Laura Ashley Holdings plc - company overview

Laura Ashley

Global organisation Laura Ashley Holdings plc has suffered differing fortunes since it was founded in the 1950s by Bernard and Laura Ashley. It has been involved in the designing, manufacturing, distribution and selling of garments, accessories, perfume, gift items, fabric, wallcoverings, bedding, lighting, and furniture. Famed for its floral prints, the chain was highly successful during the early and mid 1980s but things changed in the early 1990s when various management and structural problems as well as those relating to growth, distribution, and various external influences such as global recession surfaced

Laura Ashley herself died in 1985. There is a notable difference in the organisation up to and after this year. Up to 1985, it was a simply structured, steadily expanding organisation operating in a non-complex environment (complexity arises when there are numerous complicated environmental influences [Johnson and Scholes, 1989]). In the months and years after, many changes took place. Laura Ashley went public in flotation, acquired other companies involved in areas such as knitwear and perfume, made heavier investments in manufacturing and information technology (IT), moved towards segmentation with Mother and Child shops, exclusively home furnishing shops and unit shops (franchise operations). The organisation moved gradually away from vertical integration (it had always manufactured and delivered all goods itself) - The Guardian reported that Laura Ashley was withdrawing from manufacturing by the end of the year in 1998. In order to facilitate growth, there was a shift from the simple functional organisational structure to a more complex divisional structure (which was re-organised with every change of leadership). The most notable chief executives of Laura Ashley who were in place whilst and after problems developed were Jim Maxmin (1991-1994) and Ann Iverson (1995-1997). Each of these people were responsible for major overhauls within the organisation. Vora (1998) saysof the organisation "Laura Ashley has undergone various restructuring strategies and umpteen management upheavals, all to no avail, and all of which have decimated shareholder value and abused the brand name".

As highlighted above, the major problems of Laura Ashley began to manifest in the late 1980s and early 1990s. The first fall of profits were reported in the year to January 1989. It is important, then, to look at its success before this - from its beginnings in the 1950s to 1985. One area to naturally consider is the key success factors of the organisation for this period ie what specifically can its success be attributed to. Key success factors are what an organisation must do well in order to be successful, be an effective competitor and satisfy stakeholder requirements (Thompson, 1997). Bearing this in mind, the key success factors of

Laura Ashley up to 1985 are identified as high quality production, innovative designs, good brand management (the 'Laura Ashley' name was and is strong), well placing of stores, creation of good atmospheres in stores, general design and creative competencies, staff training, creation of a vertically integrated structure and operation within a simplistic organisational structure in general. Also, the Group's IT capabilities factored into the success as it was a source of competitive advantage eg they were an early adopter of electronic point of sale (Heath, 1996 as cited by Johnson and Scholes, 1999). These factors may also be interpreted as strategic excellence positions (SEP's) which can be described as the capabilities which allow an organisation to produce better than average results in comparison with competitors (PÜmpin, 1987).

Thompson (1997) presents a particularly useful model that can be helpful in explaining the success of Laura Ashley up to 1985. The EVR congruence model, by Thompson, considers if an organisation is being managed effectively with regards to strategy. It represents the matching of an organisation's resources (for Laura Ashley these would include plants, vehicles, IT systems and locations) to the key success factors dictated by the environment (external factors such as opportunities and threats, stakeholders, competition etc). A determinant in matching these are the values of the organisation (again, in the case of Laura Ashley, these would include the lifestyle they promote/project, shop designs and atmospheres, product designs, the brand, staff training policy and the 'family' culture). If the congruence (fit) between these three areas is great, then this indicates effective management of resources (Hamel and Prahalad [1993] comment that it is important for organisations to manage resources well in order to achieve objectives), strategy formulation and all-round success.

It can be argued that the success of Laura Ashley up to 1985 can be attributed to greater EVR congruence. That is such things as the number of shops and plants, distribution systems, stakeholders, threats (including competition), products, level of vertical integration and so on fit together well in relation to the size, structure, culture and speed of growth of the organisation then. The key success factors are also indicative of this congruence.

So that they can be developed to help ensure both present and future success, it is important key success factors are recognised and understood. One particular way ...

