Case Study - Rugeley Tableware Rugeley Tableware plc (Rugeley) is a niche manufacturer of quality ceramic tableware, based in the UK. Company history Rugeley was founded in 1779 by William Rugeley, a local businessman and entrepreneur. It specialises in the design and manufacture of exclusive ceramic tableware (sets of plates, bowls etc), which is sold direct to the hotel and restaurant industry and also to individual consumers. Rugeley's products are stocked by major retailers and can be purchased online via its website. From the beginning, Rugeley created a reputation for manufacturing tableware of the highest quality which it originally sold to wealthy individuals. For more than two centuries, Rugeley tableware was used at dinner tables in sophisticated private houses and hotels and the brand name became associated with an elegant lifestyle. As a result of its innovative patterns and designs, Rugeley was recognised as a prestigious brand throughout Europe and the US and was sought after because of its quality and English heritage. Rugeley enjoyed many years of profitability and was converted into a public limited company in 1989 at the peak of its success, when it became listed on the London Stock Exchange. 40% of the equity share capital remains in the hands of the Rugeley family, 45% is held by institutional investors and the remainder is owned by individual investors. Declining fortunes Several years after it was listed, Rugeley's results began to deteriorate. In 2000, Rugeley decided to outsource some of its manufacturing operations to Asia, in an attempt to reduce costs and to address competition from the following sources: Cheaper imports, which were almost entirely being produced in low labour cost countries. Large global retailers that had begun to introduce mass produced, own-label product ranges, designed to resemble high quality tableware. More diversified competitors in the tableware market that also offered glassware and table linen. Major international companies that were able to benefit from economies of scale by manufacturing a wider range of ceramics for use in the home (including bathroom sanitary ware, kitchen sinks, tiles and tableware). These sources of competition have become more powerful since 2000 and sales and profits have continued to decline, despite the outsourcing decision. The most recent results (for the year ended 30 June 2012) show a fall in revenue of 15%, a fall in profit of 25% and negative operational cash flow. The business urgently needs to make changes if it is to avoid becoming loss making. For nearly a year, institutional shareholders have been openly critical of the chairman and chief executive, Belinda Rugeley (a direct descendant of William). Belinda runs the company in an authoritarian manner. She has refused to appoint non-executive directors, on the basis that they would not be as committed to the company as its executive directors, whose remuneration is based on the financial performance of the business. Some institutional investors have suggested the company should consider seeking a buyer from among the major international manufacturers. Future options At a recent board meeting to discuss Rugeley's future strategic options, the following views were expressed: Marketing director (Malcolm Enderby): For years we have set worldwide standards in tableware design and manufacturing, but people's attitudes to dining have changed. As formal dining has given way to more relaxed eating habits, so our traditional products have become unfashionable. As a result, our sales to individual customers are now concentrated on a very narrow market, consisting largely of customers over 40 years of age. What's more the recession is unlikely to help matters as it will inevitably depress sales of what is seen as a luxury item. "I think we have taken too narrow a view of Asia as the solution to our manufacturing. I believe we should also focus on Asia as a new sales market. There is an opportunity here to build a brand image of exclusive tableware, based on our English style and heritage.