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PricewaterhouseCoopersCASE DISCUSSIONBUSINESS CASEInterview Case Study #1Roane & Hickey, Inc.You have been recently hired into the Strategic Change (SC) group, a business unit of PricwaterhouseCoopers. SC is the strategy thought leader in PwC. The engagement partner in Consumer Products has come to SC to help develop a strategy for Roane & Hickey, Inc. (R&H). This engagement has the potential of positioning PwC to R&H and its parent conglomerate for the next five, possible ten years.Company BackgroundR&H is a wholly-owned subsidiary of a multi-national conglomerate. The conglomerate owns ten companies operating in the U.S. R&H is the largest of the ten. R&H is a consumer goods company distributing well-known branded products through grocery, drug, mass merchant and club channels. With $4 billion in revenues in the U.S., R&H is one of the top three players in the consumer goods industry. The company has been marginally profitable over the past ten years. Last year the company made a profit due largely to an accounting change.Although R&H only operates in the U.S., it owns several manufacturing and distribution facilities around the world to support its production and distribution systems. R&H takes advantage of lower labor costs in Mexico, Canada and Southeast Asia to lower its manufacturing costs. R&H still maintains three plants in the U.S. Because of the over-capacity that R&H has experienced, R&H has negotiated deals with sister companies overseas to manufacture and direct-ship product.R&H has four market segments that operate as profit centers. The market segments are: Personal Hygiene, Consumer Tissue, Soaps and Detergents and Personal Care. Even though the revenues are roughly evenly divided among all four market segments, Personal Care contributes 90% of the companys profits. In Personal Care, R&H owns the two top branded products, in the other categories the company has the number two brand, and in one segment, number three. R&H has committed to building a consumer franchise through aggressive advertising and in-store merchandising support.Industry TrendsIn the U.S., brands are under attack from private labels, who are now competing on both price and quality. Brands are looking to justify their price premiums. The value of being the number one brand cannot be taken lightly. The return on sales of the top brand is almost twice that of the number two brand. The return on sales for the number two brand is twice that of the number three brand.The power of the retail industry in the U.S. has increased dramatically over the past five years. The retailers are driving additional costs upon manufacturers. With established products, retailers are demanding a minimal level of turns per year. With new products, retailers are demanding slotting fees and ever-increasing promotional support. Product managers are forced to achieve current product revenue and market share goals while stimulating demand for new products. Many industry experts feel that there will be consolidation of brands within many of the market segments in which R&H competes and, as a result of this brand consolidation, that R&H will lose critical sales mass and become a major casualty.In the last two years the allocation of marketing dollars has changed dramatically; trade promotion has risen to 40% of total marketing spending, consumer promotion has climbed slightly and advertising has declined. Industry analysts have pointed to R&Hs trade promotion strategy as being the catalyst for the growth in trade promotion in the industry as competitors have been forced to respond.R&H is widely regarded as a retail-oriented company. With a sales force that is twice the size of anyone elses in the industry, R&H has forged great retail relationships over the years. R&H traditionally had the best order fill rate in the business; however, recently some of the efforts to reduce inventory has caused shortages in key promoted products.R&H OrganizationThere are six Executive Vice Presidents (EVPs) in R&H responsible for functional areas. All the EVPs report to the President, who is also CEO. The Executive Vice Presidents represent Marketing, Sales, Finance, Manufacturing, Engineering and Human Resources. The EVP of Finance has responsibility for financial reporting and analyses as well as managing Procurement, Deployment, Scheduling and Logistics. All the market segment managers report directly to the Executive Vice President of Marketing.Much of the blame for the performance of the company over the last ten years fell on the shoulders of the former president. It was whispered that he was from the old school and could not change his ways. The new president of R&H, an American, joined the company six months ago. He was the Executive Vice President of an important European division of a sister company. The conglomerate has always prided itself on being able to leverage its multi-national resources.Current SituationVenn Teldren, the Executive Vice President of Finance, is considered to be a brilliant man by many in the industry. Born and raised in Europe, Mr. Teldren rose quickly through the organization. However, because of his outspoken nature, he angered enough senior level executives (showed up as Mr. Teldren would say) that he has never received a position of president, even though his name is mentioned every time an