Practise analysing stakeholder conflicts, their causes and consequences, and recommending ways businesses can manage competing interests for IB Business Management SL.
Les Amis PLC (LA)
Les Amis PLC (LA) is a public limited company that sells casual clothes for men. Its target market is high-income professionals who value a personalized sales service. LA has developed brand awareness and operates 42 shops around the country. It owns 10 of these shops and leases the remaining 32 . LA employs 950 people, who receive a higher wage than the industry average. LA also pays commission to sales staff working in the shops. LA's organizational culture values the wellbeing and needs of its employees. Labour turnover is very low.
Recently, LA launched an online shop. Since then, online sales have increased considerably, while sales in LA's physical shops have fallen. Shareholders want LA to close all its physical shops and sell online only. However, many of the employees will be made redundant if the physical shops are closed.
LA's current chief executive officer (CEO), Marie Brossard, has a democratic leadership style, and she regularly meets with employees and encourages feedback. LA's managers and employee representatives have never had a conflict. Marie plans to discuss the shareholders' desire to close LA's physical shops with all the shop managers.
Customer returns of clothing orders at LA have increased substantially. Most returns are from online customers unfamiliar with LA's clothing sizes. Marie has consulted the e-commerce department on how to reduce the increasing cost of returns, and they have suggested investing in expensive software that will enable online customers to find their correct clothing size.
Discuss whether L A should close all its physical shops and sell only online.
Candidates can structure their answers in two different ways. They can view "close retail + sell online" as one issue and provide two arguments for and two against. Alternatively, candidates can talk about advantage and disadvantage of "closing", then advantage and disadvantage of "all online". Either approach is acceptable.
Possible advantages of L A closing all its physical shops and sell only online:
- if LA closes all physical shops, important cost reductions could be made. For instance, LA will make savings in sale commission paid to sales staff in physical shops and in the cost of wages that are above the industry average;
- LA will also gain in other costs reductions such as leasing costs from physical shops. It will also gain in flexibility, as online selling has lower fixed costs;
- another advantage of having an online business is that you break the physical barriers and do not depend on the number of people passing by your street or the number of brochures you have delivered to mailboxes;
- low costs involved in marketing products abroad;
- from the internet (online) you can sell to a global market (global reach);
- LA could sell its physical shops to raise finance as well.
However,
- Selling online only can be a dangerous move as it lowers visibility. Physical shops allow clients to see the products, which facilitates purchasing decisions. Further, a physical store offers a sense of security to the clients. Hence, clients will trust you more when they are aware you operate from a physical place they can access. If you have an online presence, a physical store will complement your marketing efforts;
- Customers at L A are used to personalized assistance. Buying online is a totally different experience;
this is evidenced by the increasing number of returns experienced by LA;
- physical shops assist customers that like personalized customer service. Online selling does not quite match the target market of customers that value personalized customer service even if online sales are increasing;
- return costs from online sales are increasing. LA will have to invest in new software to cope with sizing problems.
- the buying experience of clothes is different online than in physical shops.
- Employee redundancies can damage LA's working environment (and LA corporate image) and clash with the CEO's democratic leadership style and LA's organizational culture. Potential conflicts with employees and employee representatives;
- LA may be left paying leases on shops it closes;
- Online selling is not without investment costs - technology equipment, warehousing, hiring staff with online experience, online marketing, scheduling and delivery systems etc.
All in all, it seems that closing all shops is too drastic. LA already has incurred setting up costs of an important number of shops, they could take the advantages of online selling but still keep some physical shops, or phasing out those underperforming stores on a more gradual basis.
Candidates are expected to provide a conclusion with a substantiated judgement.
Accept any substantiated evaluation/judgment/recommendation.
Marks should be allocated according to the markbands on page 3 with further guidance below.
Maximum award
One argument for closing all its physical shops and selling online, very limited application. Lacks balance
[3]
Either two arguments for or against closing all its physical shops and selling online, but no balance
OR
One argument for, one argument against closing all its physical shops and selling online
[4]
Two arguments for a position and one argument against.
[5]
At least two arguments for and two arguments against. No real conclusion.
[6]
At least two arguments for and two arguments against. A conclusion with judgments.
[7-8]
At least two arguments for and two arguments against. A conclusion with judgments. Rich use of business language. Response shows depth of understanding and nuance.
[9-10]