Catastrophe or Opportunity?
The case study is devoted to Family Fabrics Corporation. It is a family business, so members of the Farnsworth family operate it. The company has designed and marketed a unique fabric for cold weather clothes. The gear is called “ArcticCloth”. Customers choose this product because it is warm and has different color options. Family Fabrics Corporation supplies its fabric to major clothes producers, and the demand is very high. The company is located in small town, so Family Fabrics Corporation is the only large company there, and has a significant influence on local economy. The dependence of small towns on success of major businesses is proved by the situation with other companies in the region, particularly the ones that produce textile. Thus, they suffer due to decline in the industry, which happened in the result of technological improvements, foreign competition and various economic aspects. If Family Fabrics Corporation had closed, ten percent of the local population would have lost their jobs. However, the competition is intense in the textile industry, so the company cannot rely only on one product for a long time. Next move should be agreed. My role in all this is to help to develop a strategy for future. In particular, it is necessary to create a plan for planning and then analyze key stakeholders in this scenario. After that, a recommendation for immediate action as well as a high level strategic plan for the future of Family Fabrics have to be designed. Finally, a plan of viable of business options for the company and summation of expected results are required. However, many factory buildings were ruined in the result of the fire that occurred the day before my meeting with the company’s representatives. This has made my task more difficult because I need to offer immediate response to the catastrophe that happened on the factory. To make an efficient strategic plan, it is necessary to make a SWOT analysis that would demonstrate the strengths and opportunities as well as weaknesses, threats and constraints that Family Fabric Corporation has.
Key Stakeholders and Strategy Implications
The first step of effective planning is defining key stakeholders and discussing strategy implications. In particular, the management has to determine who needs to participate in the strategic planning process (Bryson, 2011). Usually, it includes people that will be implementing the plan. In the case of Family Fabric Corporation, it involves management and staff. Besides, stakeholders are also those who will be influenced. The company has an outstanding effect on the local population, so representatives of the town should participate as well as customers from other regions. Besides, it is necessary to involve those who will monitor implementation of the strategic plan. The branch responsible for monitoring in Family Fabric Corporation is Management Committee. After determining the key stakeholders, it is reasonable to determine the level and ways of using them for the strategic planning for future. First, management and staff, and representatives of local community should be interviewed about the proposed strategic planning process. The advantage of these interviews is that they build support for strategic planning and help to make sure that the plan is designed in such way that it will be the most helpful (Bryson, 2011). Family Fabrics Corporation is a large organization, so it is more reasonable to conduct group interviews instead of individual ones in order to cover more stakeholders. During these interviews, people should be asked about their vision of the company’s future and about current weaknesses. The most influential stakeholders should have individual interviews because they may feel uncomfortable of expressing their opinions in public. Another tool is competing questionnaires. They have to be used for community members and customers. Questionnaires should help to understand people’s expectations and requirements for the Family Fabric Corporation’s future. Another way is organizing open days with a variety of workshops. The participants of these workshops may involve staff, management and locals. Apart from that, a series of consultation meetings with Management Committee, management, staff and local activists are necessary to demonstrate the importance of everybody in strategic planning and building the sense of responsibility for implications of the designed plan.
These activities will help to determine core principles that will guide the actual creation of plan for the future of Family Fabrics. For example, involving different groups of stakeholders will give the opportunity to identify future policy towards relations between the factory and town. Besides, interviewing customers is useful for studying demand for certain groups of products. For instance, now Family Fabric Corporation is focused on selling fabric for cold weather gear but customers probably desire some new fabric for hot weather clothes.
