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LIGHTS OUT FOR LISA HO - A Struggling Business

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by

Jessica Smith

on 15 December 2013

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Transcript of LIGHTS OUT FOR LISA HO - A Struggling Business

Introduction
In 1982 the Lisa Ho Brand was founded by Australian designer Lisa Ho.

The Lisa Ho Brand was one of Australia's most iconic & recognised fashion brands worn by the likes of Delta Goodrem, Olivia Newton-John & Jennifer Lopez.

Lisa Ho consisted of 12 signature stores, 150 employees and a head office based in Sydney.

External and internal factors saw the Lisa Ho brand struggle under the harsh light of the economic downturn.

This presentation will analyse the challenges Lisa Ho faced as a result of external and internal factors .

The World of Fashion
The fashion industry has a strong presence in the global economy. In 2008 alone, the accessories and luxury goods market generated total revenues of $1,334.1 billion globally.

The fashion industry consists of four levels:
1)
The production of raw materials
, predominantly fibers and textiles but also fur & leather.
3)
Retail sales
in store and more recently online
2)
The production of fashion goods
by designers, manufacturers & contractors
4)
Generating Media
- advertising and promotion of goods.

These four levels play a vital role in sustaining consumer demand for apparel enabling the industry to operate at a profit.
Lisa Ho - External
Organisational Challenges
Lisa Ho
Internal Factors
Customers
- attracting & retaining customers & maintaining a high level of customer service.
Staff
- employing highly skilled staff. Training and development of staff to get a competitive edge. Staff remuneration is the highest cost to a business.
Suppliers
- providing the business with the materials they need to carry out business activities.
Media
- positive and negative media can make or break the reputation of the brand.
Identifying the problems with Lisa Ho
Poor management
Poor operational decisions
Competing with new international stores, such as Topshop and Zara setting up bricks and mortar stores in Australia.
Wastage: In August 2011 too much stock was ordered, leaving an excess of 6000 garments.
Tough market conditions that have impacted on Lisa Ho's viability and cashflow
a growing debt of $19.6 million
Six stores were losing money as a result of paying high rent, wages and fitout costs of between $8000 to $10,000 a week
Competing with online retailers
Overpayment of wages, superannuation, annual leave, motor vehicle allowance and life insurance policies
Working capital was drying which made it difficult to get 2011 & 2012 collections to the market on time and with the right amount of stock.
June 2012 sales fell to $13 million and the bottom line fell into the red with a $2.3 million loss
Soft Skills Associated
with Lisa Ho
A Brief Overview
Technological – a new digital era
Climate change
Economy - Economic downturn
Demographic change
Resource shortages
Supply and demand
Image / Goodwill
Competitors
Social Environment
These external factors affect all areas of the business from suppliers of raw materials, designers, manufactures, marketers & manufactures.
These profound external challenges are faced on a daily basis, not only by Lisa Ho but by the entire fashion industry.
Competitors

- analysising & monitoring the competition is crucial for Lisa Ho to maintain or improve its position within the market.
Pop-up stores & deep discounting on apparel were the early signs that the economic downturn was taking it's toll on the iconic brand.

Lisa Ho faced several tough years following the 2008 financial crisis driving down revenue as a result of changed consumer spending habits.

Consumers are being cautious of spending, competition intensified and the cost of rent was high & unmanageable.
Lisa Ho Tightens Belt In Uncertain Times
Economic Downturn
60 staffers made redundant effective immediately in the wake of financial troubles for Lisa Ho.
New Technology
Keeping up with the digital age.
Technology is a major macro-environmental variable which has changed the way consumers purchase goods.

Lisa Ho joined the online rag trade to keep up with technological change & the increase in online consumer demand.

Online sales drive 28% of revenue
for Lisa Ho.
Financial Drivers at the time of Business Downturn
Cost Drivers
Inventory Costs
Rental of store space & location
Hiring of staff & labour costs
Marketing costs
Freight costs
Importing costs
Discounts given
Stock adjustments/wastage
Purchase returns and allowances
Revenue Drivers
Price. Increases in price add to profit margin

Variable costs (variable costs change as a result of revenue from the cost of sales)

Overheads

Sales
Communication. Effective communication within the business to ensure an understanding of each individuals unique needs.
Teamwork. Working together through difficult times.
Conflict resolution through effective communication.
Maximising creativity and innovation with designs and store fronts.
Recommendations
Adapt to technological change. Increase online trade & online marketing techniques.

Human Resources - Invest time and money in sourcing highly skilled and qualified employees

Benchmarking - measuring the performance against similar-sized businesses in the industry.

Measure results - analysing business trends through historical data collected over time to identify consistent results & consumer trends.

Set clear goals that are specific, measurable, achievable, relevant and timely.

Reassess the business plan /reevaluate the visions and values of the company
Internal and external factors have lead to uncertain times for the Lisa Ho business. There are several avenues that can be explored in order to breathe life back into the brand these include, reevaluating the visions, goals and strategies of the business, adapting to technological change and investing in human resources planning,

Assignment by:
Jessica Smith
The four frame model
Structural, HR, Political & Symbolic
Structural
Stagnant sales

Environment shifts

Technology change - Demand for online trade adding additional pressures to structural frame

Expectations and procedures - A clearer understanding of the businesses expectations and procedures should have been in place.

Environmental - The Environment became unstable due to financial troubles

Direction - Lisa Ho’s goals and objectives seem to have lost direction from 2012 onwards

Personal and external pressure’s impacted day-day business

People - The business lacked highly skilled financial management from 2012 onwards
Structural Pressures
Human Resources
Poor communication between high level management - information not being filtered to correct channels

Poor management skills - lack of knowledge

Lisa Ho was not investing time and money in 'the right' people

Conflict between staff members becoming public - better management tools needed to be applied

Political
Lisa Ho managers should have been more "constructive" rather than destructive

Channels of informal communications should have been managed better

Confusing multiplicity of goals

Power struggles between management levels

Symbolic
Culture change challenged bonds within the organisation

Staff feeling less united in reaching their goals.

Events and actions within the business had multiple interpretations and may have been perceived negatively effect


Conclusion
Full transcript