1

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

INTRODUCTION

Turnaround is a management technique applied to loss making or sick industrial units; with a view:

a) To stop the business unit from making losses or going into liquidation andb) To bring it back on profitable track.

Turnaround is a situation strategy used to reverse the declining sales and earnings. It is a systematic study of those factors responsible for reduced efficiency, profitability, and suggests remedial measures to eliminate them. Turnaround means turning around the resources of the company to meet the crisis of reduced sales and earnings.

MEANING OF TURNAROUND

Turnaround like restructuring is a type of technique used to prevent or stop a company from making losses or going into closure forever. It believes in age old saying “a stitch in time saves nine”. Meaning thereby, that a firm should take all possible preventive or curative steps to prevent losses.The basic objective of turnaround strategy is to make a company profitable again i.e. converting a loss making unit into profit making.

The term turnaround is defined as under:

1. Turnaround is the situation wherein a company’s trend of declining sales and earning sales and earnings is reversed.

2. Dictionary of marketing (by P.H. COLLIN), defines turnaround as “making a company profitable again”.

3. “Turnaround is a technique of bringing failing companies back to life”.

T.M (6.6)

2

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

FEATURES/ CHARACTERISTICS OF TURNAROUND

The following are important features of turnaround strategy.

1. Turnaround strategy believes in improving the philosophy of “doing more with less”. It believes in improving the current level of performance, by making best use of available resources. It does not believe in extra expenditure or adding additional resources to recover losses. Instead it tries to make optimum use of available resources to improve profitability and efficiency.

2. The strategy does not aim at selling or disposing of loss making units but works to improve the performance of the unit by re-arranging the available resources.

3. Turnaround is one type of long term strategy and does not aim at providing temporary relief or short cut methods to company problems. It studies the problem in-depth and tries to solve it forever.

4. The scope of turnaround strategy is confined to sick or loss making industrial units. It is a type of crisis management.

5. Turnaround believes in curative treatment rather than shock therapy, i.e. it does not believe in closing down or selling a sick unit, but making best use of available resources to recover losses.

6. Turnaround is not a short-cut or magical formula. It cannot work on all sick units under all circumstances. It is effective in case of loss making units but having growth or future prospects.

WHEN TURNAROUND STRATEGY IS NEEDED / TURNAROUND SITUATIONS

Turnaround strategy is needed when the company experiences some deficiencies in its working. These shortcomings like reduced profits, low demand, labour unrest, high operating cost, etc. clearly indicate the sickness of a firm. Under following type of situations, a company can opt for using turnaround strategy.

1) Liquidity problem: it means shortage of cash or liquid assets. This may arise due to less inflow and rising out flow of cash.

2) Due to liquidity problem, the company may not pay wages and salaries regularly. There may be delayed or part payment of wages to workers.

3) The shortage of liquid assets affects the repayment schedule of bank loans. This may result in non-payment of monthly interest and loan amount to banks or other institutions.

4) The company experiences falling sales and an increase in stock. The market share of the company declines very sharply.

T.M (6.6)

3

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

5) The non-payment of wages on time, results in high labour turnaround and affects the morale of employees.

6) Under-utilization of production facilities.7) Fall in the earning capacity and lowering of profits.8) Delayed payment to creditors.9) Fall in the market price of shares.10) Downward trend in production, sales and profit.

A firm that notice or comes across one or more of the above symptoms in its working can be termed as sick unit or economically non-viable unit. A loss making or sick business unit is a fit case to undergo turnaround treatment. The management of a sick unit should take prompt and corrective steps to avoid future problems.

T.M (6.6)

4

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

HOW TO INTRODUCE/IMPLEMENT TURNAROUND MANAGEMENT STRATEGY

Turnaround is a systematic and detailed study of all those factors that are responsible for the downfall of the company. it tries to locate problem areas and suggests well defined action plans. for this, an analytical study of company's organisational structure, policies relating to production, marketing, finance, and all such issues is conducted. the analytical study enables to prepare and finalise an action plan to rehabilitate or revive a sick unit. normally, the turnaround plans suggest structural changes like, reallocation of internal resources, redefinition of priorities, strict control over expenditure, retrenchment of excess labour force etc. after the finalisation of actions plans, it is implemented by the company's own executives or by an outside consultant or jiontly. for implementing the action plan, the company has following options.

1) Company executives.

In the first case, the turnaround plan is implemented by the company's own executives and managers with the help of outside experts. for this , a meeting of managers, executives, employees and experts is called. the meeting is one type of brainstorming session i.e. it is called to generate a number of solutions and alternatives to deal with sickness of the enterprise. every member is expected to give a constructive suggestions or idear to reduce losses and improve profitability. the suggestions put forth by the brainstorming session are listed down and again they are placed before the meeting for critical review and analysis. this process is continuos till a useful and practical turnaround action is selected.

After finalising the action plan the company takes a stock of its stength, weakness, opportunities and threats (SWOT analysis) SWOT analysis help to finalise the strategy required to implement the proposed turnaround plan. it is very useful to locate the weak areas in the operational structure and take corrective steps to make it more effective. after the plan and strategy is finalised, it is implemented by the cheif executive of the company with the help of present managers and employees. sometimes an external consultant is appionted to advise the cheif executive and supervise the execution of turnaround plan. this method is not useful because the company's own people may not have the required skill and expertise to handle a turnaround situation. further, the exsisting executive and managers are mainly responsible for the failure of the company. therfore, it is advisable to handover a sick unit to an outside agency for necessary action.

T.M (6.6)

5

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

2) Turnaround expert.

The second method suggests the appointment of an outside consultant or a turnaround expert to take complete charge of the company. the exsisting managers and executives are asked to hand over the affairs of the company to the consultant. the present team of managers is kept aside till the turnaround plan is complete. the turnaround consultant is appointed as per the instructions of the company or financial institutions. the experts are given the complete work of

a)Identifying the causes for sickness,

b) preparing the action plan,

c) Implementing the action plan sucessfully.

The outside expert or Turnaround consultant will continue to manage the company till the turnaround plan is completely implemented.

3) New Chief executive.

In this method, the chief executive of the sick company is either asked to resign or replaced by a new one. this practise is followed by AMERICAN INDUSTRIES.

