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**The Henderson Hardware Challenge**

*At Janine’s graduation party, her Uncle Harry approached her.*

"I understand you’re in the job market now that you’ve earned that fresh, new M.B.A."

"Well," Janine replied, "I realize my real-world experience is limited, but I hope to find a place where I can learn and work my way up."

"I know it’s not as glamorous as some big corporate job, but how would you like to come work for me in the hardware business? I’d like you to consider joining the head office; we could use some new ideas over there."

"Let me think about it and call you tomorrow," Janine replied.

Janine considered the offer. Since childhood, the Henderson Hardware stores had been part of her life. The family owned twelve stores in eight counties in the state. The privately held company was started by her great-grandfather in the 1800s, and as it expanded, children, aunts, uncles, cousins, and in-laws grew up and joined the business. The income from the stock Janine received at birth paid for her college education. Her Uncle Harry had taken over the company six months ago. Janine knew from her mother’s letters that Harry was trying to bring the company into the new millennium, but it was quite a task.

Janine decided to ask her mother what she thought. As a family member who was not actively involved with the company, her mother could be more objective.

"I’m not sure that it’s the place for you, Janine," her mother answered. "The company isn’t doing as well as it once was. The stores are going downhill, and there is a lot of blaming among family members. Your Uncle Harry is the third company president in four years. I do know that they could use a new perspective. Your grandfather and great-uncles think they can run the business as they always have, but the market has changed. The baby boomers are buying, but from the competition."

After considering the situation, Janine called her uncle. "What sort of job did you have in mind?"

"Well," Harry replied, "to start, I would like you to work in human resources and help develop a customer-service program. I don’t think we pay enough attention to our customers anymore. But I’d also like your opinion in general. You’ve got a fresh viewpoint and a newly minted business degree. We can use your knowledge of new management trends and ideas."

Janine’s first week on the job was a real eye-opener. She started by visiting all the stores with her Uncle Tom, the operations director. While Tom chatted with the managers, Janine wandered up and down the aisles and looked through the stockrooms in each store. She soon realized that the types and levels of inventory, attention to service, cleanliness, knowledge and competency of the sales staff, and even the prices varied dramatically from store to store. The only consistency was the name. Even sales promotions could vary, as each store had a small personal advertising budget.

The customers were also a concern. Most were older and making small purchases. Janine asked her Uncle Tom about this.

"Well, a lot of the young kids just look at price and shop at big warehouse and discount stores like Home Depot and Wal-Mart. We’ve already got three different stores entering this market. It’s tough for us to compete against national chains because they can get much better price discounts."

One bright spot seemed to be the rise in do-it-yourself television programs, which led many people to become interested in home improvements.

Janine’s concern grew deeper when she looked at the company’s financial reports. Several stores had lost money regularly for over three years. When she asked Uncle Harry about them, he replied, "I know, but the last three great-uncles in the family are running those, and they’re on the board of directors. I can’t do much about them. Besides, it isn’t really their fault; those neighborhoods have really gone downhill in the last five to ten years."

Janine wondered about the future. Is the hardware business even a good idea anymore? Recalling her management course, she wondered what Porter’s Five Forces would reveal about viability. Altogether, it had been a discouraging week for Janine.

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**Discussion Questions**

1. Based on the information in the case, conduct a SWOT analysis. Be very specific. Remember, Strengths and Weaknesses are internal, while Opportunities and Threats are external.

2. Using Porter’s Five Forces Model of Industry Competition, examine Henderson’s micro-environment. Describe the impact each of the forces has on Henderson. What is their potential for success?

Answer :

A SWOT analysis for Henderson Hardware reveals internal strengths and weaknesses such as family brand familiarity and inconsistent store policies, alongside opportunities including the DIY market trend and threats from competitors like Home Depot.

Based on the case study provided, the following represents a SWOT analysis for Henderson Hardware.

  • Strengths: Competency in traditional hardware business, established family brand, ownership of multiple stores, and the potential for unique customer service.
  • Weaknesses: Inconsistent store policies, varied inventory levels, declining neighborhood quality for certain stores, and internal family disputes affecting operations.
  • Opportunities: Market demand stimulated by DIY television programs and the potential to capture younger consumers through improved customer service programs.
  • Threats: Competition from national chains like Home Depot and Walmart, pricing disadvantages, and changing market dynamics with evolving consumer preferences.

Utilizing Porter's Five Forces to analyze Henderson's micro-environment would expose the following impacts:

  • Threat of New Entrants: Low due to the established nature of the market and the significant capital costs associated with starting a hardware business.
  • Bargaining Power of Suppliers: High, as national chains might negotiate better discounts.
  • Bargaining Power of Customers: High, due to many alternative suppliers and the popularity of discount stores.
  • Threat of Substitute Products or Services: Moderate, because while some products can be substituted, many hardware items are specific to tasks.
  • Competition among Existing Competitors: Very high with intense pricing and service competition from both large national chains and online retailers.

While Henderson has a long-standing family business, the forces indicate a challenging environment with high competition and price sensitivity among consumers.

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