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Business cases on: Strategic leadership

Business cases on: Strategic leadership. Compiled by: Celeste Ng, Updated: October, 2018. Sears – once America’s most famous retailer. Compiled by: Celeste Ng, October, 2018 Direct Quotes from source: as indicated on each slide.

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Business cases on: Strategic leadership

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  1. Business cases on: Strategic leadership Compiled by: Celeste Ng, Updated: October, 2018

  2. Sears – once America’s most famous retailer Compiled by: Celeste Ng, October, 2018 Direct Quotesfrom source: as indicated on each slide

  3. Sears File BankruptcySource: https://www.usatoday.com/story/money/2018/10/14/sears-kmart-bankruptcy-2018-retailer-timeline/1645591002/

  4. Sears HistorySource: https://www.usatoday.com/story/money/2018/10/14/sears-kmart-bankruptcy-2018-retailer-timeline/1645591002/ • October 2018 ---- Sears has just filed for Chapter 11 bankruptcy protection. • 1886: Richard W. Sears, a railroad agent, starts selling watches as a side gig in Minnesota. Later that year, he founds the R.W. Sears Watch Company in Minneapolis. • 1887: A watchmaker named Alvah C. Roebuck answers Sears' help wanted ad. Sears moved his company to Chicago. • 1893: The two men join forces again, call their new venture Sears, Roebuck. • 1894: The catalog's page count jumped to 322 and included everything from sewing machines to sports equipment. • 1895: Roebuck exits the company.  • 1906: Sears offers stock in an IPO. • 1927: Sears creates Kenmore brand for appliances and Craftsman brand tools. • 1931: Sears introduces Allstate Insurance. • 1933: The Christmas catalog debuts • 1941: Sears stops offering groceries by mail order. • 1946: Sears launches plan to build stores in suburbia.

  5. Sears HistorySource: https://www.usatoday.com/story/money/2018/10/14/sears-kmart-bankruptcy-2018-retailer-timeline/1645591002/ • 1991: The company loses the distinction of being the nation's "top-selling retailer" to Walmart. • 1998: The Christmas catalog website, wishbook.com, debuts, one year before Sears.com goes live. • 2005: Kmart and Sears merge. • 2015: Sears raises $2.7 billion by selling stores to Seritage Growth Properties, a real estate investment trust • 2017: Sears sells Craftsman brand to Stanley Black & Decker for an estimated $900 million.  • Jan. 4, 2018: Sears announces a $500 million loan from CEO Edward Lampert's hedge fund. The company had already gotten loans of hundreds of millions of dollars previously.  • March 9: The company announces it lost $607 million during the fourth quarter. • Aug. 14: Lampert offers through his hedge fund, ESL Investments, to buy the Kenmore house appliance brand for $400 million, as well as $70 million to $80 million for the home improvement arm of the Sears Home Services Division – a deal Lampert says is "critical.''  • Aug. 23: Sears says it will close 13 Kmart and 33 Sears locations in November. • Oct. 9 and 10: Reports say that Sears is working with advisers to prepare to possibly file for bankruptcy, as soon as this week.  • Oct. 15: Amid a deadline for a $134-million debt payment, the company files for Chapter 11 bankruptcy protection. Eddie Lampert resigns as CEO but will remain chairman. A new "Office of the CEO" will manage the company.

  6. Kmart HistorySource: https://edition.cnn.com/2018/10/21/business/sears-bankruptcy-kmart/index.html • Like Sears, Kmart started at the end of the 19th century. Sebastian SperingKresge opened a five-and-dime store in downtown Detroit bearing his name. The Kmart name didn't come about until 1962, and the chain grew rapidly for several decades. It claimed the segment of the market that big box stores would eventually dominate. • Kmart became known for its 15-minute-long "blue light specials": a store would flash a blue light and announce "attention Kmart shoppers" over the public address system. The specials started in 1965 but were discontinued in 1991, although Kmart has tried to bring the back a couple of times. • In the early 1990s Kmart went on a buying spree, purchasing Sports Authority, a majority of OfficeMax and book retailer Borders. It sold all three a few years later.Sports Authority and Borders eventually went out of business after their own bankruptcies. • Kmart, losing to Walmart and other rivals offering good prices, filed for bankruptcy in 2002. It had 2,100 stores, or about three times what the combined Sears and Kmart have today. It used that bankruptcy process to close more than 300 stores and dump debt to strengthen its balance sheet.

  7. Sears History – competition & KmartSource: https://edition.cnn.com/2018/10/21/business/sears-bankruptcy-kmart/index.html • Sears and Kmart have been in a somewhat unhappy marriage since they merged in 2005 to form Sears Holdings. • Sears, face heavy competition from • big box retailers and online competitors --- Amazon (AMZN). • some department store chains — Macy's (M) and Kohl's (KSS), to name two — are profitable. • But the discount retail space is even tougher for Kmart. It faces competition from • Walmart(WMT) and Target (TGT) at one end of the market, and • Dollar Tree (DLTR) and Dollar General (DG) at the other. Both discounters are profitable and growing rapidly.