ESSENTIALS OF TURNAROUND STRATEGY

Turnaround management is not a panacea to all ailing units. It cannot work under all conditions and on all types of companies. IT is not a master key to solve problems of loss making units. it is one type of strategy which believes in facing the crisis rather than falling victim. it is like a guide for good healyh and not a book of solutions.

Its success depends upon number of factors like:-

1. GOOD leadership.

IT means determined and motivating top managers. it is better to hand over powers to one leader than to a group of leaders or a commitee because emergency needs quick decisions and not group discussions. some managers are sucessful during time of crisis and other during normal times. Mr. LE Lacocca, when he took over the charge of American Automobile company, i.e. Chrysier Corporation had the greatest challenge of turning a loss making unit into a profitable one. he took the initiative by cutting down his salary and set un example for others. his determined and dedicated leadership could bring the company out of red.

A good leader is one who knows how to mould peop into a team, motivate them to make maximum efforts, and keep their morale high. he must create a "do or die" or

T.M (6.6)

6

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

must win psychology in place of hopelessness. the top managers must be objective oriented, self confident, positive in outlook, inspire confidence in other, innovative and creative in thinking and highly visible and active.

2.Change of Management.

IN U.S.A., the cheif executive of an alling company is either asked to resign or replaced by a new one. this is in sharp contrast to practises being followed by indian business community. Indians preper toi pass the alling company to someone either by selling it or by winding it.

temporarily selling the firm solves the problem but creates another. change of ownership brings in new owners, new rules and new policy. The management is changed, but the organisation is same. the existing employees find it difficult to adjust with new owners, which in turn creates new problems of low morale, frustration and uncertainity. therefore, instead of selling or changing mannagement it is advisable to change the leader.

3.Viability of business.

A change in market strategy is necessary to bring back normalcy. A company falls sick because of its failure to sell in the market. A buisness can be made viable by ensuring better utilisation ofd resources. this can be done by giving a new look to the product by improving the quality of products or adding some new features or making some noticeable changes in packaging. it must be seen that product is better matched with the changed preferences and taste. turnaround strategy cannot work to revive the business which has lost significance. for example, to revive record player market cannot be done with turnaround principles.

4. Planning and Control.

Lack of financial planning and control is a major factor for losses. stratergies can only work when company is able to control product, operating expenses and cash flow. the company should exercise strict control over:-

*liquidation of current assets like debtors and stock

*Borrowing.

*Use of overdraft facility.

*Timely recovery of dues and paymentr to creditors.

*Raising of equity finance.

T.M (6.6)

7

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

5. Cash Availability.

Cash is necessary to pay wages, buy raw materials and carry out essential repairs. cash must be brought in to increase production and sale thereby, keep the wheels of business moving.

PHASES OF TURNAROUND MANAGEMENT

The present business scenario is one wherein constant change is the name of the game. For any firm to survive in any industry, there has to be constant monitoring and improvement of its systems and operations. When a firm faces severe cash crisis or a consistent downtrend in its operating profits or net worth, it is on its way to becoming insolvent. The slide cannot be prevented unless appropriate actions, both internal and external, are initiated to change the future prospects. This process of bringing about a revival in the firm’s fortunes is what is termed as “Turnaround Management”.

There are 3 phases in any Turnaround Management-

1 The diagnosis of the impending trouble or the danger signals 2. Choosing appropriate Turnaround Strategy 3 Implementation of the change process and its monitoring.

Let us understand each phase individually

Phase I: Watching out for the danger signal

Do companies turn sick overnight and qualify as potential candidates for turnaround, or do

they become sick slowly, which can be stopped by timely corrective action?

Obviously only the latter is possible. But in reality, most companies do not recognize

this fact.. The following are some of the universally accepted danger signals,

which a company should watch out for:

Decreasing market share / Decreasing constant rupee salesDecreasing profitabilityIncreased dependence on debt / Restricted dividend policesFailure to plough back the profits into business / Wrong diversification at the

expense of the core business.Lack of planningInflexible CEO / Management succession problems / Unquestioning Board of

DirectorsA management team unwilling to learn from competitors.

T.M (6.6)

8

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Phase II: Choosing appropriate Strategy

Hoffer, an expert management guru, classifies Turnaround Management into two broad categories. They are

1. Strategic TurnaroundAs the name itself suggests, strategic turnaround choices may force the company to completely change its current way of operations. The choices under this method are A new way to compete in the existing business Entering into an altogether new business Under the first choice, the focus is either on increasing the market share in a given productmarket frame work or in repositioning the productmarket relationship. Theincrease in market share can be achieved by improving product quality perception through dealer push or by a consumer pull. .Alternatively, entering a new business as a turnaround strategy can be approached through the process of product portfolio management

2. Operating Turnarounds

Basically they are of 4 types and the strategy adopted depends on the various

situations in which the firm is. All these strategies focus on shortterm effects only. 1 Asset reduction strategies 2 Revenue increasing strategies 3. Cost cutting strategies 4 Combination strategies

If a firm is operating much below the Breakeven level, it must take steps to

reduce its assets. This will reduce the level of fixed costs and help in reducing the

total costs of the firm.

If the firm is operating substantially but not extremely below its breakeven

level, then the appropriate turnaround strategy is to generate extra revenues.

Operating closer but below breakeven levels calls for application of combination

strategies. Under this method all the three namely cost reducing, revenue

generating and asset reduction actions are pursued simultaneously in an integrated and

balanced manner. Combination strategies have a direct favourable impact on cash

flows as well as on profits.

If the firm is operating around or above the breakeven level, cost reduction strategies are preferable as they are easy to carry out and the firms’ profits rise once the unnecessary costs are cut down.

T.M (6.6)

9

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Phase III: Implementation of the change process

Implementation plays an important role in any turnaround management. Identification of an appropriate strategy by itself will not guarantee success. Similarly partial adoption of a strategy is also not useful. The selected strategy needs to be pursued

relentlessly and with allout effort to make it work. The success or otherwise of a Turnaround strategy depends on the commitment shown by the top management as also the operating management.

