Graybar Electric

Problem_{: How do you make the culture of your organization the centerpiece}

of your strategy?

Graybar Electric Co., a distributor of communications and electrical gear, has survived through numerous business cycles since its founding in 1869. Throughout the decades, the company for the most part kept up with the various business and technology cycles.

Other times it trailed its competitors. Such was the case in 1997 with the explosive rise of the Internet followed by the increasing demand for related technology. With persistent calls for speed from suppliers and customers, the problem – and subsequently the opportunity – for Graybar was to meet the demand by delivering its products to customers quickly and efficiently. On-time delivery was, in fact, the deep-rooted problem that caused the company to lose ground to competitors. With its network of 231 local distribution centers, each run as an independent entity, Graybar could take as long as a week to fill an order. Worse yet, deliveries arrived at a customer’s location from as many as eight different branches with eight different invoices to pay. The solution was clear to Graybar’s leaders: Centralize supplies of certain products so orders could be filled quickly and from one facility. Also, build new warehouses to supplement the existing network of distribution centers. The problem for senior management: How to implement the solution without undermining the basic culture at the employee-owned company that worked so well, for so long. In particular, the dilemma of how to deal with those local managers who traditionally exercised almost complete authority over their regional warehouse operations?

It was a daunting task to change a tradition-bound company with its stead- fast culture. Only by gingerly introducing modifications could senior management expect to affect changes and reinvent the mindsets of individ- uals, many of whom spent virtually their entire careers at Graybar. That said, rather than take away local independence or close any branches, the new warehouses were designed to coexist with local facilities.

SUCCESSFUL BUSINESS PLANNING

With sensitivity to the ongoing systems and the existing work patterns of managers and other key personnel, a new corporate culture slowly and steadily evolved. The ‘old time’ managers accepted the changes as essential to Graybar’s success in the Internet age.

Results: With the new logistical framework in place, customers exuded surprise and pleasure as most orders began arriving overnight. Even better, the consolidated orders came from a single warehouse with only one invoice to pay. Once the solution for creating an opportunity was clearly identified, it was the attention to and sensitivity for Graybar’s innate culture that made the opportunities a reality.

Action Strategy

You can use the culture of your organization to best advantage if you can sensitize your awareness of the history of the organization as well as the backgrounds of the key individuals who are responsible for making things happen. Then, you can more easily mobilize the attention of individuals to focus on those strategies that would directly impact customers’ needs. For instance, to develop a successful competing brand, be certain you apply a differentiation strategy to distinguish your product from the standard offerings in the market.

Follow these guidelines to involve key personnel:

• Features and benefits. Focus on those characteristics that comple- ment the product’s basic function. Start with your core product. Then envision adding unique features and services; ideally, ones based on users’ expectations. (Graybar refocused attention on Internet-related products and technology.)

• Performance. This factor relates to the level at which the product operates – including quality. (For Graybar, performance translated to speed of delivery.)

• Acceptance. This characteristic measures how close the product comes to established standards or specifications.

• Endurance. This factor relates to the product’s expected operating life.

• Dependability. This attribute measures the probability of the product breaking or malfunctioning within a specified period.

• Appearance. This factor covers numerous considerations ranging from image, function, look, or feel. Different from performance, appearance integrates the product with all its differentiating components, including packaging.

• Design. While design encompasses the product’s appearance, endurance and dependability, there is particular emphasis placed on ease of use and appropriateness to the function for which it was designed.

SBP Reference:

Section 6 (Business Portfolio), Section 7 (Tactical Objectives) and Section 8 (Strategies and Tactics).

15. Lowe’s

Problem_{: How do you position your products effectively against a market leader?}

Lowe’s is a mass merchandiser of basic products such as bolts, ceiling fans, clothes washers and dryers, as well as a wide assortment of appliances. For years the firm, although growing and prosperous, was lagging behind market leader Home Depot.

Beginning in earnest during 2000, Lowe’s charged forward with a forceful strategy that placed its rival on the defensive. Although selling similar merchandise at competitive prices, Lowe’s decided on target marketing as the focal point of its approach. The strategy: Attract women who, in turn, will lure their husbands into the stores. In contrast, Home Depot gears its efforts to the male shopper.

The strategy, supported by Lowe’s research, reveals that women initiate 80% of all home-improvement purchase decisions, especially the big-ticket items such as kitchen cabinets, flooring and bathrooms. “We focused on a customer that nobody else in home improvement is focused on,” declared CEO Robert Tillman.

SUCCESSFUL BUSINESS PLANNING

To make the strategy come alive and appeal to women, Lowe’s stores are bright and airy, with uncluttered aisles and supermarket-like signs that list what is in each aisle. Some areas have particular allure, such as the window-décor aisle with displays of valances, tiers and cotton drapes, all of which the customer can take home immediately. In contrast, similar purchases have a wait of six weeks for delivery from its competitor.

The strategy of focusing on women and pushing into big-city markets has turned Lowe’s into one of the fastest growing, most profitable operations in its industry. The genesis of the strategy began during a period of identity crisis in the early 1990s.

A plan evolved after conducting a mammoth six-month effort involving extensive surveys among 8,000 customers as they exited selected Lowe’s stores. The feedback was bitter with criticism ranging from slow service, narrow aisles, dark floors, dull assortments and high prices.

The remedies proceeded during the 1990s with extensive experimenting of displays, colors, lighting and overall eye-appeal until the optimum mix of elements came together. For instance, to set the tone of a customer orientation, Lowe’s goes so far as to install call buttons in most aisles to bring the salesperson to the customer, rather than the exhaustive effort of hunting for sales help. Also, for convenience, hardware is located at the entrance so that shoppers who only need wing nuts can grab a handful and go. This breaks with the general retail rule, which calls for placing everyday staples in parts of the store to force customers to walk past other merchandise.

Action Strategy

If you want to position your product effectively against market leaders, consider some of the following action strategies suggested by the Lowe’s example:

1. Select a competitive advantage that larger competitors cannot perform