  8. Sears History – competition & KmartSource: https://edition.cnn.com/2018/10/21/business/sears-bankruptcy-kmart/index.html • Kmart. • It was still a retailer in search of a profitable market niche when Eddie Lampert bought it out of bankruptcy in 2003. • "I think Kmart was too far gone by the time Lampert took over to be salvaged unless he or someone was willing to invest a tremendous amount of capital," said Mark Cohen, a former CEO of Sears Canada. • Kmart failed to keep up with Walmart and Target, he added. • Kmart was always operating at a much thinner gross profit margin, which compares sales revenue to the cost of goods. • Searshad established brands, such as Kenmore and Craftsman. Kmart had to compete purely on price.

  9. Sears History – competition & KmartSource: https://edition.cnn.com/2018/10/21/business/sears-bankruptcy-kmart/index.html • Kmart. • Kmart's losses started in 2011, just as other retailers were emerging from the Great Recession. And it has closed stores, while sales declined, ever since. Sears suffered too, but the decline was steeper at Kmart. • Between 2010 and August 2018, Kmart closed more than 70% of its stores. Of the 360 stores that remained, another 110 have already closed or will close soon. • Sears Holding pulled back on advertising for Sears. The marketing budget for Kmart virtually disappeared.

  10. Sears Bankruptcy CauseSource: https://edition.cnn.com/2018/10/21/business/sears-bankruptcy-kmart/index.html • The two brands were never a good fit. • Kmart's own problems only distracted Sears Holdings' top managers from their efforts to fix Sears. • "It's difficult to run two retail brands with different merchandise and consumer strategies," said Greg Portell, head of the retail practice at consultant A.T. Kearney. "There are relatively few areas where you could see synergy between Kmart and Sears."

  11. Singapore competition watchdog fines Uber and Grab $9.5m(新加坡競爭監管機構對Uber和Grab罰款950萬美元) Compiled by: Celeste Ng, October, 2018 Direct Quotesfrom source: Financial Times, 24 September, 2018, “Singapore competition watchdog fines Uber and Grab $9.5m,” Financial Times, URL:https://www.ft.com/content/d2b097d2-bfa9-11e8-95b1-d36dfef1b89a

  12. Singapore competition watchdog fines Uber and Grab -1 • Uber sold its south-east Asian operations to Grab in March in return for a 27.5 per cent in the Singapore-based company. The deal sparked an investigation … • “Mergers that substantially lessen competition are prohibited and CCCS [Competition and Consumer Commission] has taken action against the Grab-Uber merger because it removed Grab’s closest rival, to the detriment of Singapore drivers and riders,” CCCS [競爭和消費者委員會]已採取行動反對Grab-Uber合併， 因為這一個合併會把Grab最強烈的競爭對手拔掉

  13. Singapore competition watchdog fines Uber and Grab -2 • Singapore’s competition watchdog has fined Uber and Grab more than S$13m ($9.5m) over an “anti-competitive” deal to merge the two ride-hailing companies’ operations in the country.新加坡的競爭監管機構已經對Uber和Grab進行了超過1300萬新元（950萬美元）的罰款，超過了一項“反競爭”協議，以合併這兩家乘坐公司在該國的業務。 • The Competition and Consumer Commission said it had fined Uber S$6.58m and GrabS$6.4m to “deter completed, irreversible mergers that harm competition”. Reason for 罰款“以阻止完成，不可逆轉的合併，從而損害競爭”。

  14. Singapore competition watchdog fines Uber and Grab -3 • The commission said [ as a result of the merger] • Grab held 80 per cent of the market and that exclusivity agreements with drivers and taxi companies hampered the ability of competitors to enter the market. • It directed Grab to remove exclusivity agreements with taxi fleets in Singapore.它指令 Grab取消與新加坡出租車隊的獨家協議. • Uber was also directed to sell vehicles belonging to Lion City Rentals, a car rental service, to "any potential competitor who makes a reasonable offer based on fair market value" to prevent Grab and Uber from absorbing or hoarding the fleet to limit access by a new competitor.它指令 Uber向“任何潛在競爭對手”出售屬於Lion City Rentals的汽車.

  15. AT&T-Time Warner Deal Is a Strike in the Dark Compiled by: Celeste Ng, October, 2016 Direct Quotesfrom source: Manjoo, Farhad, 24 October, 2016, “AT&T-Time Warner Deal Is a Strike in the Dark,” The New York Times Company, URL:http://www.nytimes.com/2016/10/25/technology/att-time-warner-deal-is-a-strike-in-the-dark.html?_r=0 [A version of this article appears in print on October 25, 2016, on page A1 of the New York edition with the headline: “Chancy Merger In an Industry Up for Grabs.”]