Success Stories

The case of Hindustan Machine Tools

HMT was formed to manufacture machine tools with a foreign collaborator. After nearly a decade of operation, it decided to diversify into Watch industry. The effect of this diversification was felt only after 57 years when the main business of HMT crashed and the company started incurring losses. The watch division came to the rescue and it generated cash profits to keep the company going.

The case of Bharat Heavy Electricals Limited

The company was started with the objective of producing power generating equipments and virtually enjoyed monopoly. But as the years went by because of the inability of the State Electricity Boards and private sector to set up new power plants, its capacity utilisation fell down tremendously. To offset this depression, BHEL ventured into Telecommunications, Metropolitan Transportation and Defense production. Due to this timely diversification, BHEL is now one of the rare profit making PSUs

T.M (6.6)

10

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

STRATEGY FOR CORPORATE TURNAROUND

CORPORATE failure is as much a fact of life as death or taxes, But a failing company does not have to be written off with a requiem; it can be nursed back to life by a good turnaround strategy. Companies have been known to transform themselves into strong, profitable enterprises after a turnaround, but the strategy adopted varies from case to case. However, there are a few elements common to all such efforts.

In India, there have been classic examples of good, profitable companies failing, a representative list being: Metal Box; Binny Limited; Standard Motor Company; Best and Crompton Engineering; Mangalore Chemicals and Fertilisers, Madras Fertilisers; Bata India; and Philips India.

While the first four companies mentioned have irretrievably gone under, Bata India and Philips India have both turned around and aided, of course, by their international parent companies. Seshasayee Paper Boards is a stunning case of a wholly Indian company in great decline for a few years not only coming back to life but also achieving a considerable market share in the paper industry, which is itself in the doldrums.

A turnaround situation is usually caused by some form of financial distress – reduced sales; failing market share; posting of losses quarter after quarter; or decreasing share prices. Managements must be able to discern these trends as warning signals, quite different from normal business fluctuations. Loss in income must be considered the single most visible sign that a company is on the decline. The main reasons for company failures are:

*Inability to cope with dumping from foreign manufacturers, consequent upon the removal of tariff barriers

*income-generating capacity being constrained by a system of administered selling prices

*Changes in government regulations

*Loss of market share through poor product-quality and faulty pricing policies

*Unrelated diversification affecting core competencies

*product obsolescence

Often, company failure can be traced to poor management, and to a lesser extent, environmental factors but if the managements identify these problems early, companies have a better chance of a successful turnaround. Managements’ decision-making process should revolve around certain common factors in planning a turnaround. These are:

T.M (6.6)

11

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

*Failure of existing business plans and strategies and the failure to recognize warning signals in time. If the decline is to be checked, strategies will have to be changed, and quickly, so that there is no further loss.

An inflexible or incompatible chief executive officer (CEO), who refuses to identify the problems but blames them on external factors, could be a serious handicap to any turnaround process.

One of the first steps to be initiated in the turnaround task is the replacement of the CEO, preferably with one who has had experience in retrieving a company from a troubled situation. Even when companies scout around CEOs to replace one on the verge of retirement, the choice is always a person with a proven track record. Some examples of recent appointments of CEOs are: Louis V.Gerstner Jr. at IBM; John F.Welch Jr. at General Electric; George M.C. Fisher at Eastman Kodak; and the late Roberto Goizuetta at Coca-Cola, all of whom have been performing superlatively with the companies they have joined. In fact, the incomes at Coca-cola have increased multifold during Goizuetta’s tenure.

To attract the right CEO, the compensation package will have to be commensurate with the problems he will be inheriting in the new company. As soon as a new CEO has taken over, one of his first actions will be to find ways and means of cutting costs and reducing losses and this could be achieved by selling unproductive real estate, thereby raising cash for deployment; selling off businesses or activities not running profitably; cutting back on workforce and abandoning projects needing large fund investment.

The reduction in labour force has an immediate effect on the bottom line as the recurring cost is checked, cash is released and the profitability starts improving. Cost-cutting efforts to get the company back on the rails should be more on consideration of long-term benefits than as a knee-jerk reaction. One way to ct costs is for operations to become centralized as it helps attract good calibre professionals, eliminates duplication of staff and enables economies of scale.

Refocussing attention to the company’s core competence of primary business should be the next step, as often companies find themselves in areas not intended originally but which came about due to a variety of factors. Examples of companies hiving off unproductive activities are those of ITC hiving off the hotels division to a separate company; Coates of India transferring its packaging-coating business to a separate company – CIBA Specialty Chemicals India Limited; and the latest restructuring by the Aditya Birla group, which is bringing all cement production under Grasim.

Company failures have become increasingly identifiable with such unrelated business affecting their core competence. Many companies discover that businesses in which they had a stranglehold for several years are threatened by global competition, which is striking at the root of their existence.

T.M (6.6)

12

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Caustic soda, PVC, steel and paper are some of the areas where the existing Indian companies to are finding it increasingly difficult to stay afloat with their costs of production vis-à-vis the international prices. While during the cost-cutting stage, CEOs need to focus their attention on a strategy of centralization, during the refocus-and-reinvest stage, they have to adopt one of decentralization.

The advantages of such decentralization include the ability to provide faster response and better customer service. The steps are the common remedial measures to effect a successful turnaround in companies and in most of the US companies mentioned, these measures produced remarkable results, as is seen from the following observations in each case.

*At Clark Equipment, sales in 1988 increased by $250 millions over 1987 sales to $1.28 billions. Losses of $60 millions in 1986 and $16.6 millions in 1987 transformed into positive net income of $46 millions. There were increases in both the earnings per share and the book value.

*At Intermedics, sales in 1987 at $193 millions were at an all-time high and it also had a turnaround in pre-tax earnings of $50 millions with the earnings per share also showing an increase.

*L.E.Meyers did not show any dramatic increase in ales volume post-turnaround but there were other improvements such as a reduction in its long-term debt from $6 millions in 1987 to below $1 million in 1990.

*Quantum increased sales lin 1989 to $208 millions and net income to $12.9 millions.

Analyzing some of the more common causes for the gradual in decline company fortunes, the following points emerge and emphasis the need for management to focus attention on information systems within the company.

*Availability of information on each core activity or process and the cost of providing such service.

*Cost of providing information on activities not used by management for any meaningful decision-making.