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So that they can be developed to help ensure both present and future success, it is important key success factors are recognised and understood. One particular way Laura Ashley could do this is through a SWOT analysis. This reviews an organisation's internal strengths and weaknesses and opportunities and threats in the external environment (Cole, 1996). This may be done for a particular moment in time or as an overview encompassing the past and present. As made clear, Laura Ashley has faced much change during its existence. Opportunities and threats come about as a result of constant change and the SWOT analysis can help to identify these and internal strengths and weaknesses relevant when dealing with change (Johnson and Scholes, 1989).

Below is a SWOT analysis for Laura Ashley that covers the most important aspects in terms of their successes and failures.

Strengths

· Strong customer loyalty.

· In the beginning, complimentary talents of Bernard and Laura Ashley.

· Uptake of IT in the 1970s and 80s.

· Laura Ashley Chargecard (encourages increased transaction values).

· The 'Laura Ashley' brand name.

· Shop designs.

· Numerous product lines.

· Vertical integration up until 1988 (proved not to be a strength after aggressive expansion).

Weaknesses

· Fragmented management structure.

· Lack of corporate strategy.

· Constant (costly) restructuring.

· Unstable leadership.

· Growth without direction.

· Ambiguity over strengths, weaknesses, opportunities and threats.

· Rising manufacturing costs after 1985.

· Poor market research (failure to keep up with fashions).

· Heavy borrowing and high overheads in the early 1990s.

· Up until the appointment of Jim Maxmin in 1991, employees were disempowered.

· Up until 1991, there were no standard shop operating systems.

· Numerous product lines.

· Unsure of identity, particularly in the early 1990s - designing, manufacturing or retail?

· Insular family culture (problematic when expanding and implementing strategies).

· Lack of success and in US, particularly in relation to delivery problems and management.

· High production wastage in the late 1990s.

Opportunities

· New lucrative markets such as men and other age groups.

· Advancing technology.

· Advent of the Internet and e-commerce in mid to late 1990s.

· Ability to have ranges in already popular home shopping catalogues.

· Acquisition of new businesses which compliment core competencies.

Threats

· Currency value fluctuations.

· Increasing competition.

· Changing interest rates.

· Fluctuating exchange rates.

· Volatile mortgage rates.

· Changes in consumer tastes.

· Possibility of take-over when in weak position.

· Recession (this will adversely affect other businesses and competitors).

This SWOT analysis can be used in relation to analysing the problems faced by Laura Ashley in the late 1980s and throughout the 1990s. They can be greatly attributed to the weaknesses and threats identified. For example, fluctuations in the economy had a knock-on effect on the sale of property and hence on the sale of household furnishings. Also, high borrowing, wastage and forced discounting meant that, despite sales increases, shops were making a loss. The reorganisations in 1988, 1991 and twice in 1995 had their effect too - they were costly and highlighted inefficiency. Chandler (1977) states that structures are not adapted until pressure of inefficiency forces the change and that this change process is usually a painful one - often carried out by a different chief executive each time. Upon and after his appointment in 1991, Jim Maxmin found that the organisation lacked a core identity, clear strategies, empowered staff, thorough market research, efficient logistics, and many problems in the US such as limited growth, poor management and delivery problems. He responded with his 'Simplify, Focus and Act' programme. This included reorganisation, institution of a Global Operations Executive (GOE) and Global Collection Development (GCD) which aided globalisation and marketing, encouragement to empower staff, an alliance with Federal Express Business Logistics to improve delivery and distribution systems, sourcing half of the organisations manufacturing to the Far East (rather than in-house in Britain) and management replacement in the US. Before leaving Laura Ashley in 1994, Jim Maxmin commented that "throughout the entire organisation, people has embraced the principles of the Simplify, Focus and Act programme and set about sorting out the operational problems which have plagued Laura Ashley" (Maxmin, 1993 as cited by Warnaby, 1994).

Ann Iverson was appointed chief executive of Laura Ashley in 1995. She was to spearhead the rush into the US and revamp the product range (Teather, 1999). Her observations found various problems - all of which can again be attributed to identified weaknesses. It was found that the product range was too broad, there was no 'unified' look to match globalisation, the supply chain was inefficient and problems continued in the US. Ann Iverson's response included strengthening the alliance with Federal Express Business Logistics, opening larger stores in the US and reviewing marketing and sales. These changes were considered to be good as Laura Ashley restored dividend payments in 1996 for the first time since 1989. Ann Iverson was dismissed in 1997, however, mainly due to continuing problems in the US and the organisation's image (Keynotes, 1997).

