Winston and Holmes Case Analysis
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Winston and Holmes
Bob Landau Decision(s) and Criteria
Bob Landau is the president of Winston & Holmes (W&H), which is a company that sells luxury men\'s accessories and fine tobacco. In this article Bob is facing a crucial decision that would affect the financial stability of his company. Bob has to make the decision if he should expand the main location of his company in Yorkville to increase it to 2,500 square feet or keep it the same size. (pg.3) If Bob decide to expand his location he would have to make another decision on how to finance this expansion as well.
For Bob to make these decision he would need to consider if the closing the store during the months October to the end of November is a profitable move since November to January contributes to 30% of annual sales .( pg.5) Also Bob will need to consider if the expansion will generate a higher profit to offset the new expense incurred from the expansion. This expansion would lead to higher overhead and if it doesn\'t increase the current number of sales it would result in negative income. Also the expansion has to be profitable enough for Bob to determine future management salary increase and bonus.
C urrent state of the industry and Winston and Holmes\'s competitors
Winston and Holmes (W&H) is mainly a niche industry of tobacco products, with some diversification of non-tobacco items, such as men\'s accessories (p.57). Since W&H have many product lines and more products being added, W&H competitors are companies with similar products. There are some competitors have attempted to copy W&H business, but failed to succeed (p.58). The reason is that W&H have an effective strategic plan that is continuously being monitored and updating their strategic plan to continue being a strong company and be ahead of the rest of the competitors (p.58). Also W&H have created uniqueness and excellent company image for their service and products, which is difficult for other companies to copy (p.58).
142875348615000-62865038036500NPV Calculation (Please See Appendix 1 for Data and Formulas used to find NPV) - For more details please refer to the excel spreadsheet (posted along with this document).
Pros and Cons of the Expansion
There are some benefits with the expansion of Winston and Homes store to the Yorkville location. The first benefit for the business because of the expansion is that it will increase their sales figure in the future. According to the managers of the business their sales will increase by 45 to 60 percent in the future because of the expansion because of the high demand (PG 60). Another benefit for W&H from this expansion is that it will increase their revenue and profit. This is because of their expanding in the highest profitable area for their business. According to the managers of W&H, Yorkville location accounted for 58% of company overall sales (p.59). Achieving the maximum revenue and profit is very important for W&H because it will determine the survival in their business. This expansion will also increase the market share of W&H in the future. It will affect the market share in a positive away because now they can offer different products for different customer segments. At the same time they can use their excellent customer service to attract more target customers. This expansion will give W&H more space to store more inventory. This means the business can stock up more inventory and meet the customer demands on time. At the same the business can introduce more products since they have more floor space. Overall this expansion will benefit W&H in different ways such as sales growth, increase in revenue and profit, increase the market share and more space to store inventory.
On the other hand there will be an increase in the total cost for the expansion, which makes W&H think twice about the expansion. First there will be more cost towards labor because they need to hire two full time and one part time staff member. This addition of labors will increase the total cost by $35,000 (p.60). Second there will be an increase in total advertising cost because the business has to put more ads about the expansion. This will make the advertising cost for the
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Marketing, Distribution, Operations research, Manufacturing, Supply chain management, Inventory
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