Recommendation(s) for Immediate Response (to stabilize the situation)
The disaster on Family Fabrics Corporation is very similar to the situation with Malden Mills where three of eight factory buildings were destroyed in the result of fire. Therefore, the experience of the company should be used for designing recommendations for immediate response to stabilize the case. One of the most important issues is that thousands of workers could lose their jobs, which would affect the whole town. The CEO of Malden Mills as well as Family Fabrics Corporation had few possible responses to stabilize the situation. First, he could take the insurance money, close the company and go away. Second, the CEO could use the insurance revenues for moving factory buildings to another state or even country with smaller spending on labor forces. Finally, he could use the money to pay his workforce, build new buildings instead of burnt ones and leave the company where it was. The CEO of Malden Mills chose the last option, which can be explained by his religious beliefs, a significant sense of individual and family responsibility, and confidence in his own capabilities to solve the situation. According to Aaron Feuerstein, corporate responsibility means caring about stockholders and responsibility to workers and community. Therefore, closing the business was unacceptable in his case. Aaron Feuerstein’s policy could be named “doing the right thing for the right reason”; it responded the postulates of Corporate Social Responsibility (CSR) and Catholic Social Thought (CST). Moreover, the businessperson was called a corporate hero because he decided to continue paying salaries to his employees out of his pocket. Feuerstein also promised to rebuild factories. However, this policy was not successful. The company did not manage to pass the test of marketplace and became a bankrupt. Workers lost their jobs and Feuerstein lost his corporation. After declaring the bankruptcy, the company was going to stop its existence completely. It was saved only at the last moment by a group of corporate lenders (Gini & Marcoux, n.d.). This case demonstrated that passing CSR test does not mean passing the test of the market place. It is also an example how Family Fabrics Corporation should not act.
As for responses that are firstly needed to stabilize the situation, they involve analysis of such business considerations as insurance, site safety, displaced workers, customer relations etc. In particular, it is necessary to determine whether insurance covers all the damages caused by the catastrophe and identify the time and cost needed for reconstructing factory buildings. Besides, safety of the rest of the factory should be checked for avoiding the same kind of disaster in the future. One more aspect is displaced workers. As the experience of Malden Mills demonstrates, this business consideration should be carefully analyzed. On one hand, Family Fabric Corporation takes social responsibility for workers because thousands of people will not be able to find new jobs in case of firing. On the other hand, the company cannot pay salaries to people that do not work and will not be able to return to their workplaces soon because reconstructing destroyed buildings requires quite a long time. The solution to this ethical dilemma is offering support to workers during the first few months until they find new jobs and adapt to new reality. It is also necessary to contact with other textile manufactures in the region to determine whether they can hire displaced workers. Besides, some of employees could be offered to help with reconstructing works. Finally, customer relations require attention because Family Fabrics operates in a highly competitive industry, so it is difficult to keep market presence and return current customers in the case of losing them after the fire. The effective solution of the issue is applying interim measures such selling licenses for producing ArcticCloth to other textile companies and subcontract manufacturing.
To assess the business after fire efficiently, it is reasonable to use different stages and types of reflection. The first stage of refection starts with a description of what has occurred. In the case of catastrophe in Family Fabrics, a fire destroyed large part of factory buildings. On this stage, it is necessary to identify the things that should be considered for avoiding the same situation in the future. However, it is difficult to do this without knowing the factors that caused the fire but effectiveness of actions of staff during emergency should analyzed (Dickel, 2010). I was present in the town when the situation happened, so the next day after the fire I need to go the place where the catastrophe happened to make refection-in-action, particularly I have to observe its consequences and talk to people about their opinions of what happened. After that, reflection-on-action should be applied to make professional judgment about the situation.
Internal and External analyses
To plan the future, it is necessary to evaluate current circumstances. This could be made through applying SWOT analysis where strengths and weaknesses belong to internal factors and opportunities and threats are external aspects (Hill & Jones, 2010). Family Fabric Corporation has numerous strengths. First, it has strong relations with major clothes manufactures and designer houses. Second, the company has a unique product that in high demand. Moreover, this fabric is produced of recycled materials, which demonstrates careful attitude to ecology. It is a popular trend now, and can be used for attracting more customers. Staff is very loyal because Family Fabric Corporation is the largest employer in the town, so it is difficult to find a new job, especially in textile industry after firing. The company has high brand awareness due to continued presence on the market, so it would be easier for it to keep a market presence even after the disaster.