Traditional costing systems do not recognize the needs of the various levels of management which require information for decision-making and, more important, do not highlight the cost of not doing a thing – that is, the cost of excess capacity. Activity-based costing is a new basis that has been found to fill this need adequately as it seeks to cost products on the basis of the resources consumed by them and not by a blanket recovery rate for overheads, irrespective of whether the products attract them or not.

T.M (6.6)

13

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Quite often, the problems with managing turnarounds are the difficulty of timing and implementing the necessary changes and the inability to convince the management that something drastic needs to be done to remedy the situation.

Companies should look into the need for preparing a contingency plan that will take into account uncommitted liquid cash resources; a programme for controlling cash outflows and investments; and formulating a strategic plan for the manner in which liquidation of plant, equipment or the hiving-off of unremunerative business units should be handled in the event of early warning signals showing up. Such contingency plans should be an integral part of the budgeting process and the overall long-term corporate plan.

T.M (6.6)

14

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

SECTION I- SUCCESSFUL TURNAROUND

T.M (6.6)

15

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

NIKE: RUNNING OVER THE COMPETITION

Nike, Inc.  (NYSE: NKE) is a major publicly traded sportswear and

equipment supplier based in the United States. The company is headquartered

near Beaverton, Oregon, which is part of the Portland metropolitan area. It is the

T.M (6.6)

16

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

world's leading supplier of athletic shoes and apparel and a major manufacturer

of sports equipment with revenue in excess of $18.6 billion USD in its fiscal year

2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people

worldwide. Nike and Precision Cast parts are the only Fortune 500 companies

headquartered in the state of Oregon, according to The Oregonian.

The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill

Bower man and Philip, and officially became Nike, Inc. in 1978. The company takes

its name from Nike(Greek Νίκη pronounced , the Greek goddess of victory; it is also

based on Egyptian usage of "strength", "victory”, Nike markets its products under its

own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike

Skateboarding and subsidiaries including Cole Haan, Hurley

International, Umbro and Converse. Nike also owned Bauer Hockey (later

renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing

sportswear and equipment, the company operates retail stores under the Nike town

name. Nike sponsors many high profile athletes and sports teams around the world,

with the highly recognized trademarks of "Just do it" and the Swoosh logo.

IGHT Nike manufactures high quality athletic shoes for a variety of sports including baseball, athletics, golf, tennis, volleyball and wrestling. In addition to footwear, Nike also manufactures fitness equipments, apparels and accessory products. The company's products are sold in over 140 countries around the world.

All product development factory contracting and marketing activities were carried out at the company's headquarters in Beaverton, Oregon in the US. Nike's global operations were broadly divided into five geographic regions – United States; Europe, Middle East and Africa (EMEA); Asia Pacific and Americas (includes Canada, Mexico and other Latin American countries of Chile, Brazil and Argentina).

Since the mid-1970s, Nike has outsourced its manufacturing activities. The company's products were manufactured in factories owned and operated by its business partners commonly known as contractors around the globe.

Nobody takes the admonition “Just do it” more seriously than Nike, the company for

whom the slogan was written. Whether it's entering a new sport, moving into a new

geographic market, or developing a new product, Nike approaches its mission with

the dedication and single-mindedness of an athlete training for competition. And

whatever the task, the goal is always the same: To turn in a peak performance, one

that leaves no doubt as to who the best is. That's because at Nike, winning isn't

merely a corporate philosophy—it's the company's business.

T.M (6.6)

17

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

“This brand is all about building products for athletes, high-performance

products, very authentic products, innovative products, bringing new technology to

athletes so they can perform better—at a higher level in their sport,” says Bill Zeitz,

global director of advertising development at Nike.

The rest, as they say, is history. Nike has become a dominant

player in sports apparel. With track, basketball, tennis, and other traditional sports in

the “win” column, Nike recently has turned its attention to building its franchise in

soccer, cricket, rugby, hockey, and in-line skating, among others. After all, Dolan

explains, being a global sports brand requires an intensely local focus.

Being a global brand is extremely important to Nike because its home market,

the United States, is nearing saturation. According to John Horan of the newsletter

Sporting Goods Intelligence, sporting-goods chains have over expanded and profit

margins are threatened. When Nike announced that its second quarter earnings in

1997 would not live up to Wall Street's expectations, its stock dropped 13 percent.

With these spurs at home, Nike has to look overseas there it has only 27 percent of

sales compared to 43 percent in the U.S. to generate additional revenues.

But going overseas is not a sure win for Nike. “Understanding what sports the

people in [a] country play, and then being great at those sports... that's always the

challenge. In the U.K., for instance, we are a really good basketball brand, but they

don't play that there. And we are a really good tennis brand, but they kept telling us.

‘Other than the two weeks during Wimbledon, nobody in the U.K. really cares about

tennis.’ So in the U.K. soccer is what they play. Rugby is what they play. So we had

to really concentrate on being great at two sports that were not really something that

came from our American tradition at all. That took years of product development and

talking to consumers about, ‘What does this sport really mean to you when you play

it, and what does it really mean to you when you watch it?’ The brand attributes for

Nike in the U.K. are the same—we really want to be the authentic sports brand—but

T.M (6.6)

18

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

the sports that are the building blocks for that are very different in the U.K. than they

would be in the United States or than they would be in Japan.”

Outside the United States soccer is the main sport, and Nike has pursued the

soccer player and fan with a vengeance. In the United States, Nike has signed a

multiyear contract with major league soccer that calls for it to spend $3.75 million a

year to sponsor 5 of the league's 10 teams. In addition, the contract contains a clause

that allows Nike to retain sponsorship of half of the League's teams as it expands.

Overseas, Nike spent $20 million in a sealed bid process to sponsor the Italian

national team. During last year's European championships, it bought up all the

billboards around stadiums where matches were held, effectively undermining the

event's official sponsor, Umbro. In the spring of 1997, it sponsored a worldwide

soccer tour that featured top teams. It has also spent millions on global advertising

campaigns and signed leading national soccer stars such as Eric Cantona (captain of

the national champion Manchester United soccer team in the U.K.) to highly lucrative

contracts.

