Custom «Liz Claiborne» Essay Paper Sample
Since the year 2006, Liz Claiborne has not been making any profits. Currently, Liz Claiborne is selling some of its brands to allow it concentrate on its Kate spade, lucky brand, and juicy couture brands, which appeal to high-end customers. One of the strengths of Liz Claiborne before the announcement of its plans to sell some of its brands was presence of different brands. This allowed the company to stock a variety of products that gave the consumers a wider selection. In addition, presence of variety of brands allowed Liz Claiborne to serve a wider clientele, since it would provide different commodities to satisfy different tastes and preferences of a large group of customers. However, it is clear that Liz Claiborne has a weakness of managing its capital structure. The company depended much on debt capital to finance brands’ acquisition activities.
One of the internal factors, which explain why Liz Claiborne is taking this action, is the need to restructure its capital structure. The company has more than US$280 million in debt. The company plans to use the proceeds from the sale of some of its brands to pay its debts. The need to make profit is yet another internal factor, which explains Liz action. Since 2006, Liz has not been able to make any profits. In fact, its annual revenue has dropped by more than a half from 2006 to the current year. On the other hand, one of the external factors, which explain Liz’s action, is the need to survive in the market. Due to economic difficulties, consumers have changed their spending habits. Low and middle-income earners are cutting down their expenditure on luxury good, while high-income consumers are increasing their expenditure on luxury goods. Therefore, Liz wants to concentrate on the brands, which appeal to high-income earners.
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In my opinion, the action being taken by Liz is strategic. This is because the company appears to have already identified the basics, skills, time, and money requirements of the strategy. Under the basics, the company has identified what it wants to do: to concentrate on its core brands. Under time and money, the company has already decided to sell its non-performing brands in order to raise money, and by the first quarter of its 2012 financial year, the company expects to start receiving profits from its operations. Liz’s action is tactical. It is clear that the CEO fully understands how the strategy is going to be implemented. This is an indication of fulfillment of one of the requirements of a strategy: skills. While implementing a strategy, the lead person in the organization needs to have the knowledge about the concerned product, industry, and the planned strategy. McComb, Liz Claiborne CEO appears to be aware of all aspects about the planned action.