Simple Case Frank Cheese
BIG RED CASE BOOK
JOHNSON SCHOOL CONSULTING CLUB
HAMMERJACK
Type of case: Profitability
Hammerjack is a regional chain of "local hardware stores" located in numerous neighborhood strip malls and shopping centers. They had enjoyed excellent performance for the past 15 years but have experienced declining profits in the past two years. They are concerned about their profitability and have hired you to explain their situation and provide recommendations to get them back on track.
ADDITIONAL INFORMATION
Competitive issues:
Costs:
Revenues:
CGS – no change
Overall sales - down
Lease of space - no change
Number of customers - down slightly
SG&A, Overhead - no change
Dollar amount of purchase -down heavily
Franchise costs - no change
All other drivers - no change
Assumption:
We are losing customers and based on the heavy decrease in dollar amount purchased, we are losing high spending customers. (There must be substantially different customer segments)
Question:
What do we know about our customer segments? A: 3 segments (as follows):
Maintenance People
Do It Yourself-ers
Contractors
# of visits
1
10
100
$ spent/visit
$100
$1,000
$10,000
# of people/segment
100 million
10 million
10,000
Assumption:
Hammerjack is losing customers and dollar revenue, there is a strong possibility of increased competition. A: Yes, Home Depot and other huge "warehouse" hardware stores have entered
Hammerjack regional locations.
Assumptions about "Warehouse Stores":
Lower prices due to buying power (economies of scale). A: Yes
© 2003 The Johnson School Consulting Club
Page 35
BIG RED CASE BOOK
JOHNSON SCHOOL CONSULTING CLUB
Provide additional services such as training courses, information, tips. A: Yes
Stealing contractors due to substantially lower costs and DIY's due to price and help. A: Yes
SOLUTION STRUCTURE
Analyze drivers of profitability: Profit = Revenue - Costs.
Based on the above information, you can determine which segments are most valuable to
JOHNSON SCHOOL CONSULTING CLUB
HAMMERJACK
Type of case: Profitability
Hammerjack is a regional chain of "local hardware stores" located in numerous neighborhood strip malls and shopping centers. They had enjoyed excellent performance for the past 15 years but have experienced declining profits in the past two years. They are concerned about their profitability and have hired you to explain their situation and provide recommendations to get them back on track.
ADDITIONAL INFORMATION
Competitive issues:
Costs:
Revenues:
CGS – no change
Overall sales - down
Lease of space - no change
Number of customers - down slightly
SG&A, Overhead - no change
Dollar amount of purchase -down heavily
Franchise costs - no change
All other drivers - no change
Assumption:
We are losing customers and based on the heavy decrease in dollar amount purchased, we are losing high spending customers. (There must be substantially different customer segments)
Question:
What do we know about our customer segments? A: 3 segments (as follows):
Maintenance People
Do It Yourself-ers
Contractors
# of visits
1
10
100
$ spent/visit
$100
$1,000
$10,000
# of people/segment
100 million
10 million
10,000
Assumption:
Hammerjack is losing customers and dollar revenue, there is a strong possibility of increased competition. A: Yes, Home Depot and other huge "warehouse" hardware stores have entered
Hammerjack regional locations.
Assumptions about "Warehouse Stores":
Lower prices due to buying power (economies of scale). A: Yes
© 2003 The Johnson School Consulting Club
Page 35
BIG RED CASE BOOK
JOHNSON SCHOOL CONSULTING CLUB
Provide additional services such as training courses, information, tips. A: Yes
Stealing contractors due to substantially lower costs and DIY's due to price and help. A: Yes
SOLUTION STRUCTURE
Analyze drivers of profitability: Profit = Revenue - Costs.
Based on the above information, you can determine which segments are most valuable to