But nothing matches Nike’s sponsorship agreement with the Confederacao

Brasil de Futebol, Brazil's soccer federation, which cost the company a breath-taking

$200 million. Why Brazil? It won the 1994 World Cup soccer match. The contract

is a 10-year deal that includes appearances in Nike-produced exhibition matches and

community events. Nike will supply Brazil's national teams with sports kits. In

return, the teams will participate in five annual friendly soccer games that Nike is

arranging, and to which Nike retains the television rights. Nike will also have access

to training clinics in Brazil and to the infrastructure of the game.

Nike has applied the same technical skill and drive to soccer shoes that it

applied to the basketball shoes. For example, when Nike couldn't find equipment for

testing the best stud configurations and traction in created soccer shoes, it decided to

build its own. The goal is to create the world's best soccer shoe, but that won't be

T.M (6.6)

19

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

easy. First, the competition isn't yet ready to roll over and play dead. Adidas retains

sponsorship of many top teams and players, including the national teams of Germany,

Spain, and France. It also sponsors World Cup 1998, with the rights to sell official

soccer balls and sports apparel. Further, Adidas has invaded Nike's home turf,

sponsoring three U.S. teams and featuring players from those teams in its U.S.

advertising. “We don't think that anybody can get near to us on the product side,”

says Peter Csandai, an Adidas spokesman. Reebok, Nike's main competitor in the

U.S., has also signed contracts with at least 30 professional soccer clubs throughout

the globe.

And there's competition at home from firms such as Vans, a small California

company that aims directly at the teenage market by targeting the California

adolescent—an Internet-surfing latchkey kid. As the number of teenagers in the

United States grows from 25 million in 1997 to over 31 million in 2010, this move

could prove shrewd. These kids are not into team sports; instead they are attracted by

individual sports such as skateboarding, snowboarding, surfing, and mountain biking.

Within two years of entering the market for snowboard boots in 1995, for example,

Vans has become the third largest company in the business. So, it’s in a position to

make a move on Nike.

Competition is not Nike's only problem; some of its actions haven't left fans

cheering either. Signing bad boy Eric Cantona generated a lot of criticism and

infuriated the soccer establishment in the U.K. In 1996, Nike flew eight of soccer's

hottest players to Tunisia to film an advertisement in which the athletes competed

against the devil. Not surprisingly, this ad drew angry letters from many offended

fans. Even the Brazil deal has been heavily criticized. As part of that deal, Nike had

to pay Umbro an undisclosed amount to cover the remaining two years of its contract

with the Brazilian federation. “Nike is going in and almost encouraging teams to

break contracts,” says James R. Gorman, president of Puma North America. Finally,

not all soccer athletes are convinced Nike is better. Many pro players continue to get

T.M (6.6)

20

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

their equipment from companies such as Umbro, Puma, and especially Adidas, which

has been part of the sport for decades, not just the last few years like Nike.

Still, with over $8 billion in sales in 1997, Nike remains the biggest player in

the game. Adidas is a distant second with $3 billion. With its free spending, Nike

appears to have changed the economics of the game. Nike intends to be the number

one supplier of soccer gear by World Cup 2002, but so far its efforts have produced

only $200 million in annual sales. It has a long way to go before it scores a match-

winning goal in the global soccer market.

FOUNDER OF NIKE Inc.

Philip Knight Bill Bowerman

PRODUCTS OF NIKE

T.M (6.6)

21

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

22

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

23

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

24

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

CASE STUDY-1 SUCCESSFUL TURNAROUND

SCM and ERP Software Implementation at Nike: From Failure to Success

The case gives a detailed account of the failure of Supply and Demand Planning software implementation at Nike, a leading Footwear and Apparel company. The case traces the history of supply chain and ERP software implementation at Nike and presents the rationale behind their implementation. It details the

T.M (6.6)

25

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

circumstances that led to the SCM software implementation failure and also examines the steps taken by Nike to fix the problem. Finally, the case explores how Nike was able to use the learning from the failure to its advantage and emerge successful with the SAP implementation, a part of the Nike Supply Chain Project.

We became a poster child for failed implementations.

- Roland Wolfram, Vice-president - Global Operations, Nike Corporation, commenting on the i2 software implementation failure in 2000

Introduction

The US-based Nike Corporation announced that it had generated profits of $97.4 million, around $48 million below its earlier forecast for the third quarter ended February 28, 2001. The company said that the failure in the supply chain software installation by i2 Technologies3 was the cause of this revenue shortfall.

This admission of failure also affected the company's reputation as an innovative user of technology. The supply chain software implementation was the first part of a huge project to install an integrated ERP system from SAP, and customer relationship management (CRM) software from Siebel Systems.

For over a year, Nike reeled as a result of this failure. i2 and Nike blamed each other in public, for the failure and this led to a further downslide in the share price of both the companies. Analysts pointed to lapses in project management, too much customization and an over reliance on demand forecasting software. Nike insiders raised doubts about the 'Single Instance Strategy'4being followed by Nike.

However, the company remained firm and relentlessly pursued its Single Instance Strategy for SAP implementation. The guiding instruction as put across by Gordon Steele (Steele), CIO of Nike was that the "Single Instance was a decision not a discussion."

By 2004, the company had successfully implemented its Nike Supply Chain (NSC) project, indicating that its centralized planning, production and delivery processes were right for the Single Instance Strategy. With this success, Nike's Single Instance Strategy became the desired approach for many companies implementing ERP software. Nike used SAP for 95% of its global business.

An AMR Research5 survey of 110 companies of annual revenues of $500 million or more using ERP revealed that only 23% had adopted a single instance strategy while 36% were planning to put it in place, while another 17% were trying to get the instances down to one per major global region and were investing considerable funds to achieve this.

Analysts acknowledged that Nike had indeed taken a bold step when it adopted the single instance strategy with its first ERP rollout. During the late 1990s, most

T.M (6.6)

26

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

companies avoided it due to its huge costs and bandwidth problems. Christopher Koch, Executive Editor, CIO Magazine, remarked, "If it was easy, everyone would just do it."

Nike's Supply Chain

Founded in 1957 by Philip Knight (Knight), Nike manufactures high quality athletic shoes for a variety of sports including baseball, athletics, golf, tennis, volleyball and wrestling. In addition to footwear, Nike also manufactures fitness equipments, apparels and accessory products. The company's products are sold in over 140 countries around the world.

