• Executivesummary-briefsummaryofthecase
• Issues-Identifyfiveissues/symptoms
• Problem statement- short statement summarizing the primaryproblem(s)ofthecase;tobeaseriesofwell-constructedsentences(nomorethantwoparagraphs)
• Decisioncriteria-Clearlydefinethecriteriathatprovidesthebasisforevaluation

• AnalysisofAlternatives-threealternatives;strenghtsandweaknesses
• Recommendation-describethepreferredoptionandprovideajustificationforthesolutionyouchoose
• Implementation/actionplan-brieflydiscusswhatshort-,medium-andlong-termactionstepsyouwouldtake(oneactionstepforeach)

TEMOCStoresInc.beganlifeasa

itsfounder,EthanGilchrist,anengineer,asabusinesscustomers'bulkywireless radiosinMelbourne,Australia.

byfor

With an eye for spotting upcoming trends in electronics, in a very short time,Gilchrist outgrew thisstart-up position. He shifted the business into radio rentals, then capitalized on early televisions andopened the first store in the 1950s. TEMOC expanded during the 1960s and 1970s and became apubliclylistedcompanyin1972.

The

eout-of-towndiscountwarehouseinAustralia.

Intheearly1950s,demandforwirelessradiosgrewfast,andfounderEthanGilchristchangedtheopeninghisfirstretailstore.Morestoresfollowedquickly.

FollowingtheConsumerPricesAct(1964),TEMOCexpandedheartland,becominganationaldiscountretailer.TEMOC

state

pure-playelectricalretailerscouldcompete.

Expansion

In1968,thefirstTEMOC

retailprices.Few

makingTEMOCthefirstcompany

to launch a warehouse style store for selling electricals, such as televisions and radios.Considered a trailblazer,TEMOCbeat a path subsequently followed byDo-it-Yourself(DIY) stores and supermarkets.TEMOChas developed from selling sofa-sized radiogramsto iPods, digital cameras and laptops under the grammatically dubious slogan "we liveelectricals".

TEMOCwentpublicinJuly1972andexpandeditsrangebypurchasingEvoenergyGas,adiscountretailerofgas appliances.Bytheendof1976,thegrouphadgrownto50outlets.

Duringthe1970sand1980sthecompanyhadcompetitionfromseveralgrowingcompaniesalsoproviding electricalgoods.OnesuchcompanywasBi-RitewhichTEMOCboughtoutin1989.

Under Ethan Gilchrist's leadership and vision, and for much of the '80s and the 90s,TEMOCwas booming, with 460 stores and 10,000 employees and mind-blowing profits.Ethanfeltconfident that this success would continue because of his vision and leadership, and resultingstrategy.

GilchristdevelopedaprogramwhereTEMOCgaveawayitsownbrandofbatteriesinexchange for getting people hooked on their brand of batteries yieldingTEMOCa niceannuity in the form of 80% of the market for batteries for small electrical personal andhousehold appliances.

InsideTEMOC, this was known as the "nickel" strategy named after one of the chemicals in itsbatteries. It was a fantastic success story. This business strategy was similar to Gillette's orthat of printer manufacturers: give away razors or printers to make money on blades and inkcartridges.TEMOC gave away batteries to make money on service and replacement batteries.TEMOC's marketed its batteries under the private brand"Spartan"and due to the lowerpricing and relatively good quality, many consumers purchased Spartanbatteries for otherneeds. As a result,TEMOCenjoyed a 39% share of the battery market; slightly behind thebatterygiants DuracellInc.andEvereadyCompany.

Wal-MartEnterstheScene

In 1994, Wal-Mart entered the Australian market with the takeover of Appliance Giant.Theworld's(then)largestretailereffectivelywipedclosetoUS$1,500moffthevalueofAustralian chain stores with its announcement that it would discount some goods byaround 60%. To survive, retailers had to - at least - match Wal-Mart's like-for-likediscounts.

Theconsumerapplianceretailbusinesswasrelativelysecureandprofitable,andTEMOC's market dominance was so secure throughout the 1980s, theelectrical retailchainbarelybattedaneyelashwhen Wal-MartenteredtheAustralianmarket.

In 2001, theconsumer electronics and white goods sales peaked worldwide. Butin a weeklysenior executive meeting, Noah Harrison,TEMOC's Executive Vice-President of Marketingtoldthe other executives in the meeting that, "although sales are at an all-time high, a peakalways conceals a treacherous valley." He went on to say, "Revenue growth is different thanstrategically positioning ourselves for the future. We need to focus on the long-term game tocontinuetoenjoy the growthwehave hadforthese somanyyears."

ManyoftheotherseniorexecutivesviewedWal-Martasaformidablecompetitorand

voiced their concerns about how critical they thought it was to focus on the long-termgameas well.