Each of the changes mentioned came about from the organisation's particular strengths (as identified) at the time. For example, whilst such things as restructuring and shop closures were happening, the strong name of Laura Ashley and strong customer loyalty were greatly relied upon. Bowman and Asch (1987) comment that the strengths of an organisation are a if not the determinant in how it handles weaknesses, opportunities and threats.

Opportunities open to the organisation in dealing with its various problems can be identified as the opportunities in the SWOT analysis. Opportunities change and differ over time. For example, the alliance with Federal Express Business Logistics resulted from available opportunities at the time. A possible opportunity in the early 1990s would have been a speedier move away from vertical integration for example.

Laura Ashley became totally vertically integrated in the 1970s and continued to be so though gradually moved away from this in the 1990s - completely in 1998. Vertical integration can be backwards eg manufacturer purchasing/owning supplier and forwards eg manufacturer purchasing/owning retailer - Laura Ashley was both backwardly and forwardly vertically integrated - everything from the supplying of materials and manufacturing to distribution and retail. The main benefits of this throughout the organisation's development included greater control, greater ability to differentiate, the opportunity to achieve economies of scale (higher margins), assurance of supply and greater synergy. Despite this, there were numerous disadvantages particularly that it was costly and greatly increased operational leverage as well as the need to keep up with technological change. This tied up capital having long-term affects. It meant that there was not full concentration of key strengths (design and retail) on which key success factors are dependent (Thompson, 1997). Furthermore, vertical integration was inflexible (cheaper manufacturers could not be sourced) and sensitivity to decreases in sales increased. It was the cost aspect that had the greatest impact - particularly in the face of costly expansion (especially in the US). Warnaby (1994) comments that vertical integration was responsible for financial problems in the early 1990s. The costs of vertical integration had an impact on the organisation's ability to successfully expand internationally.

Laura Ashley embarked on international expansion five years after it moved into direct retailing. By 1985 there were 81 stores in the UK, 80 in North America, 46 in Europe and 12 in the Pacific Basin (Warnaby, 1994). Treadgold (1991) identifies four keys to international expansion. They are as stated in table 1 along with how each, according to Treadgold, applies to Laura Ashley.

TABLE 1:

KEY LAURA ASHLEY

The product Should be distinctive and have the same global product formula but with changes to such things as pricing and store sizes to suit local demands.

The retail formula Should reflect that of the home market and shops should have same look and atmosphere - (much like The Body Shop).

The consumer Should be aware that tastes, demands and expectations differ geographically.

Management Should implement suitable structure which will encourage management to "build a team based on local expertise and with freedom to modify the Laura Ashley operation to meet local demands while the core of the business remains tightly controlled…" (Treadgold, 1991).

(Treadgold's Four Keys to International Expansion)

Perhaps with the exception of a distinctive product look and the adoption of a divisional structure, Laura Ashley did not expand internationally applying Treadgold's keys/strategies - each was applied/introduced incrementally as problems arose to highlight the need eg it was not until 1995 when Ann Iverson felt the need for a unified product look. This is indicative that the organisation was not particularly capable of embarking on such ambitious international expansion as it did. This is highlighted by the numerous problems faced by the organisation eg poor marketing/marketing strategy, inefficient logistics and lack of direction and clear strategy. Additionally, the paternalistic management style was not suited to rapid expansion and this coupled with high finance demands from vertical integration, reorganisation and early acquisitions further indicate unreadiness for expansion.

Laura Ashley has faced so many problems throughout its existence. Problems owing to management, organisational structure, logistics and rapid international expansion continuously came and went. In 1998 bankruptcy looked imminent but an injection of £44 million in equity capital by Malaysian businessman Dr Kay Peng Khoo (giving his MUI property company 47.5% share ownership whilst the Ashley family retained just 9% [Gibbs, 1999]). He installed Ng Kwan Cheong as chief executive who made changes including the disposal of the problematic North American franchise (retail operations were sold to a management buyout team for $1 at the end of July, 1999 [Gibbs, 1999]), targeting of younger markets and investment in e-commerce (Abdullah, 2000). However, all of these changes looked to have no major impact in the Group's success with sales steadily decreasing from 1998. Whether or not Laura Ashley manages to achieve the sort of success it enjoyed in the early 1980s under its new management remains to be seen - as does its survival. Chief Executive Ng Kwan Cheong refrained from placing false hopes, commenting in March of 2000 - "We have a lot of things to do. All I can say is we are moving in the right direction and things are changing" (Cheong, 2000 as cited by Abdullah, 2000).

