TN Business Retention & Expansion Course 2013 Case Study Documents

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LIFEBOAT An Exercise in Identifying Your Best Customers The Scenario:

You are the business retention manager for Anytown, Tennessee. A “perfect storm” is brewing in Normandy Lake. There are seven companies adrift in these rough waters. You are navigating a lifeboat towards the storm in hopes of saving as many of these companies as possible. Your Dilemma:

The lifeboat can only accommodate five companies. You have to decide which five companies to take…and which two companies to leave adrift. The companies are as follows.

• A candy store on Anytown’s Main Street

• A small manufacturer

• A mid-‐sized legal firm

• A 12-‐person IT firm

• One of Anytown’s largest employers

• A third-‐generation family farm

• A five-‐and-‐dime store on Main Street

Which companies do you rescue? Which companies stay behind? Why?

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A CANDY STORE ON ANYTOWN’S MAIN STREET Carvelli’s Candies on Main Street only looks like an ordinary small town candy store. Behind the front counter is an aggressive, growing company specializing in high quality, low fat chocolates. Originally sold from just this one retail outlet, Carvelli’s chocolates are now sold nationally through its interactive web site which accounts for 80% of its total sales. With 18 full-‐time and 10 part-‐time workers, Carvelli’s has established a national reputation in the world of candy. Now, it is about to announce a major supplier agreement in which it will supply Wal-‐Mart with private-‐brand, low fat chocolates on a regional basis. There is the further potential to supply all Wal-‐Marts in North America. To accommodate this new customer, Carvellis’ will build a new 25,000 s.f. facility and hire another 75 full time, workers earning family-‐sustaining wages in the next 6-‐9 months. Further expansions are planned as the product rolls out to all Wal-‐Marts nationally.

Does this company get saved? Yes ¨ No ¨

A MID-SIZED LEGAL FIRM The law firm of Krayer Moyer and Smythe is well known in the Anytown, Tennessee area. The trio has been in business for 35 years and each has been active in the community. As the founders near retirement, the company

has stagnated. The trio seem reluctant to expand their market, preferring instead to concentrate on the immediate Anytown area. Employment at the firm has dropped from 25 to 10 good-‐paying jobs, primarily through attrition and retirement over the past five years. Almost all of the staff is nearing retirement. Most troubling of all, the trio does not have a succession plan and have started to spend more time at their ‘winter’ homes in California.



A SMALL MANUFACTURER Dovetail Wood Products makes high-‐end wood cabinetry (case goods) for office and bank lobbies. The firm is well-‐known for the quality of their work and design. Major architectural firms within a 500 mile radius of Anytown gravitate toward Dovetail because they can purchase high quality case goods for their clients at prices far less than other case good manufacturers in the major cities. Dovetail is just six years old and started with five highly skilled craftsmen. Growth has been steady and the owners have willingly invested in new technologies and training. The owners, both of whom are Anytown natives, conservatively project a 15-‐25% growth rate in sales and employment over the foreseeable future. They plan to stay and grow in Anytown as they expand to markets beyond Tennessee Does this company get saved? Yes ¨ No ¨

A 12-PERSON IT FIRM Integrated Sales Solutions is a small software development firm that hit the big time four years ago. At the time, its Tracker™ database system was revolutionary, enabling small, independently owned retailers to track inventory, communicate and place orders with major suppliers.

Unfortunately, Tracker has been eclipsed by other products on the market and ISS has not been able to develop a hot new product. From a high of 25 programmers, ISS has declined to a 12-‐person firm. One of the co-‐ founders, an Anytown native, just left after a highly publicized feud with Julie Hopkins, the other co-‐founder. Hopkins is a New York native who has never adjusted to Anytown. She recently sold the headquarters mansion on Main Street and is now leasing space in a suburban strip plaza. There are rumors that she is trying to sell the Tracker system to a competitor.