All product development factory contracting and marketing activities were carried out at the company's headquarters in Beaverton, Oregon in the US. Nike's global operations were broadly divided into five geographic regions – United States; Europe, Middle East and Africa (EMEA); Asia Pacific and Americas (includes Canada, Mexico and other Latin American countries of Chile, Brazil and Argentina).

Since the mid-1970s, Nike has outsourced its manufacturing activities. The company's products were manufactured in factories owned and operated by its business partners commonly known as contractors around the globe.

In 1975, Nike introduced the Futures program to manage the market for its footwear products. Under this program, Nike's retailers placed orders with the company six months before the required delivery date with the guarantee that 90 percent of their orders would be delivered within a set time period at a fixed price. These orders were then forwarded to the manufacturing units around the world...

The i2 Debacle

In March 1999, Nike decided to implement the first part of its supply chain strategy; the demand and supply chain planning application software from i2 technologies. This software was intended to help the company match its supply with demand by mapping out the manufacturing of specific products (Refer Exhibit I for details of i2 TradeMatrix Plan Solution).

This module had to be linked with other ERP and back-end systems as well. The i2 project replaced an earlier implementation by Manugistics . The project was supposed to reduce the amount of rubber; canvas and other materials that Nike needed to produce for its wide range of footwear products with a variety of sizes and styles.

Nike also wanted to make sure that it built more shoes that fulfilled customers demand. The cost of the i2 project was estimated to be around $40 million. Nike went ahead with the deployment using its legacy systems rather than implementing it as part of its SAP ERP project. The company had 1,20,000 different varieties of products (SKUs) and a wide variety of information sources...

T.M (6.6)

27

Main Reason for Failure

Nike’s profit dropped by 50%

from US$ 798 million to US$

399 million

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Was it Avoidable?

IT experts were surprised by the fact that Nike did not hire a third-party integrator since the company was replacing an already troublesome older application with a new supply chain planning application. The company claimed that i2 software had failed to deliver on the promised functionality as it delivered erroneous forecasts. However, officials at i2 denied this allegation and charged Nike of a faulty implementation, which ignored i2 recommendations of minimizing customization to 10-15% of the software.

The Lessons Learned

After the debacle, Nike realized that implementing supply-chain management software cannot be taken lightly. The company felt that a third-party perspective from an integrator's point of view could have exposed the flaws in the implementation. Experts

felt that Nike and i2 should have set realistic goals since SCM deployments had yet to be proved across all verticals...

T.M (6.6)

Excess Inventory at Some Places

Shortage of Inventory at Other Places

Wrong Demand Forecasting

What Happened?

Over Customization of Software

Failed Demand Forecast System

Big-Bang Deployment

Not Using Software as intended

Over Budget

Why?

28

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Implementing SAP Apparel and Footwear Solution (AFS)

As part of the SAP ERP project, Nike had decided to implement the SAP AFS solution which was a variant of the SAP R/3 software developed specifically for the apparel and footwear industry. In conformity with the Single Instance Strategy, Nike used the SAP AFS application across all geographies, and also chose to implement other SAP applications including Supply Chain management (SCM) and Business Information Warehouse (B/W) (Refer Exhibit V for details). It was also considering pilot testing of the SAP NetWeaver platform in the near future. The company expected that Single Instance Strategy would result in better integration and provide a competitive edge by enabling holistic view of its business...

The Benefits

Nike spent six years and $500 million on the NSC project. By 2004, the project was 80% complete. The company reaped several benefits from the project. While inventory levels witnessed a declining trend, the project also made design and manufacturing quicker and resulted in increased gross margins of 42.9% in 2004, up from 39.9% five years ago. The company also saw its highest cash flows from operations in eight years. Earlier, Nike purchased products from manufacturers about 9 to 10 months in advance while Nike's retailers ordered only six months in advance.

T.M (6.6)

Being Patient

Having a Definitive Business Goal

Focus on Satisfaction of Customers and Channel Members

Thus, Continual Process Implementation

29

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

30

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

SECTION II- UNSUCCESSFUL TURNAROUND

T.M (6.6)

31

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

FOUNDER OF TOMMY HILFIGER

Mr. HILFIGER

History

Tommy Hilfiger made his first foray into fashion as a purveyor of hippy chic to New York campus kids in 1969.   Building on the success of his first shop, People's Place, Hilfiger had established a chain of 10 speciality stores in upstate New York by the age of 26. During the Seventies, he turned to designing and for a period worked for Jordache before launching his own label in 1985. An astute businessman with a talent for publicity, Hilfiger's first ad campaign, which cost him $3 million (£1.8m), prompted a flurry of interest, after it proclaimed him as one of the "Four Great American Designers for Men", along with Perry Ellis, Calvin Klein and Ralph Lauren. By 1990, sales of Tommy Hilfiger clothes had topped $25 million (£15m).  Today the growing Hilfiger fashion empire, supplemented by fragrances and other merchandising spin-offs, is worth more than $400 million (£240m) a year. Meanwhile

T.M (6.6)

32

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Hilfiger is known to spend much of his spare time including his 50th birthday in March 2001 - and money on the Caribbean island of Mystique.  

Early life

Hilfiger was born and raised in Elmira, New York. The second of eight children, he grew up in an Jewish-American family; he claims direct descent from Robert Burns. His parents originally intended for him to be an engineer. He attended Elmira Free Academy for high school. Rather than furthering his education, he started to work in retail at the age of 18. Hilfiger would go to New York City to buy jeans and bell-bottom pants, which he customized and resold at a local downtown Elmira store, Brown's.

He later opened his own store, named The People's Place, around the block in downtown Elmira. Although the store was a hot spot for teens with frequent contests and live DJ appearances, there were often more people hanging out than shopping. Over the years, a number of stores closed in downtown Elmira as shopping traffic shifted to the new Arnot Mall in Horseheads, New York. It wasn't long before The People's Place became another casualty. After seven years, The People's Place went bankrupt, when Hilfiger was 25. The site of the original store has since been demolished to make room for First Arena, home of the Elmira Jackals Hockey team.

