Lands’ End Case Analysis

LANDS’ END CASE ANALYSIS

Alhassan Alzahrani

[pic 1][pic 2]Introduction to Management Information Systems

SECTION 1: COMPANY BACKGROUND

Lands’ End is known for their nice and well-made clothes for both men and women. They started back in 1963 in Illinois where the founders used to sell sailing equipment. They moved to Wisconsin where they started selling clothes, rain suits and bags. The company is now very popular with outlet stores outside US such as United Kingdom and Japan. In 1999, the company realized the importance of e-commerce because 40% of their operating costs are being consumed in creating, printing and mailing catalogs to their customers and prospects. They also found out in their study that many of their customers like to customize the items that they purchase from the company. Ideas were generated and screened. The company also put emphasis on their Supply Chain Management which allowed them to differentiate themselves from their competitors.

Lands’ End obtained the service of Archetype Solutions, Inc. (ASI). The latter created the program which Lands’ End used in its online ordering process and pattern-cutting process. The program was flawless technology software which ASI and Lands’ End had tested to avoid frustrations and complaints from customers. In order to save money, Lands’ End licensed this program from ASI. The former believed that it would have been a better move to licensed the program from another company rather than develop and use their own software in-house. Also, in order to have some control, Land End’s decided to invest in ASI. This investment also allowed the integration of the website form of Lands’ End where customers place their order and the software of ASI where the orders are processes.

The customers played a big role in the success of Lands’ End. Not only did they purchase items from Lands’ End, they also provide feedback to the company which greatly helped the company improve their products and services. Lands’ End made sure that they have a very attractive and user-friendly website to assist their customers in their orders. The features were easy to use and understand and there was a quick response from the website, hence ordering would not take long. The website was organized to make sure that the customer would be able to create the type of clothe that he/she wanted.

Customers would go to the company’s website where they input their measurements such as weight, height, description of their hips, thigh, etc. A program analyzed these information, calculated the ideal dimensions for the customer’s order, and would send the information to the manufacturer. There were computerized cutting machines that would create the fabric pattern and sew the order. The final product would be packed and shipped to the customer.

SECTION 2: KEY ISSUES/PROBLEMS

This paper wants to determine whether the information technology of the Lands’ End provided them with competitive advantage, how the technology gave the company competitive advantage, whether this competitive advantage is sustainable and if the company made the right decision in selling to Sears when they did.

In order to be valuable, a company’s technology should not only be beneficial to the customers but especially to the company. The goal of Lands’ End technology is to provide the customers a chance to customize their order and satisfy them. But this is not where the goals end. It is also important for the technology to increase the sales of the company and yield to higher operating income. In order to increase sales, the customers need to find value in customized products. They need to see the point why they are paying more for customized products and they have to be satisfied for the premiums that they will pay. Lands’ End also needs to assess the impact of their technology to their costs. In order to be considered a good asset to the company, a technology’s benefits should outweigh its cost. Factors like the increase in production cost and the effect on carrying cost and inventory cost should be considered.

For a competitive advantage to be sustainable, it is important to determine whether the company’s technology is easily accessible to competitors. The source of this technology is assessed to determine the possibility of duplication in case a competitor purchases similar software to the same source. If Lands’ End’s competitors decide to hire the services of ASI and avail their software, will Lands’ End sustain its competitive advantage? In case of duplication, can Lands’ End keep its customers?

Another problem is the possibility that ASI might use the information gathered from Lands’ End customers which the latter input in the software created by ASI for Lands’ End. The security and control of data is an important factor to the company’s competitive advantage. Without this security and control, competitors can have access to the company’s technology and use it to their own advantage.

Despite the success that Lands’ End was experiencing, they decided to sell to Sears at $62 per share which was $11 higher than the company’s closing price the day before. The decision was made to help each other face challenges in a very competitive industry. Lands’ End wanted to reach the shelves in Sears’s brick and mortar stores and be featured in Sear’s websites for added marketing.

SECTION 3: DISCUSSIONS OF ISSUES AND RECOMMENDATIONS

Lands’ End had made initiative in the custom-made clothing. This initiative created a competitive advantage to the company. Evidence of the initiative’s success to provide the company with competitive advantage is the fact that customers were willing to pay premium just to get the customized items. The company was able to increase their total revenue because of custom-made clothing not only because they were able to increase their sales but also because they were able to charge premium in customized items with insignificant increase in cost (Piccoli, Bass, Ives, 2003). The company’s technology also minimized the amount of unwanted merchandise in their warehouse, they were also able to reduce the company’s carrying cost, and increased their revenue per item (Tedeschi, 2002).

The technology gained the company with competitive advantage in the form of well-established brand, customer loyalty, partners in many countries and minimal conflicts with channel. The policy of free return for unsatisfied customers increased the company’s chance to have customers who are confident with their shopping which resulted to customer loyalty. Another advantage of this technology is that there was a high switching cost for customers. This was made possible because the company offered their customized items at lower price than what the customers were willing to pay. Outsourcing the manufacturing of their products to developing nations allowed the company to sell at competitive prices. This attracted new customers and retained their loyal customers. Lands’ End enjoyed a high switching cost because customers need to repeat the same steps in order to buy customized apparel online. This dissuaded their customers to switch to another brand, encouraged them to try again when they are dissatisfied and provide feedback (Piccoli, Bass, Ives, 2003).