuilding the business would take time. In February 1993, it was announced that the Ashley family had sold 10 million shares, reducing their stake in the business to about 50%. This followed a similar sale fourteen months earlier when Sir Bernard stepped down from his executive duties. In May, an additional 30 million shares were sold, and Sir Bernard retired as chairman. The complications faced by Laura Ashley in the USA had been somewhat masked by sales growth through new shop openings. However, analysis revealed that no store had seen year-on-year growth beyond its second year. Despite efforts from Jim Maxima and others to improve the situation, the group's difficulties in the USA persisted for over two years.In his findings, it was discovered that there were no standardized

shop operating systems. Additionally, the managers of American shops were found to be less capable compared to their counterparts in the United Kingdom. Furthermore, in the fiscal year 1993/4, 53 percent of US shop managers were replaced. The challenges faced by the US continued as heavy snowstorms in March 1993 resulted in a loss of 800 store days during the launch of the spring and summer collection, leading to further discounting.