TO:Louis Eisman and Joseph Segal
FROM: Sean Mayer
DATE:January 16, 1989
SUBJECT:Mr. Jax Fashion Growth Strategy and US Expansion
PROBLEM (See Appendix 1: Problem Highlights):
Mr. Jax Inc. has successfully grown into one Canada’s largest clothing apparel company. We have grown to be the 6th largest and had four successful acquisitions. Our success in the past eight years has shown our revenue stream at 1500% and profits at 500%. Over the last 2 years, the company has been in a loss position due to aggressive growth and operational costs. Profit margin has declined from 23.52% to 9.91% as a result of increased selling and General Administrative costs outpacing sales revenues. The ROA for 1987 was 8.59% and for 1988 4.65% is declining due to aggressive growth acquisitions that are ailing business and hence effecting the ROE for 1987 was 13.35% and 1988 was 8.34% trending downward as well. These recent losses have been financed through bank debt and additional share investment in the company in 1987.
Our mission to be a large-scale retail operation in clothing apparel within Canada has reached a market limit. Mr. Jax fashion Inc. is facing stagnant growth in the Canadian apparel market, with very little room to grow by consumption rate. Naturally looking at growth outside of Canada is the eventual goal for this company. But before we can implement our future growth strategy there are key immediate issues we need to address within our organization. We need to restructure our operations in order to better manage our existing operation and look at some key financial and cost savings issues. Hence our proposed action plan is to remedy some of operational costs within company and bring it back to profitability and management strength. Furthermore, the development of an effective strategy to enter the US apparel market is in need of development and effective implementation
ANALYSIS (See Appendix 2: SWOT Analysis):
Overall the company’s main issues can be considered in 3 main categories: Organizational, Financial, Expansion.
1) Organizational Restructuring: In order to gain stability and sustainable growth there has to be large restructure needed to be implemented within the company. Eisman has taken on too much in a CEO capacity. This current approach will not be feasible for the US expansion. CFO Madill suggested that corporate personnel, financial and systems management departments be established to integrate and aid management of the subsidiaries. These would streamline the organization into one common vision and entity. Better management of plants and operations is required. New management structure can create efficiencies in operations. There needs to be a more linear cohesive structure with all company operations including West Coast Woolen Mills. This entity is having operational deficiencies and closer management operations would improve its performance and will help immensely in US expansion (as a result of FTA “origin” regulations. Improvements in HR training and development is something to consider as it improve labor efficiencies and morale within the plants, hence improving productivity. Final consideration should be a new overall CEO for Mr. Jax. Although Mr. Eisman has performed fairly well in the past his true expertise are in the fashion design and apparel market. Hiring a CEO that can handle a large expansion in the scale of the US is something to consider.
2) Improve Operational Costs: Due to stagnant growth in the CDN market since 1986; in order to grow in the near future there is requirement for growth outside of Canada or through more acquisitions. There has to be a review of current operations of some of the previous acquisitions that have been made. Considering selling off some of the non-profitable and operational expense exhaustion, Olympic Pant and Sportswear Co Ltd &...