Harrison was pleased that his other colleagues had brought this up. He knows that Wal-Mart's behavior elsewhere could help them understand how the company will likelyoperate in Australia. Harrison pointed out that Walmart has stated publicly that it iscommittedtoitsimplementationofitscost-cuttingmodelineverymarketwhereitoperates.

Hemadethefollowingpassionatestatement:

"Wal-Martis particularly relevant because compared to other large international retailers; ithas the largest footprint in Australia and is therefore poised to expand rapidly.Wal-Martexecutives emphasize the need to build scale in existing markets in order to achieve profitablereturns, as soon as the company enters a new market, rapid growth is a priority. I believewithoutadequatesafeguards putinplace,TEMOC may notsurvive."

Since TEMOCis a public company and a highly visible one, Ethan Gilchrist commentscameunderfirebyanalysts,pundits,andthemedia.

ThestakesforTEMOC'sfourth-quarterearningsreportwerehigh.Forthepastyear,analysts and investors have demanded that the consumer appliance company clarify itsvisionandstrategy andexplainwhatitis doingto combattheentryofWal-MartintotheAustralian market.Callsforachangeinleadershipintensified.

A well-respected industry analyst commented in her recent report about the retail consumerappliance market, "The problem, it seems, is that as the world has changed,TEMOChasn't".Ethan Gilchrist is an engineer and was known aroundTEMOCas a "nice guy," a consensusbuilder, simplynotwhatTEMOCneeds right now.

IstheMarketChanging?

Over the next two years, first, the market began shrinking very slowly, and then picked upspeed. During the weekly senior executive meetings chaired byGilchrist, Gilchrist used thisnew market data to emphasize his rational to stay focused on the current strategy. He said,"our reputation and long-standing position in the country will bolster us from any stormscausedbyWal-Mart."

Thesignsofachangingmarketplacewerebothexternalandinternal.

Externally,lifebecameharderyetforTEMOCwhenonlinestoresstartedtoseebigsales.

TEMOC's strategy focused ondiscount warehouse superstores and the traditional brick andmortar approach to purchasingand selling products. With over 460 superstores now, TEMOCwas undergoing a massive refitting of many of its stores, adding mezzanine levels to many ofthem,whichwasverycostly.

OnlineShoppingTakesOff

TEMOCmissedtheinitialsignsofshoppersmovingtotheinternetforthebestprices.Customerbehaviorwaschanging,andcustomersarenotbeinginfluencedand controlledbythebrandandfirmasmuchnow,whentheymakeabuyingdecision.Peoplewereincreasingly starting to use and becoming more comfortable with the online platforms togather information and purchase products and services. As a result,TEMOCwas losing salesto ecommerce giants such as Appliances Online(#1 e-commerce site in Australia), Amazon,B2WDigitalandAlibaba.com.

In response, although slow to adopt to e-commerce,TEMOCestablished its own e-commercebusiness; store.TEMOC.com.au.With its background and competence with brick-and-mortarstores,TEMOCcommittedacardinalsininthedevelopmentofe-commerceplatforms:Itappliedin-store segmentation to its e-commerce scenario. Although store.TEMOC.com.au.was packedwith information that consumers wanted, many customers complained that the e-commercesitewasdifficulttonavigate.

Oneonlineshoppercommented:

"They don't have a clue about creating an online experience for customers. I don'thave all day to find what I'm looking for.It's very frustrating.They should giveAppliancesOnlineacallandgetsomehelp!"

AntonioIaconis,Sr.ExecutiveVice-President,e-commercemanagementservicesforSana,agloballeaderspecializingine-commercemanagementnotedina ForbesMagazine articlethat:

"Corporateleadershipmustfullygraspthatinthedigitalera,retailersmustprovidecompellingreasonstobuyin-storeandconvertthatintentintosales."

Although purchases on the internet were growing, the "bricks and mortar" retailers (such asTEMOC) could survive. To survive, however, they need to develop an integrated multi-channelapproach and view their operations from the position of the consumer (looking from theoutsidein)anddevelopanengagingenvironmentthatenhancesbrandloyalty. (OMNI CHANNEL APPROACH)

TEMOCexecutivesappearedtohavelittleunderstandingofintegratedmulti-channelretailing,operating instead from disconnected silos - marketing in one, customer services in another,supplychainandlogisticsinyetanotherandoperationsandtechnologyoutonitsown.

TechnologyexpertJonahDundeetoldBusinessFirstMagazine:"TEMOCisfailingtounderstandtheimportanceofmultichannelretailandfailingtoinvestine-commerce."

StormCloudsontheHorizon

CustomershadbecomedissatisfiedwithTEMOC'sin-storeexperienceandlackofcustomerservice.Onecustomerwas interviewedonalocalradioshowduringasegmentabout Wal-Mart and its online shopping store. One of the listeners called-in, and theradioshowhostaskedherwhatshethoughtofTEMOC.Sheanswered:

"Unfortunately, with stores like this and the overheads they have - renting premises andpaying staff - they can't compete. A lot of people prefer the internet shopping, especiallytheyoungeragegroup.Everyone'snow just consciousof moneyandit'sallaboutprice."