The most significant weakness is reducing manufacturing capabilities because of destroying factory buildings. On the other hand, it is an opportunity to purchase more innovative equipment and hire new staff in the case if some workers reject to wait until finishing reconstructing works. Second, the company has only one unique product. It is dangerous for such large corporation because eventually competitors of Family Fabrics Corporation will develop a fabric with the same characteristics. In addition, additional financial losses do not allow the corporation to invest significant costs in technological advances. Besides, the company’s leaders pay much attention to CSR, so they cannot make tough decisions such as firing people and reducing production or moving the factory to another region or country with lower labor costs. In other words, the organization’s leadership is quite weak. It is especially dangerous now when many employees are left without work, so they cannot raise profits of the organization but the CEO cannot fire them immediately because it will have negative effects on the economy of the town. Moreover, the company will have additional financial losses due to necessity to pay salaries its workers at least some time.
As for opportunities, fire is one of them because it makes the company search new ways for keeping a marketplace. In addition, it is also additional advertising. Demand for ArcticCloth is still high, so there are possibilities for increasing production by subcontract manufacturing. Finally, other textile companies suffer from reduction revenues, so Family Fabrics Corporation can strengthen its position in the market
External environment has many threats for the company. First, foreign competition is high. In addition, labor costs are quite significant in the US in comparison with other countries, so Family Fabrics may lose price wars, especially now when it cannot afford to reduce prices. Second, other companies can develop new fabrics even with better characteristics, and Family Fabrics will lose a marketplace if new products will not be invented. Third, economic problems decrease customers’ spending on clothes, especially on expensive ones.
Analysis of Viable Strategic Options
The next stage of strategic planning is deciding how the company’s future should look. The vision for the next three-four years will include few aspects. First, the company will stay on the same place and will reconstruct all the burnt buildings. Licensing and subcontract manufacturing will allow avoiding serious financial losses and over three years revenues will be on the same level as before the catastrophe. The company will fire workers that are not involved in production. It mainly relates to the first year after the fire when production is expected to be reduced due to smaller number of factory buildings. Instead, new specialists involved in Research and Development as well as marketing will be hired. Their major task will be developing new products and marketing them. The Family Fabrics Corporation’s core products will include fabrics for different weather conditions. The customer base will be increased through marketing new products overseas; especially in developing countries were competition is less intense than in developed countries. The company will expand its presence in the Internet to cover more customers. In particular, there will be options for buying online. Family Fabrics Corporation will continue to increase revenues through using recycled materials for its products.
Strategic recommendations are also based on new mission statement. According to it, Family Fabrics Corporation develops and markets technologically advanced fabrics for different weather conditions. They are sold to major clothes manufactures and designer houses. Family Fabrics Corporation differs from other companies by more advanced products and significant coverage of clothes manufactures as well as close relations with local community. Sales are performed directly and through large distributors in the American market and abroad.
Corporate values also affect strategic plan recommendation. First, the company continues to keep CSR but the company’s financial stability receives higher priority. If the company becomes bankrupt, the town will lose more. Second, Family Fabrics Corporation operates following the highest standards in relations with customers, suppliers, environment and community. Third, the company motivates staff to develop new products and rewards for innovative ideas.
Business aims for longer time period include gradual expanding business, which will allow the company provide above-average returns to its shareholders. In addition, organization is going to become leading, innovative company in the textile industry in the region. Key strategies include changing leadership style and optimizing labor forces. In addition, Research and Development team will be strengthened, which will allow to develop new products. New employees for marketing department will be hired. This is necessary for expanding the customer base and moving to new markets. Apart from that, selling options will be also modernized, particularly Family Fabrics Corporation will increase presence in the Internet providing opportunity to purchase its fabrics online. Finally, additional venture capital will be increased.
