The first Holtzclaw Supermarkets store was started in 1977 by Sam Holtzclaw and his brother Bob. Both were veterans who wanted to run their own business, so they used their savings to start the small grocery store in Charlotte, North Carolina. The store was immediately successful. The location was good, and Sam Holtzclaw had a winning personality. Store employees adopted Sam's informal style and "serve the customer" attitude. Holtzclaw's increasing circle of customers enjoyed an abundance of good meats and produce. By 2001, Holtzclaw had over 200 stores. A standard physical layout was used for new stores. Company headquarters moved from Charlotte to Atlanta in 1995. The organization chart for Holtzclaw Supermarkets is shown in Exhibit 3.20. The central offices in Atlanta handled human resources, merchandising, financial, pur-chasing, real estate, and legal affairs for the entire chain. For management of individual stores, the organization was divided by regions. The southern, southeastern, and southwestern regions each had about 70 stores. Each region was divided into five districts of 10 to 15 stores each. A district director was responsible for supervision and coordination of activities for the 10 to 15 district stores. Each district was divided into four lines of authority based on functional specialty. Three of these lines reached into the stores. The produce department manager within each store reported directly to the produce specialist for the division, and the same was true for the meat department manager, who reported directly to the district meat specialist. The meat and produce managers were responsible for all activities associated with the acquisition and sale of perishable products. The store manager's responsibility included the grocery line, front-end departments, and store operations. The store manager was responsible for appearance of personnel, cleanliness, adequate checkout service, and price accuracy. A grocery manager reported to the store manager, maintained inventories, and restocked shelves for grocery items. The district merchandising office was responsible for paigns, advertising circulars, district advertising, and attracting customers into the stores. The grocery merchandisers were expected to coordinate their activities with each store in the district.

Business for the Holtzclaw chain has dropped off in all regions in recent yearsmostly because of increased competition from large discount retailers such as Walmart, Target, and Costco. When these large discounters entered the grocery business, they brought a level of competition unlike any the Holtzclaw brothers had seen before. Holtz-claw had managed to hold its own against larger supermar-ket chains, but now even the big chains were threatened by Walmart, which became number one in grocery sales in 2001. Holtzclaw managers knew they couldn't compete on price, but they were considering ways they could use advanced information technology to improve service and customer satisfaction and distinguish the store from the large discounters However, the most pressing problem was how to improve business with the resources and stores they now had. A consulting team from a major university was hired to investigate store structure and operations. The consultants visited several stores in each region, talking to about 50 managers and employees. The consultants wrote a report that pinpointed four problem areas to be addressed by store executives.1. The chain was slow to adapt to change. Store layout and structure were the same as had been designed 15 years ago. Each store did things the same way, even though some stores were in low-income areas and other stores in suburban areas. A new computerized supply chain management system for ordering and stocking had been developed, but after two years it was only partially implemented in the stores. Other proposed information technology (IT) initiatives were still "on the back burner," not yet even in the development stage.

2. Roles of the district store supervisor and the store manager were causing dissatisfaction. Store managers wanted more decentralization and freedom to tailor store inventory, and to carry specialty products, to fit their specific market clientele as a way to boost sales. The store managers also wanted to learn general management skills for potential promotion into district or regional management positions. However, their jobs restricted them to narrow operational activities with little authority and they learned little about merchandising, meat, and produce. Moreover, district store supervisors used store visits to inspect for cleanliness and adherence to operating standards rather than to train the store manager and help coordinate operations with perishable departments. Close supervision on the operational details had become the focus of operations management rather than development, training, and coordination. 3. Cooperation within stores was low and morale was poor. The informal, friendly atmosphere originally created by Sam Holtzclaw was gone. One example of this problem occurred when the grocery merchandiser and store manager in a Louisiana store decided to promote Coke and Diet Coke as a loss leader. Thousands of cartons of Coke were brought in for the sale, but the stockroom was not prepared and did not have room. The store manager wanted to use floor area in the meat and produce sections to display Coke cartons, but those managers refused. The produce department manager said that Diet Coke did not help his sales and it was okay with him if there was no promotion at all. 4. Long-term growth and development of the store chain would probably require re-evaluation of long-term strategy. The percent of market share going to traditional grocery stores was declining nationwide due to competition from large superstores and discount retailers. In the near future, Holtzclaw might need to introduce nonfood items into the stores for one-stop shopping, add specialty or gourmet sections within stores, and investigate how new technology could help distinguish the company, such as through targeted marketing or online promotions via Facebook or Google, providing superior service and convenience, and offering their customers the best product assortment and availability. To solve the first three problems, the consultants recommended reorganizing the district and the store structure as illustrated in Exhibit 3.21. Under this reorganization, the meat, grocery, and produce department managers would all report to the store manager. The store manager would have complete store control and would be responsible for coordination of all store activities. The district supervisor's role would be changed from super-vision to training and development. The district supervisor would head a team that included himself and several meat, produce, and merchandise specialists who would visit area stores as a team to provide advice and help for the store managers and other employees. The team would act in a liaison capacity between district specialists and the stores

The consultants were enthusiastic about the proposed

structure. With the removal of one level of district operational supervision, store managers would have more freedom and responsibility. The district liaison team would establish a cooperative team approach to management that could be adopted within stores. Focusing store responsibility on a single manager would encourage coordination within stores and adaptation to local conditions. It would also provide a focus of responsibility for store wide administrative changes. The consultants also believed that the proposed structure could be expanded to accommodate non grocery lines and gourmet units if these were included in Holtzclaw's future plans. Within each store, a new department manager could be added for pharmacy, gourmet/specialty items, an on-site bakery, or other major departments. The district team could be expanded to include specialists in these lines, as well as an information technology coordinator to act as liaison for stores in the district.

1) We are going to conduct an Internal and External Analysis (an internal and external analysis is a simplified version of a SWOT analysis). Read the case carefully. In the space below, summarize factors EXTERNAL to the grocery store (factors from the environment) that are contributing to the grocery store's problems.

2) summarize factorsINTERNALto the grocery store (factors from within the company) that are contributing to the grocery store's problems.