Handleman Company Case Analysis

HANDLEMAN COMPANY

PRESENTED BY:

ANDREW VACCAREZZA

CARLOS RODRIGUEZ

DANIEL SAELEE

MIKE GARDNER

TABLE OF CONTENTS

COMPANY OVERVIEW 3

HISTORY 3

ORIGINAL BUSINESS MODEL 4

Main Idea 4

Middleman in Music Industry: 4

Competitive advantage (differentiation): 4

Business strategy: 4

Innovations: 5

CHANGES TO THE BUSINESS MODEL 5

Overview & Challenges: 5

Complications: 6

Channel of Choice Merchandise Planning: 6

Product Replenishment: 6

Inventory and Distribution Systems: 6

Store Clustering: 7

Downloading of Music: 7

PROBLEM STATEMENT 7

CHANEL OF CHOICE MERCHANDISING & DISTRIBUTION 7

COMPANY OVERVIEW

• Provider of management services, such as inventory control, distribution control, retail merchandising, category management, and pre-recorded music for retailers.

• Main operation in North America and UK.

• Headquarters located in Troy, Michigan

• About 2,600 people employed.

• Average operating income has been decreasing for the last 4 years.

• Average revenue is about 1.3 million dollars a year in recent times.

• Recent involvement in video game software.

• Crave Entertainment Group was acquired by Handleman (outside source)

• Crave operates in the video game industry (outside source)

• Crave distributes other published video game software as well as their own (outside source)

HISTORY

• 1934: Founded by Philip Handleman and his four sons.

• Started out as a distributor of drug sundries

• 1953: Music distribution started with the introduction of the rock and roll era

• 1963: Went public and was listed on the NYSE

• 1975: Book distribution started trying to capture mass market purchases

• 1983: Computer software business developed with the introduction of the home computer expansion era

• 1985: Videos made available to mass merchants (Notes: videos only available for rental until now)

• 1985 Late: Honored by the Video Software Dealers Association

• 1989: Acquisition of Video Treasures (First venture outside the box)

• 1991: Acquisition of Lieberman and Slight and Sound

• 1994: Business went international with expansion into Mexico

• 1995: Expansion into Brazil and Argentina

• 1999: Expansion into UK (see bellow)

• 1999: Acquired Lifetime Entertainment (Distributors of music and videos in UK)

• 2000: ASDA selected Handleman to be distributor of music and video products (a lot like www.amazon.com)

• 2001: Changed name in UK from Lifetime (acquired company) to Handleman to create brand name recognition

• 2001: Relocated UK facility to a Larger 10,000 square meter facility to support their new fully automated distribution center and larger inventory levels

• 2001: Customer base expanding rapidly in UK

• 2004: Committed to selling off parts of their NCE (North Coast Entertainment Division) (outside source) Note: this division was not doing well from 2000 to 2003

• 2005: Acquisition of operating assets of REPS (A National In-Store Merchandiser for Home Entertainment and Consumer Product)

• 2005: Acquisition of Crave Entertainment Group

• 2006 Late: COO, John Beeder, resigned from his position

• 2006 Late: COO, Robert E. Kirby appointed

• 2007: Terminated music agreement with ASDA

Original Business Model

Main Idea

o Handleman’s original business model was to think about the music market, to determine what would sell and what would not, and therefore what to stock and what not to stock on the shelves of several major retailers in North America, Latin America, and Europe, with a product line that included video, software, books, but mainly compact discs and cassettes.

Middleman in Music Industry:

o Buying recorded music in the form of compact discs and cassettes from the major record labels and then reselling them to mass retailers.

o Provided distribution, inventory management, retail merchandising, and category management to its retail customers.

Competitive advantage (differentiation):

o Keep tracks of trends in the music industry and ensuring