General Information

The Harrison Company, a public company headquartered in State College, PA is facing a time of crisis. (See Attachment 1 for financial statements.) The company is a mid-sized regional retailer. It has 80 stores in seven states, primarily in the Northeast. It also owns two equally-sized distribution centers, one in Pennsylvania and one in Massachusetts. All of its stores are in rural areas and generate exactly $600,000 per store in sales per year (to simplify the case). As shown in the attached financial statements, sales and profits have been dropping over the last three-year period. You have been brought in as president to move the company in a new and better direction. The previous president has just retired at age 70, is no longer on the board of directors, and has broken all contacts within the company.

Although your predecessor did not see the need to employ an explicit strategy for running the business, competition from retail chains, such as Wal-Mart and Dollar General, has become more intense. In the past, your company has been somewhat shielded from competition by its stores’ rural locations. Now there is a Wal-Mart store within 10 miles, on average, of each of your stores. Your eight home office employees have not developed advanced business skills. For example, your marketing manager does not prepare either store or company-level sales forecasts.

As you look at the company situation, there does not appear to be an obvious choice between a low-cost strategy (such as that followed by Wal-Mart) and a differentiation strategy (such as that followed by Nordstrom). Next year’s plans, which you can alter, call for the purchase or construction of eight new stores, as well as the renovation of the Pennsylvania distribution center. Planned new store locations include three stores in West Virginia, two stores in Rhode Island, two in Vermont, and one in New York. The board wants to know if you agree with this specific action plan. There have been no store openings, closings, or changes to the distribution centers last year or this year.

There are several immediate concerns that face you upon taking over as president. One of your store managers, who has recently been fired, has gone to the press with accusations that your company has been buying very inexpensive clothing from a Honduran company whose employees face slave-like conditions. He claims that the main reason for his being fired was that he insisted on raising this issue with top management. There seems to be no documentation within the company related to this issue.

As with many of your competitors, you find that the company is actively discouraging the entry of unions into your company. Although this seems to be taking place primarily by store managers, it would seem reasonable that company headquarter personnel are directing this effort.

After having researched the cases of Cohen vs. California and Texas...