REFERENCES

Texts

· Bowman, C. and Asch, C. (1987). 'Strategic Management'. Macmillan Education.

· Chandler, A.D. (1997). 'The Visible Hand: The Managerial Revolution in American Business'. Harvard University Press.

· Cole, G.A. (1996). 'Management Theory and Practice' (5th Edition). Letts Educational.

· Johnson, G. and Scholes, K. (1989). 'Exploring Corporate Strategy: Text and Cases'. Prentice Hall.

· Johnson, G. and Scholes, K. (1999). 'Exploring Corporate Strategy: Text and Cases' (5th Edition). Prentice Hall.

· PÜmpin, C. (1987). 'The Essence of Corporate Strategy'. Gower.

· Thompson, J.L. (1997). 'Strategic Management: Awareness and Change'. International Thomson Business Press.

Journals and Publications

· Hamel, G. and Prahalad, C.K. (1993). "Strategy as stretch and leverage". Harvard Business Review, 71, March-April, pp75-84.

· Keynotes (1997), 'Keynote Market Report - Clothing Retailing', 1997 Reports, p23.

· Treadgold, A. (1991) 'Dixons and Laura Ashley: Different Routes to International Growth'. International Journal of Retail and Distribution Management. Vol. 19(4), pp13-19.

· Warnaby, G. (1994). "Laura Ashley - An International Retail Brand". Management Decision, Volume 32 (3).

Other

· Abdullah, S.A. "Turning around Laura Ashley". http://adtimes.nstp.com.my/archive/mar3.htm (09 December 2000).

· Gibbs, G. (1999) "Laura Ashley bids farewell" The Guardian Unlimited Archive. http://www.guardianunlimited.co.uk/Archive/Article/0,4273,3904775,00.html (18 December 2000).

· Teather, D. (1999) "Banks push Laura Ashley to quit US" The Guardian Unlimited Archive. http://www.guardianunlimited.co.uk/Archive/Article/0,4273,3855892,00.html (18 December 2000).

· Vora, K. (1998) "Lessons from Laura Ashley". The Motley Fool: The Daily Fool, Evening Fool - Tuesday, 03 March 1998, (online) (cited 04 January 2001). http://www.fool.co.uk/DailyFool/1998/DailyFool980303.htm .

BIBLIOGRAPHY

Texts

· Cole, G.A. (1997). 'Strategic Management' (2nd Edition). Continuum.

· De Wit, B. and Meyer, R. (1994) 'Strategy Process, Content, Context: An International Perspective'. West Publishing.

· Hatch, M.J. (1997). 'Organization Theory'. Oxford.

· Palmer, A. and Hartley, B. (1996). 'The Business and Marketing Environment' (2nd Edition). McGraw-Hill.

· Palmer, A. (2000). 'Principles of Marketing'. Oxford.

· Porter, M.E. (1980) 'Competitive Strategy - Techniques for Analysing Industries and Competition'. The Free Press.

· Porter, M.E. (1985) 'Competitive Advantage - Creating and Sustaining Superior Performance'. The Free Press.

· Wild, R. (1994) 'How to Manage' (2nd Edition). BCA.

Other

· Framed-Art Wholesale. "Laura Ashley - The History" http://www.framedartwholesale.com/aboutLA.htm (20 December 2000).

· Herzog, J. (1997) "Laura Ashley closure a strategic decision". Daily Yale News Online - Friday, 12 September 1997, (online) (cited 20 December 2000). http://www.yale.edu/ydn/paper/9.12.97/I-1lauraashley.html .

· Hoover's Online. "Laura Ashley Holdings plc Company Capsule" Companies and Industries http://www.hoovers.co.uk/uk…capsule/5/0,3042,90245,00.html?referer= (20 December 2000).

· Wetfeet. "Laura Ashley Holdings plc" Company Profiles. http://www.wetfeet.com/asp/companyprofiles.asp (18 December 2000).

· Wright Investor's Service. "Research Report: Laura Ashley Holdings Plc" Corporate Information http://profiles.wisi.com/profiles/scripts/corpinfo2.asp?cusip=C826EG930 (18 December 2000).

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Laura Ashley Holdings plc - company overview

Laura Ashley

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Weaknesses

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