ONE OF ANYTOWN’S LARGEST EMPLOYERS CJ Industries originally started life as the Anytown Chair Company. It was purchased by CJ Industries from Texas 15 years ago. With 75 employees, CJ Industries is still one of the major employers in town but the handwriting is on the wall. Employment is down from a high of 190 workers as recently as 2002. A manufacturer of high-‐end office furniture, sales are down 40% -‐-‐ just like the premium office furniture industry as a whole. Industry experts do not expect the premium office furniture industry to recover for at least five years. The Anytown facility has been operating at a loss for the past four years. Once actively engaged in the Anytown facility, management at the parent company has reduced the number of its annual visits from four to two. In the last year, the parent company has discontinued membership in the local chamber of commerce. Does this company get saved? Yes ¨ No ¨

A 3RD GENERATION FAMILY FARM Enchanted Valley Farms is on a mission. The third generation owners are young, college educated, and understand the growing trend toward organic foods among big-‐city dwellers. In the last four years, they have transformed Enchanted Valley Farms from a dairy farm selling

milk to one that is generating over 65% of its sales and profits from high margin, organically grown specialty produce sold in major grocery chains under the Enchanted Valley Farms brand name. Now, the owners want to bring packaging and labeling operations in-‐house, necessitating a $1.8 million, 30,000 square foot expansion that includes cold storage, production and assembly areas as well as additional loading docks. Up to 65 full time jobs will be created, adding to the firm’s current 25 full-‐time and 100 seasonal workers. The expansion is part of the strategic plan for this agribusiness that outlines a 15-‐20% annual growth rate in sales and employment over the next five years.



A FIVE-AND-DIME STORE ON MAIN STREET Anchoring the block across the street from Carvelli’s in downtown Anytown is Kennedy’s Old Fashioned Five and Dime. Complete with wooden floors, original store fixtures and soda fountain, Kennedy’s has become a bona fide attraction, attracting those seeking the five and dime stores of yesterday. It has become nationally known and has even been featured on the Travel Channel. Despite its old fashioned image, Kennedy’s does a robust Internet business. In just three years, Internet sales have grown to 40% of its total and the percentage continues to increase. With sales growing at a steady 10% clip and approaching $1.5 million, Kennedy’s employs 20 in the store and another 40 in its modern distribution center at the edge of town. With as many as 10 bus tours per day in the summer season, Kennedy’s draws over 450,000 people annually from around the US and even Canada and Europe. The success of Kennedy’s has prompted a successful Main Street program in Anytown that captures the small town, old fashioned feel of the store. Several restaurants and other specialty stores have opened in downtown Anytown, encouraged by the traffic generated by Kennedy’s. Does this company get saved? Yes ¨ No ¨

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September 15, 2013

To: File (For Internal Use) From: Mr. David Tyler Re: Music City Lighting Industries Inc. I recently visited with Steven MacDonald, the president of Music City Lighting Industries in Nashville. Here’s a brief narrative of our meeting. Steven is a second-‐generation owner of this firm that makes high-‐end lamps, track lighting and other lighting fixtures for residential and commercial applications. He became president early last year when his father retired. Steven spent 15 years in Los Angeles working for a major architectural firm before returning home to this area in 2009 to assist with the company’s expansion. He earned both his undergraduate and MBA degrees at The University of Tennessee. Steven is proud that the firm has never used any kind of government assistance. The company completely financed their new headquarters and manufacturing/distribution facility that opened in March 2011. Music City Lighting Industries generates $25 million in sales and employs 110 people, most of whom are highly skilled. Steven was not especially complimentary about state or local economic development activities. He made a point of mentioning that no one from any agency ever welcomed him home or contacted him or his father about the expansion. If it weren’t for his family’s loyalty to their workforce (most have been with the firm for over 20 years), Steven would have relocated the firm’s headquarters and manufacturing to Los Angeles where he feels most at home. He said that California officials contacted him in early 2013 during one of their recruiting trips to the area. The California officials noticed a large number of storage trailers next to Music City’s main building and concluded that the firm was strapped for space. They then offered an attractive incentive package but Steven’s father had already decided to expand in Nashville. Steven wondered with a laugh why local economic development officials did not notice the same thing. He further noted that he was personally not interested in incentives when making a site decision. He prefers the California lifestyle and is bullish on the LA area. When we talked about business conditions, Steven acknowledged that global competition has impacted his firm because their products are high end. He would like to reduce manufacturing costs so they can maintain margins. He would like to evaluate suppliers as well. Finally, he would like to “get really aggressive” about expanding his market share among the growing gambling market in the U.S. He would also like to break into the resort markets in the Caribbean and Central America. He’s been unable expand into new markets because he’s being stretched to the limit with day-‐to-‐day operational issues. I reminded him that we want to see his company grow. I gave him a list of contacts that he can call if he needs help.

Education

TN Business Retention & Expansion Course 2013 Case Study Documents