  16. News headline

  17. News headline – the deal • The official rationale for AT&T’s $85 billion deal to purchase Time Warner is that: • in uncertain times, bigger is better – a bigger company with more options will inherently be better suited to weather the enormous changes now shattering the TV business • together, they’ll have more leverage and can build new stuff faster,

  18. The players • AT&T is: • a telecom company that offers wireless service in a saturated market, • [AT&T公司是美國最大的固網電話服務供應商及第二大的行動電話服務供應商 --- Source: Wikipedia, 2016], while • Time Warner is: • a content company whose primary assets, networks like CNN and HBO, face tougher times in a cord-cutting world. • [美國有三大傳媒公司] • [是全球第三大無線電視、影視製作及娛樂公司，僅次於華特迪士尼公司和康卡斯特公司；並且其一度是全球最大的傳媒公司--- Source: Wikipedia, 2016]

  19. The confusion • In most mergers, people talk up “synergies” — • how bringing various parts together creates a more valuable whole. • But for regulatory reasons and business ones, the obvious synergies between AT&T and Time Warner are limited. • E.g.: it does not make sense for Time Warner to offer most of its content exclusively to AT&T’s customers. ... That destroy its profitability ... The notion of content tied to specific distribution lines is exactly what consumers are moving away from when they choose services like Netflix over cable bundles

  20. The reason for accepting • Instead this megadeal is best seen as a Hail Mary pass (- a very long forward pass, made in desperation with only a small chance of success ---Source: Wikipedia, 2016). • It’s a way to do something, anything, to get some grip on a rapidly changing future. • The basic story underlying this merger is that the great delivery and content business for television is cracking up

  21. The reason for Proposing • It diversifies AT&T’s offerings — • now a single company combines content and distribution, rather than just one or the other. • When you face an uncertain future, diversity isn’t a bad weapon. • If it turns out that in the future, content becomes more valuable than distribution, the new AT&T will have that; if the opposite happens, it’s covered there, too.

  22. Source: 愛范兒 ifanr , 2016, “年度最大宗併購案誕生：AT&T宣布以854億美元收購時代華納！”http://www.bnext.com.tw/article/view/id/41472?utm_source=dailyedm_bn&utm_medium=content&utm_campaign=dailyedm • “AT&T為何要收購時代華納？ • AT&T收購時代華納，這筆收購有可能讓AT&T和時代華納雙方在各自的領域內有更加強大的影響力。 • 在網路的影響下，時代華納旗下的HBO、CNN等新聞媒體、電視台都紛紛拓展線上業務，允許消費者透過訂閱，下載app等方式觀看高品質內容，並以此推送廣告或收取訂閱費實現盈利。不過想讓觀眾能夠觀看更多的劇集和新聞資訊，獲取更多廣告收入，時代華納還需要有高品質的網路作為支援，AT&T有能力提供這樣的後台。恰好AT&T近年來正在佈局影音領域，在去年以500億美元收購了DirecTV。 • 根據併購雙方共同新聞稿介紹，合併後的新公司可以充分利用雙方在電信和傳媒領域的強勢地位，把優秀的內容輸送給消費者。所以AT&T願意高額收購時代華納的原因，或許就是看中了雙方基礎設施和最終產品結合之後能夠產生的規模效應： 影片的未來在於行動，而行動的未來則在於影片（The future of video is mobile and the future of mobile is video）。 • 除了業務擴張之外，雙方還認為AT&T收購時代華納還會給公司帶來一些財務上的回報，不過在併購消息公佈後，AT&T股價下跌3%，時代華納股價上升8%。”

  23. The nutshell • The AT&T and Time Warner deal is perhaps the watershed example: • Every move is a guess, and if you are lucky, an educated one. • Randall Stephenson and Jeffrey Bewkes, the chairmen and chief executives of AT&T and Time Warner, added another dimension to this argument: • Bigger, they said, is faster. • “This appears to be about empire sustenance鞏固市場rather than economic efficiency,” said Brian Wieser, an analyst at the Pivotal Research Group.

  24. Cord Cutting • Cord cutting refers to the process of cutting expensive cable connections in order to change to a low-cost TV channel subscription through over-the-air (OT) free broadcast through antenna, or over-the-top (OTT) broadcast over the Internet. Cord cutting is a growing trend that is adversely affecting the cable industry. • Netflix, Apple TV and Hulu are some of the popular broadcasting services that encourage cord cutting. The cord cutting concept received a considerable amount of recognition beginning in 2010 as more Internet solutions became available. These broadcasters have convinced millions of cable and satellite subscribers to cut their cords and change to video streaming. Source: https://www.techopedia.com/definition/28547/cord-cutting

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