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Strategic Implementation

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CS: The rise and decline of Habitat

The young designer Terence Conran opened a home furnishing store called Habitat on Fulham Road, London in 1964. Conran´s enthusiastic young team quickly established Habitat as a trendy, furniture and lifestyle company. It pioneered stylish, modern-looking, relatively affordable products, very attractive to young, married couples brought up in dowdy, post-war 1950s homes. The Habitat chain expanded across the UK during the late 1960s and 1970s in busy city centres and in major European cities.
Habitat became a public company in 1981; it merged with Mothercare, the mother and baby goods retail chain, in 1982. The combined public company acquired Heal´s the specialist furnishings store at its prestigious Tottenham Court Road location and Richards, the women´s fashion store chain. In 1986 Habitat-Mothercare plc merged with the down-market British Home Stores variety chain, renaming the enlarged group Storehouse plc. Conran, by now a wealthy man, remained chief executive until 1988 and chairman until 1990, as he pursued a range of business and other interests. Storehouse executives grappled with the integration, rationalisation and future strategy of this disparate retail group.
By 1990 Habitat seemed to have lost its freshness and design flair. Swedish IKEA entered the U.K., quickly establishing several massive, out-of-town warehouse-style home furnishings and accessories stores that offered UK consumers a radical new shopping experience. Its named, young international designers created attractive, functional, minimalist designs. Crucially they were available in greater variety and at much lower cost than Habitat and other furnishings stores. IKEA´s cost advantage derived from a global supply chain that sourced its furniture and other products from low-cost countries. It reduced costs further by distributing furniture to its stores in flat-packed form for customer collection and home assembly.
Heal´s quit the Storehouse portfolio in 1990 by management buyout. In 1992 Sears plc acquired Storehouse, and Habitat was transferred to IKANO, a private company owned by IKEA until 1988 when it was acquired by realatives of Ingvar Kamprad, IKEA´s founder. IKANO rejuvenated Habitat´s stores, aiming for a more up-market profile than IKEA. The chain stabilised at 36 UK outlets and a similar number elsewhere in Europe, plus franchised stores in 12 other countries. Nonetheless, Habitat experienced losses of about 40 million euros a year for several years. At the end of 2009 IKANO transferred Habitat to Hilco, a private equity group that claims particular expertise in retail restructuring.

Tasks and discussion questions:
Senior management teams change, so strategy implementation can be likened to a marathon relay.
In this light, examine critically the following explanations of Habitat´s decline (give the arguments for your own opinion), being particularly aware of timing: - The predictable consequence of ageing and predatory competition - Continued implementation of a static, inflexible strategy that was unresponsive to critical transition points in time - Poor understanding and implementation of a suitable adaptive strategy. - Just bad luck

(Further information about the company: http://www.habitat.co.uk/)

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