The Success of the Business Model
Author: admin \ September 9, 2018 \ Business Papers \ 0 Comments
As previously stated, Mrs. Fields is producing all kinds of confectioneries but their core competency is freshly baked tasty cookies. Seems that Mrs. Fields secret cookie recipe is pretty successful since it meets customers' needs and preferences. Beside the cookies, they are also selling muffins, brownies, ice cream, chocolate, frozen cookies dough, candies etc. They also designed jars, tins and baskets in order to make their cookies easier for preserving and look like a real gifts. Mrs. Fields cookies are available at 390 locations in the United States and about 80 locations internationally.
Even though Debbie wanted complete control and responsibility at the beginning, she changed the approach and turned her business into franchise of a pure business format in early 1990. Furthermore, Mrs. Fields is dealing with direct orders of products with a price higher than $25, but only within the US. They are successfully placing the orders thanks to their six receiving and five shipping docs. Mrs. Fields business model succeeded because they found a way to satisfy customers needs and wants by providing fresh and high quality cookies on-premises.
Providing free samples as promotion strategy was also winning method to approach potential customers and attract them into the store. Once they had an opportunity to taste Mrs. Fields incredible cookies, customers were convinced that she has unique recipe and started buying the cookies on regular basis. The high demand for her cookies was a reason to start expanding throughout the USA, later even internationally. Nevertheless, Debbie Fields didn't stop at the moment when she found the perfect-cookie-recipe, but she devoted on creating and introducing new types of cookies.
By using various ingredients she expanded the range of cookies and attracted curious customers to try the new flavors. To improve the control over the expanding business they introduced a computer system to streamline the business operations, which took off part of the pressure that comes with increasing responsibilities. However, the company was still increasing so was the pressure. As previously mentioned Mrs. Fields became too busy and couldn't control so many stores and decided it is time for changes. That was turning point for the business because it was turned into franchise.
Another change on the initial business model happened in 1986 when the company went public. The first public offering was on London Unlisted Securities Market and British investors purchased 16% out of 30 million offered on the market. There were some changes in the executive team in 1989, but Randy and Debbie still had the major role. What went wrong in the company? First problem with Mrs. Fields arouse when in early 80's competition began to be more and more powerful. Their major competitor Famous Amos began to franchise over a hundred stores, while Mrs. Fields refused for years to do so.
The big mistake is that she was too emotional about her business and didn't want "anyone else's hands to touch it". This is definitely not way to go, if their competitors were eating up the market share by franchising, they should have put aside their compassion for the cookies and change their strategy. Another problem was their Initial Public Offering in the London Stock Market in 1986, when British investors were not really confident in buying their stocks. They could not be sure what was Mrs. Fields about, which of course caused the stock price to go down.
It is obvious here that after expansion and changing strategy, company failed to provide their stakeholders with the clear vision, mission and objectives. Since investors were not comfortable with investing in their stock, debt was a primary source of funding to support the growth. High rate growth was supported by large debt, which has put the company on high level of risk; such as bankruptcy, interest rate and liquidity problems. In the cases where company is under the growth, it is much better and less risky to sustain it by shareholder's raising equity than by borrowing from the bank.
Feasibility Analysis We have to say that Mrs. Fields approach to customer satisfaction was really astonishing. Besides from making great cookies, she focused on "love and caring atmosphere" in her stores in order for her customers to feel more than welcome and to differentiate by the experience of tasting cookies, not only the taste itself. However, she failed to pursue some market opportunities. The one mentioned above, regarding franchising, was really huge mistake, not deadly however. Eventually, she had to realize market conditions and adapt to them in order to stay in the business.
Furthermore, company was expanding at really high rate, and all that growth was mainly supported by debt. They couldn't raise their equity after they've been listed in the London Stock Exchange because of the bad reaction of British investors. Then, in 1993 they were delisted from LSE, and majority of their stocks was bought mainly by Prudential group who was to write off majority of their debt which was close to 94 million. Highly leveraged company trying to sustain the growth was in need for refinancing. Mrs.
Fields mistake was that she was unable to correctly answer the question how is the company going to support the growth because the debt was wrong answer. Debt is interest bearing first of all, which highly affects net income and more important, owner's investment in the case of such an expansion was better solution. In conducting feasibility analysis, it is crucial to address the question if some change in normal economic cycle occurs, how is that affecting the business in question and what a business can do in order to lessen that impact. Mrs.
Fields failed to address this problem and continued to sell its cookies for one dollar per cookie, which given the economic recession in early 90's was very expensive. SWOT Analysis Strengths First, we should mention that the most important issue that adds to the success of Mrs. Fields is that she specialized in a job that she knew how to do it, based on a skill that she had – she knew how to make good cookies. Her idea of giving samples was a very innovative one, but it was the quickest way to attract customers and have immediate observation whether they like your product or not.