Strategic Plan Recommendation
According to the SWOT analysis, Family Fabrics Corporation has weak leadership style. Therefore, one of the most important strategic options for the near future is reviewing approaches towards leading the company. Corporate Social Responsibility is good thing and is able to create a positive brand image. However, it is very dangerous for the financial state of the company and can lead it to bankruptcy. Therefore, the company’s top managers first should evaluate and satisfy necessities of their organization and only after that take care about community.
The HR strategies should be also changed because large part of factory buildings was destroyed, and the company needs fewer workers at least in next few years until reconstructing its facilities. In addition, necessity to invent new products requires hiring more marketers and specialists that are responsible for developing innovative products.
One strategic plan recommendation is increasing presence in the internet. The company needs to create a modern website with possibility to buy products online. Besides, it is necessary to make accounts in social media such as Facebook and Twitter. Chanel on YouTube is also required to post videos about new products of Family Fabrics Corporation.
The next strategy is opening factories in other countries, especially in developing countries where labor costs are lower. In addition, new factories will be opened in US because producing only in one town makes Family Fabrics Corporation dependable on economic situation in a place as well as unexpected situations such as fire.
Today, it is popular to demonstrate careful attitude to the environment. Therefore, new products should be made of recycled materials like ArcticCloth. Fabrics that cannot be produced of recycled raw, should be of high quality. On the other hand, price strategy should respond to needs of customers because economic instability may force clothes manufactures and designer houses be more economical. Marketers need to prepare customers for high prices by explaining that qualitative fabrics cannot be cheap.
To implement suggested recommendations, strategic action programs should be developed. First, CEO is responsible for choosing adequate leadership style. Financial department needs to calculate the financial losses caused by the fire and the ways of optimizing spending. HR department should determine workers that have to be fired and people that have to be hired to stimulate R & D and marketing. Research and development team needs to intensify work on developing new products. Marketing department has to work on increasing customer base and strengthening presence in the market.
However, creating a strategic plan is not the end of strategic planning. To ensure that plan works as it was expected, it is necessary to review the processes and make corrections if some strategic options are not effective. Such reviews should be performed at least once a quarter (Bryson, 2011).
Expected results from changing leadership style are increasing profits due to smaller attention to CSR and overall optimizing of labor force. The objective is employing people and keeping workers that are useful for the company. After the fire, many of employees have to be fired due to reducing production. As experience of Malden Mills demonstrates, trying to pass CSR test and leaving staff will lead to bankruptcy. At the same time, hiring creative people will help to improve variety of products and the ways of their marketing.
Increasing presence in the Internet will lead to growing sales because it will help to cover new customer groups. Apart from selling fabrics to major clothes manufactures and designer houses, Family Fabrics is expected to attract small businesses. Accounts in Facebook, Twitter and YouTube will strengthen brand awareness. In addition, it will help to reduce spending on advertising because posting information in social media is much cheaper than traditional sources such television, billboards or print media. This strategy will also make the company efficient and innovative.
Opening factories in other American states and in other countries will cause reducing spending on transportation. It especially important for customers that are located oversees. Besides, this will give the opportunity to manage effectively in the case of emergencies because the fire that happened in factory buildings forced to search every possibility for keeping the company’s presence in the market. However, existence of factories in other places will facilitate these processes. Finally, this strategy will help to reduce labor costs.
Using recycled materials and qualitative raw materials for producing fabrics will improve brand image of Family Fabrics Corporation. This will be also the company’s competitive advantage, especially now when other companies operating in the textile industry suffer from reducing sales. Therefore, they are more interested in surviving in the market at any price than on developing fabrics, which is useful for environment.
Overall, fire is an opportunity for the company because it needs to purchase new equipment and reconstruct buildings. It will also encourage the organization to reduce spending in order to avoid bankruptcy. Besides, there is a significant motivation for developing new products because it will increase sales.