opening appears.Recently the vice chairperson of the conglomerate responsible for the group in which R&H is a member, sat down with the R&H President and EVPs. The vice chairperson stated that the company needed to improve performance within one year. He offered a couple of scenarios of what the conglomerate was considering in the event that the management failed to improve profitability.Scenario 1: Drop unprofitable brands and reduce the size of the companyScenario 2: Merge the company with a sister company that has similardistribution requirements and have proven profitabilityRecent InitiativesR&H has recently taken part in an industry-wide study called Efficient Customer Response or ECR. The study found that an industry-wide effort to develop more efficient trade practices and delivery systems could save an aggregated $30 billion dollars a year. PwC assisted R&H in this study. All the EVPs agree that there are huge dollar savings that can be achieved with efficiency improvements.Venn believes that the supply chain (i.e., Procurement, Manufacturing, Deployment, Scheduling, Logistics, and Warehousing) can become a strategic advantage for the company if it can outperform its competitors. PwC studies have shown that improvements cannot be made without the input or the support of all the functional areas of the company, especially Marketing and Sales. The EVPs from Marketing and Sales do not always see the Supply Chain as key players; in fact, the EVPs of Marketing and Sales see the Supply Chain as only a vendor to them.Venn knows that the results of the ECR initiative may not be enough to rally support among the EVPs. Venn knows that whatever strategy is accepted needs to define the roles of each of the EVPs and to provide an outlet for each EVP to demonstrate his and her skills. He is also aware that the other EVPs are very conscious of the growth of Venns power. Each EVP will initiate a project with the assumption that the architect of the solution to R&Hs current situation will be in position for the next presidency.The EVP of Human Resource has championed the need to implement a whole new way of envisioning the company working together. She has envisioned a flatter organization and has spent years developing studies with another leading consultancy to support her vision. She has a strong supporter in the EVP of Sales. The present EVP of Sales was originally from Human Resources. Her vision has always entailed an extensive re-structuring and re-training effort.The EVP of Engineering feels that the company needs to invest in its new product capability. The strategy is to acquire smaller, regional companies that are producing differentiated products. We can absorb them into us and stimulate our new product pipeline, he stated. With these new, regionally proven products, we can fill capacity and leverage our distribution and sales strength. I can also energize my area with fresh ideas. Its win-win, no doubt about it.The EVP of Manufacturing is sick and tired of hearing that manufacturing is the problem. He points to the fact that they re producing and shipping three times the product they were five years ago with the same number of people they had eight years ago. If things dont change in other areas, then things wont change in Manufacturing, other than the inability to support the orders coming in.The EVP of Marketing believes that a combination of re-structuring and acquisition is needed. He wants to reduce the salespersons role with the retailer and focus on consumer spending behind a high quality message grounded in tangible product benefits across all product segments. He wants to broaden the product mix with new products from acquisition.The EngagementVenn has mentioned to Gary Forstman, the PwC engagement partner, that he is willing to devote the necessary resources in his functional areas to prove out the right strategy to the other EVPs. Venn has also indicated that the company is willing to devote significant resources and capabilities to the right effort. All the EVPs know, he said, that there will be whole-scale changes if the company doesnt turn itself about.Mr. Forstman has called Grady Means, ISS SBU leader and partner, and said, This is PricewaterhouseCoopers first major engagement with R&H after several years of smaller engagements where we were able to demonstrate our ability to implement solutions. Now we have an opportunity to really shine. The company is re-evaluating its strategic position and has asked several consulting firms to talk to them. Grady discussed the situation with ISS partner, Michael Hanley, and they agreed that you would be a great person to work on this project. You receive a call from Grady. Hello, How are you doing? After exchanging pleasantries, Grady explains the situation to you. We need some dynamic thinking on this one. I know Venn Teldren from years ago. Venn is going to be all over us if we dont get this right. Whats important is that we show Venn that we have a vision of where the company needs to go, how the parts fit together and how they are going to get there. What is important is that our analysis is fact-based. We need to be ready to say to Venn, This is the situation, this is the problem, this is the solution and this is step one, step two, step three on what you need to do tomorrow. This is a big opportunity for us and Im counting on you. See what you can come up