Careers

• After turning to the design aspect of clothing by designing for the rest of his stores in upstate New York, Hilfiger moved to New York City with his now estranged wife, Susie. Although he was offered design assistant positions with designers Calvin Klein and Perry Ellis, and was broke, he turned them both down with greater plans in mind.

• In 1984, he founded the 'Tommy Hilfiger Corporation', (NYSE:TOM), with support from The Murjani Group, which went public in 1992, introducing his signature menswear collection. By 2004 the company had 5,400 employees and revenues in excess of $1.8 billion. Hilfiger was named Menswear Designer of the Year by the Council of Fashion Designers of America in 1995.

• In 1998, Hilfiger gave singer Aaliyah her endorsement deal, in which he honored her in his Summer 1998 fashion show in Jamaica.

• In 2005, a CBS TV reality show called The Cut tracked the progress of sixteen contestants as they competed for a design job with Hilfiger in similar fashion to Donald Trump's The Apprentice. In the end Hilfiger chose Chris Cortez.

T.M (6.6)

33

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

• In May 2006, Hilfiger had a close encounter with Guns N' Roses singer Axl Rose at the Plumm in New York City. Hilfiger reportedly took a couple of swings at Axl Rose for touching his girlfriend's breast, before being carried away kicking and screaming by his own security guards.[2] Club owner Noel Ashman stated, "Axl was a gentleman and had the good sense not to retaliate as he would have done some serious damage to Hilfiger." Later that night, Rose dedicated the song "You're Crazy" to "My good friend Tommy Hilfiger.“

After turning to the design aspect of clothing by designing for the rest of his stores in upstate New York, Hilfiger moved to New York City with his now estranged wife, Susie. Although he was offered design assistant positions with designers Calvin Klein and Perry Ellis, and was broke, he turned them both down with greater plans in mind.

In 1984, he founded the Tommy Hilfiger Corporation, (NYSE:TOM), with support from The Murjani Group, which went public in 1992, introducing his signature menswear collection. By 2004 the company had 5,400 employees and revenues in excess of $1.8 billion. Hilfiger was named Menswear Designer of the Year by the Council of Fashion Designers of America in 1995.

In 1998, Hilfiger gave singer Aaliyah her endorsement deal, in which he honored her in his Summer 1998 fashion show in Jamaica.

In 2005, a CBS TV reality show called The Cut tracked the progress of sixteen contestants as they competed for a design job with Hilfiger in similar fashion to Donald Trump's The Apprentice. In the end Hilfiger chose Chris Cortez.

In May 2006, Hilfiger had a close encounter with Guns N' Roses singer Axl Rose at the Plumm in New York City. Hilfiger reportedly took a couple of swings at Axl Rose for touching his girlfriend, before being carried away kicking and screaming by his own security guards.[2]

Largely due to declining sales, in 2006, Tommy Hilfiger sold his company for $1.6 billion, or $16.80 a share, to Apax Partners, a private investment company.

Product Line

• Tommy Hilfiger, including men's, women's, children's, footwear, swim, fragrance, accessories, and home.

• Hilfiger Denim, including men's and women's.

• Hilfiger Sport, including fitness, golf, sail, ski, and swim.

• Tommy also offers products such as fragrances, belts, bedding, home furnishings, and cosmetics. The company's clean-cut clothing is sold in major

T.M (6.6)

34

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

department and specialty stores as well as some 165 Tommy Hilfiger shops and outlets.

• Tommy offers almost 40 product lines.

Product Segregation

• Tommy Hilfiger

• Hilfiger Denim

• Hilfiger Sports

1) Tommy Hilfiger

• Target audience: 25- 45 years of age.

• Tommy hilfiger label appeals to those seeing new interpretations in classic American styles

• Tommy collection consist of casual sportswear n accessories for men,& women that reflect the classic American brand mission.

• Tommy includes products for men , women and children.

2) Hilfiger Denim

• Hilfiger denim speaks to a younger target of 18- 28 year old denim oriented customers.

• The label consists of casual sportswear with a focus on premium denim-related, separate for men & women.

• The collection is slightly more “ fashion forward” than the main TOMMY HILFIGER Label.

• Designs are inspired by American classics & finished with a modern edge & fresh spirit.

• The products are sold at dedicated retail stores, department stores, & specialty stores.

T.M (6.6)

35

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

3) Hilfiger Sports

Targeting the 18-45 year old customers, hilfiger sportswear consists of high performance active wear for men & women including apparels for fitness/ training, golf, swimming, sailing, skiing.

Hilfiger sportswear are sold at dedicated retail stores ,department stores, & specialty stores in Europe and Japan.

T.M (6.6)

36

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Product lines

Hilfiger Denim, a premium-upscale denim collection for men and women. Designs are inspired by American classics and finished with a modern edge.

True Star Gold, fragrance created by Hilfiger and spokeswoman Beyoncé Knowles

True Star, another fragrance created by Hilfiger and with spokesperson Beyoncé Knowles&True Star Men, a fragrance created by Hilfiger and with spokesperson Enrique Iglesias

Tommy Girl, fragrance for women Red Label, a line of denim-themed products including jeans, t-shirts, and

sweatshirts H by Tommy Hilfiger, an upscale line which was ended after Tommy Hilfger

sold his company, the same sort of style is now carried on under the Tommy Hilfiger label in their specialty stores

Tommy Hilfiger, the company line of clothes sold in department stores, company stores, and specialty stores

Tommy Sport, a defunct line that came out in the 1990s and capitalized on Hilfiger's popularity in urban areas.

Tommy Hilfiger for the Home, a line of bedding and bath products Tommy Sailing, was due to be released in January or February 2007.

T.M (6.6)

37

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

38

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

39

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

40

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

41

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

T.M (6.6)

42

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

CASE STUDY-2 UNSUCCESSFUL TURNAROUND

Rebranding failures: Tommy Hilfiger

The power of the logo

Tommy Hilfiger is one of the world’s best-loved designer clothing brands. During the

1990s Tommy Hilfiger moved from being a small, niche brand targeting upper class

US consumers to becoming a global powerhouse with broad youth appeal. But then,

in 2000, the brand was suddenly in trouble. From a high of US $40 per share in May

1999, Tommy Hilfiger’s share price fell to US $22.62 on New Year’s Day 2000, and

was cut in half again by the end of that year.