Also, from the outside was peer pressure. Several Australian retailers such asWesfarmers,Coles Group and Ampol Limitedwere already on a track to develop new strategies includinge-commerce to compete with Wal-Mart and its low pricing, cost-cutting model and onlineshoppingstore.

Another,slightlybizarre,problememerged.Withsimilar-soundingnamesandbothcompanies' logos blue on a white background, consumers confusedTEMOCwith TAMOC(ownedbyrivalWesfarmers).DespiteaUS$20mrebrandingcampaignin2005,TEMOCcontinuedtolosemarketshare.

Theinternaltriggerswereclear.

There are, in the end, two generic marketing strategies: cost leadership and differentiation.Operating in a fiercely competitive market characterized by very low margins,TEMOCwasnever going to be able to sustain a cost-leadershipposition. Yet it continued to focus (almostsolely)onprice.

GlobalEconomicCrash

Theglobaleconomiccrashofthe2007wasthefinalstraw.Theturbulenceemergingfromthefinancial sector passed over into the real economy, and back from the real economy to thefinancialsector.Economicactivitywasparalyzedinpracticallytheentireworldwithunprecedentedsynchronicity.

TEMOCandotherelectricalretailcompanieswerefacingchallengingtimes,withunprecedented decreases in sales and profits, but with strategic cost-cutting, were able tostay relevant. However, those cost-cutting measures included cuts to service that customersexpected,andasaresult,servicelevelsdropped.Whentheservicelevelsdropped,consumers stayed away,and worse, became street-savvy and avoided dogged selling ofextendedandexpensivewarranties.

TEMOCwasseverelydamaged,moresothanitscompetitorsbecauseofitsbrick-and-mortarstrategyandtheaddedpressuretoreducecostsbyre-structuringstoresand

laying offstaff.

TEMOC's profit before tax tumbled from US$150m to US$56m. In successive years it postedlosses of US$8m, US$3m and finally US$39m in 2011. In 2012, it is reported to have lost asimilaramount.Turnoverpeakedin2008atafractionoverUS$2bnanddeclinedsteadilytoa reportedUS$1.2bnin2012.

ScottMorrison,afullprofessorandresearcherattheEconomicDepartmentoftheAustralianNational University said:

"Increasing levels of unemployment, wage freezes and stagnation in the propertymarketcombinedtokeepconsumer spendingondiscretionarypurchasesrockbottom. It was simply impossible for struggling TEMOC to improve its appeal tocustomerswhilstclosingstoresandaxingstaff."

BestBuyPutsthePressure On

InApril2010,BestBuylaunchedanonlineshopinAustraliatotakethefighttoitscompetitors Amazon Australia, Bunnings and Woolworth Corporation. The online move byBestBuywasintendedtoshakeupthe lucrativeonlineconsumerelectronicsmarket.

However,oneyearlater,BestBuy'seffortstowinoverAustralianconsumerswereanexpensive failure, costing some US$200m to set up just 11 big box stores. According to RogerTaylor, CEO, "We were a bit late to launch them and, in that time,clearly consumer confidencehas fallen significantly, the product cycle is quite tough to be trying to launch a big boxmodel."Although Best Buyfailed,itstillplaced seriouspressureonTEMOC.

SmartphonesEatingintoTEMOC'sSales

Witheverypassingday,moreandmorecustomersarebuyingsmartphoneslikeneverbefore. This has been fueled bythe increasing number of cheap smartphones that are beingintroducedinthemarketbyallmajorsmartphonemakers.Smartphoneownersaredownloading thousands of applications to watch movies, television shows, listen to radiobroadcasts, sports broadcasts, news events and so much more. As a result, television andcomputer and related consumer product sales dropped dramatically. These consumer goodssalesareTEMOC'sbreadandbutter. TEMOCcontinuedtomakealoss.

Meanwhile,TEMOC's stock has plummeted by roughly 50 percent since its post-IPO peakabout a year ago.WhileTEMOC's first quarterrevenue came in at $436 million, an increase of74%overlastyear,theamountfellbelowanalystexpectationsandthecompany'sguidance.Thecompanylost$162millionduringthequarter.

CallsforNewLeadership

Callsforachangeinleadershipwerebeingdemanded.TheBoardofDirectorsofthe

companysaidthecompanyneedsaCEOwith"adefiningvision"forthecompany.Finally,EthanGilchristwasforcedtostepdown.

In April 2013, Nicole Gibson, was announced as the new CEO and President of TEMOC StoresInc. On her first day, Gibson was sitting at her desk, and looking out the window and said toherself, "wheredoIstart?