Saving RadioShack

[Tom Spencer]

Ashley, thanks for the excellent post looking at how to turnaround and save RadioShack.

 

There is a free book on offer for the best recommendation to save RadioShack, and we are throwing our hat in the ring. 

 

Our understanding of RadioShack's business is that it has a large brick and mortar presence and sells electronics products focusing on customers who can best be described as "innovators and engineers".

 

To understand what's going wrong we would want to understand the business situation:
1) Company: What are RadioShack's sales & cost structure compared with the competition? Compare current and historical figures. 
2) Products: What does it sell, and what is its approach to pricing and marketing? How does this compare with the competition?
3) Customers: Who are the target customers, what do they want and how much are they willing to pay?
4) Competition: Who are RadioShack's key competitors (e.g. Apple, Bose, Amazon, Wal-mart, etc.)? What has changed in the industry?

 

What strategy is RadioShack pursuing and how does this compare with the competition?  

 

We gather from Ashley's article that RadioShack sells through local brick and mortar stores and has a particular focus on electronics for hobbyists/engineers/innovators. 

 

The problem with this strategy is that:

1) it is high cost compared with operators like Amazon and Wal-Mart, and

2) it is not particularly unique or distinctive compared retail stores operated by firms like Apple or Bose. 

 

In other words, RadioShack is being squeezed on both sides and its strategy (to the extent that it has one) appears to have become stuck in the middle. It is neither low cost nor unique.

 

It will need to pick a strategy: low cost or differentiated? It would most likely be difficult for RadioShack to compete on cost with Amazon and Wal-Mart, and so we agree with Ashley that RadioShack's best bet would be to return to its roots with a focus on niche/specialty products.

 

Regardless of strategy, RadioShack will need to slash costs (which will involve among other things selling some of its stores).  We would want to understand RadioShack's finances in order to know (1) how much time is available to turn the company around, and (2) whether the company needs to seek immediate financing. 

 

What strategy would you recommend for RadioShack? Comment below.

[jtobrien]

Using the Sheth Rule of 3, there is clearly not room for RadioShack (RS) on the mass market level. Undifferentiated as they are in their current strategy they currently occupy or soon will occupy the "ditch". First priority is to preserve cash. How much? Enough to operate profitable stores, revamp inventory, and hire from outside. RS has a storied past. They were the bricks & mortar accelerating the tech wave in the 80s. Go into their stores today, what innovation is there? Cell phones? Nope. Radio Controlled vehicles? Nope. Multi media cables? Nope. Routers? Nope. In the day, RS made their hay when techies or near techies craved access to hardware. Today, the Maker movement reminds me of that earlier time. The Maker movement is out there and mostly performed online. Arduino is another tech fitting the RS mold of yester-year. RS has not built communities to leverage sales into the hardware. They could sponsor Meetups for Maker group. Help the average techie with finding the hardware, connect them with the software groups and press a differentiation strategy. 

[Chen Cao]

I read through all blog posts on Tom's, and it looks like there hasn't had any article covering turnaround domain. I hereby just list a few thoughts of mine, taken as humble contribution to the topic.

 

Turnaround is a big business and there is no hard-and-fast definition of what constitutes a turnaround situation. According to Stuart Slatter, the author of Corporate Turnoarund, the terms refers to those firms or operating units whose financial performance indicates that the firm will fail in the foreseeable future unless short-term corrective action is taken. A broad definition of what constitutes a turnaround situation recognizes that firms often exhibit symptoms of failure long before any crisis begins. If no corrective management action is taken in a turnaround situation to adapt to the changing product-market environment, a crisis situation will eventually ensue, as it it is in RadioShack's case, and the corporation becomes insolvent, since external events can only postpone insolvency, not avert it. The company could ultimately end up in liquidation under Chapter 11.

 

Four phrases to save RadioShack:

1. Take Control

    ■ Crisis stabilization

       · cash management

       · first-step cost reduction

       · short-term financing

    ■ Leadership

       · change of CEO (e.g., depending on whether there are lots of internal bureaucratic bottlenecks, etc)

       · change of other senior management

2. Rebuild Stakeholder Support

    ■ Stakeholder management

       · communications

3. Resolve Future Funding

    ■ Financial restructuring

       · refinancing

       · asset reduction 

4. Fix the Business

    ■ Strategic focus

       · redefine core businesses

       · divestment and asset reduction

       · product-market refocusing

       · downsizing

       · outsourcing

       · investment

    ■ Organizational change

       · structure changes

       · building commitment and capabilities

       · new terms and conditions of employment

    ■ Critical process improvements

       · improved sales per store and marketing

       · quality and services improvements

       · improved responsiveness

       · improved information and control system (e.g., referring to Zara's savvy systems)

Back to the case in point, it ironically reminds me what happened to a still fleshing case - HMV saved by Helico out of administration. Though many successes and shortcomings can be applied from HMV's situation, we'd still like to look at the causes of corporate decline in particular to prioritize efforts on the framework chains we mentioned earlier. This includes looking after both internal and external factors.

■ Internal Factors

   · poor management

   · inadequate financial control

   · poor working capital management

   · high costs

   · lack of management efforts

   · over-trading

   · big projects

   · acquisitions

   · financial policy

   · organisational inertia and confusion

■ External Factors

   · changes in market demand

   · competition

   · adverse movements in commodity prices

 

As far as from the available evidences and facts we collected from the case, we agree that it is competition that matters more, based on which I could further derive our plan to shift the strategic focus and the following marketing plan for the growth phrase.