Although free samples remained the cornerstone of her business, more and more companies are adopting actually this method of attracting customers and ensuring them about the quality of your products. Mrs. Fields is customer oriented and she wants to maintain the same quality as the one she was offering from the first moment. This is shown when she refused to replace higher cost raisin with lower cost ones but with lower quality. Moreover, she constantly puts attention on quality, as she states that her cookies should be always fresh or at most two hours out of the oven.
The training sessions seem to be very useful as Mrs. Fields is not only teaching them her expertise, but also allowing them for their own development, as each manager was so well-prepared that they could recognize which cookies they have baked. Mrs. Fields tried to constantly develop her business apart from the opening of new stores; she was developing a wide variety of cookies to serve all tastes. The software developed by Mr. Fields, that helped them reduce administrative staff represented a very good competitive advantage against the other companies who were not using it.
Computerization helped them to plan production schedules, do variety of activities – electronic mail, employee training, accounting tasks. In general it helped them keep staff low. The reorganization in 1989 helped the company deal with some current problems, the company joined many other people who were to be involved in the management and the decision making process. Through agreement with Marriott the company was able to expand even more, by allowing Marriott to build stores in airports, hotels, highways etc.
and receive 5 % of the gross sales. Moreover, the company has expanded already worldwide and was continuing through joint ventures, licensing agreements, without the need to invest a lot. Weaknesses One issue that can be referred as weakness is the fact that the cookies produced by Mrs. Fields are larger than the normal and should be sold at much higher price than the normal cookies. The young couple was not prepared for such rapid expansion and they could not actually manage it.
By 1979 they couldn't already manage the three stores they got, but they kept opening other stores, thinking that they could easily manage growth. So by 1982, the store operating were 70, which is a huge number to operate on your own. Mr. Fields developed the new software and started selling it, which actually represented him entering into a completely new industry, which meant that he would spend less time in the cookies industry and it will be very difficult then to manage the business.
The public offering on London's United Securities Market resulted with a very bad outcome – making the stock price to decrease from 2. 46 $ to 44 cents. Moreover, they failed to present objectively the direction the company will take – from cookies store to bakery, which disappointed even more the investors. They started closing the original Mrs. Fields cookies store in order to put capital into the building of the newly acquired bakery brand – La Petite Boulangerie, which was a mistake as they had to keep to their original company strategy and positioning.
The gossips have really damaged the company's reputation, presenting it in a very negative way. The lack of right decision to respond to these rumors, have even damaged the reputation of the company even more. The respond should have been only the announcements inside the stores, but more severe actions should have been taken. The main weakness was the huge debt that the company was encountering, which resulted to the acquisition of 80 % of the company by the Prudential group, which wrote off 84 million debt.
This also resulted in the removal of the company from the LSE, the position of CEO and president given to Thomas Fay, taken by Mrs. Fields until now. As stated the main weaknesses that added to the failure of the company were the too fast growth of the company, the expensive rents for the stores, the high prices of the cookies which in a time of economic downturn were regarded as an expensive product, resulting in not buying it and most of all, the reluctance of Mrs' Field to let the management of the company to somebody more experienced.
By not willing to franchise the company they actually let it fail, as competition of franchise brands was increasing and the store in malls needed close supervision, which obviously couldn't be done. Threats The competition is rising. Instead of competing with a great number of small independent stores, Mrs. Fields now has to compete with national brands such as Famous Amos cookies that were franchising 100 stores within 2 years, in contrast with Mrs. Fields not willing to franchise her business, but keep complete control over it.
The fact that the couple is investing in many different properties – Park City's Mall, the Egyptian Theatre, they even opened a Cookie College, by selling the ice cream parlor. This remains a very big threat as they are constantly moving from the original business they had – selling cookies to another field which is making investment in different properties, for which they might not have the needed expertise. By starting selling frozen cookie dough, they risked damaging the company's image as they were the only one that was not selling frozen dough, and obviously they had a name about this.
Obviously the company is very vulnerable to different gossips and the fact that so many people try to copy the mystery recipe of Mrs. Fields, should represent a very big danger, as once the recipe is found the cookies will not have the unique taste any more. Opportunities Through the new owners of the companies, the vision might be changed which will result into new strategies to be acquired. The first step is to let the company for franchising in different parts of the world and thus expands the business.
Through diversification and presenting new products: coffees, yogurt they might attract even more customers and thus make the stores more appealing. The increasing usage of Internet represents a fresh opportunity for the company to stimulate sales and to present the I shopper – a way to order cookies online. Moreover, through deciding to franchise outside the United states , the company might be able to gain significant market share and make up for the lost market share home.