Sales were slowing and, most tellingly, flagship stores in London and Beverly Hills

closed down. Various runway shows at fashion events worldwide were also cancelled.

So what was going wrong? According to Tommy Hilfiger himself, the explanation is

to be found in his decision to be adventurous with the brand.

He said in a 2001 interview with New York magazine:

At one point, I told my people, ‘We have to be the first with trends’, so we ran out and

tried to do the coolest, most advanced clothes. We didn’t just do denim embroidery.

We jewelled it. We studded it. We really pushed the envelope because we thought our

customer would respond.

But the customer did not respond in a big way, and our business last year – men’s,

women’s, junior’s – suffered as a result.

Part of this ‘pushing the envelope’ strategy involved reworking the brand’s famous

imagery. Tommy Hilfiger, more than any other brand in the fashion industry, is a

brand based on a logo. Indeed, some of the company’s most successful products have

been T-shirts with the red-white-and-blue logo emblazoned across them. Everything

about the logo, from the primary colours to the capital letters shouting TOMMY

HILFIGER, suggested a bold, brash and 100 per cent US identity. When you wore a

Tommy Hilfiger T-shirt everybody knew exactly what you were wearing, so long as

they could read.

T.M (6.6)

43

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

Of course, these logo-centric US brand values had been present in other fashion labels

– most obviously Calvin Klein and Ralph Lauren – but Tommy Hilfiger had taken it a

step further. And by 1999, Hilfiger himself was starting to feel it may have been a

step too far. ‘When business plateaued in 1999,’ he explained, ‘we thought the

customer didn’t want the Tommy logo anymore. So we took it off a lot of stuff. We

made it tiny. We became very insecure about being a red-white-and-blue logo brand.

We thought we had to be much chic-er, more in line with the Euro houses like Gucci

and Prada.’ In other words, Tommy Hilfiger abandoned the values that had built the

brand. Of course, the brand had in many senses become credible in high fashion

circles but this credibility arrived, in part at least, by the brand’s urban appeal. In No

Logo (written before Tommy Hilfiger’s dip in fortunes).

Naomi Klein explored the twin identity of the Tommy brand: ‘Tommy Hilfiger, even

more than Nike or Adidas, has turned the harnessing of ghetto cool into a mass-

marketing science. Hilfiger forged a formula that has since been imitated by Polo,

Nautica, Munsingwear and several other clothing companies looking for a short cut to

making it at the suburban mall with innercity attitude.’

However, this twin identity (suburbia meets the inner-city) happened initially by

accident. In the beginning, Tommy Hilfiger produced clothes for the ‘preppy’ market,

falling somewhere between the Gap and Ralph Lauren.

Pretty soon though, the hip-hop community embraced the label, and the Hilfiger logo

could be seen popping up on every other rap video. It was only later that Hilfiger

deliberately designed clothes for this market. In effect, this meant accentuating what

was already there – making the prominent logo even more prominent, and the baggy

T-shirts even baggier.

This strategy proved successful because the company was only exaggerating a

formula that was already there. In 1999 though, the formula was abandoned

completely, and, because of this, it strayed from the original preppy style that had

made the brand so strong originally. For instance, Hilfiger launched a ‘Red Label’

sub-brand aimed at the very top of the market. This logoless range included such

garments as US $7,000 patchwork, python-skin trousers. Clearly these items were out

of the reach of the average Tommy Hilfiger customer. Another bad move was the

decision to place stores in locations such as London’s Bond Street and Beverly Hills’

Rodeo Drive. ‘The London flagship store wasn’t open for a year when we realised we

had made a mistake,’ he said in the New York magazine interview. ‘And the average

T.M (6.6)

44

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

age on Rodeo Drive is probably 50 years old. My customers are much younger than

that. We thought all the cool people in LA come to Rodeo. But they don’t.’

Since 2001 though, Tommy Hilfiger has been learning from his mistakes and going

back to basics. ‘As a result of learning from our errors, we went back to our roots:

classics with a twist. We’re about colour, we’re about preppy, we’re about classic,

we’re about America!’ And as a result of this turnaround, customers and investors

alike are again comfortable with the Tommy Hilfiger brand. ‘It will never again be the

hot, sexy, overly talked about, flashy, zippy, fast-growing company it was, but it will

be a damn nice company with lots of cash,’ observed one Wall Street analyst at the

time of the turnaround. ‘What you’ve got now is a company that went from an Aplus

to an F-minus. And now it’s going back to a B. And it’s a hell of a business as a B.’

Lessons from Tommy Hilfiger

Don’t deviate from your formula. Known as the brand which produces ‘classic

with a twist’, Hilfiger concentrated too much on the ‘twist’ and not enough

on the ‘classic’.

Don’t compete with irrelevant rivals. Tommy Hilfiger attempting to compete

with successful European high fashion brands such as Gucci and Prada on

their own terms was a mistake which even Hilfiger himself has

acknowledged.

Don’t over-extend the brand. During its bad patch, Tommy Hilfiger moved

into a lot of new product categories for which it wasn’t suited.

Don’t be scared of your logo. The logo is what made Tommy Hilfiger the

brand it is today. In fact, the Tommy Hilfiger brand is pure logo. When the

logo disappeared or was toned down, the brand ran into trouble.

T.M (6.6)

45

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

CONCLUSION

The turnaround in any branch or department of any company is a huge task for a company. It involves a big amount of risk as a huge corpus is involved. So, it is not a job that can be taken at haste because as the saying goes haste makes waste. So in the cases taken in this project we have seen how a turnaround can be successful and how it can turn unsuccessful.

So while taking any turnover decision the businessman needs to know as companies mature and the staff becomes more knowledgeable, the corporate focus needs to change.

T.M (6.6)

46

SUCCESSFUL & UNSUCCESSFUL TURNAROUND

BIBLIOGRAPHY

BOOKS

o BUSINESS ENVIRONMENT AND MANAGEMENT -MICHAEL VAZ o TURNAROUND MANAGEMENT- HIMALAYA PUBLICATION

WEBSITES

www.nike.com www.tommyhilfiger.com www.livemint.com www.timesofindia.com www.forbes.com http://www.suite101.com

T.M (6.6)