Strategic Failure of House of Fraser: Reasons and Recommendations

This assignment discusses the reasons for the strategic failure of House of Fraser, a departmental store in the retail industry. It analyzes factors such as lack of e-commerce strategy, cash flow issues, excess stores, and poor leadership. Recommendations are provided to improve the company's performance.

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Strategic Management

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Contents
Introduction.................................................................................................................................................3
Company’s strategy (House of Fraser)........................................................................................................3
Reasons for strategic failure........................................................................................................................4
Formulate recommendations.......................................................................................................................6
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

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Introduction
The main aim of this assignment is to highlight those factors that are liable to reducing the
productivity of the business. In the context of the strategic management, it is the management
that includes setting aims, evaluating the competitive environment, analysing strategies and
making sure that management rolls out strategies across the organization (Robert Mitchell,
Shepherd and Sharfman, 2011). This assignment will cover the case study of House of Fraser
and will elaborate on the reasons for strategic failure. The recommendations will be made in
against of strategic failure so that appropriate action can be made.
Company’s strategy (House of Fraser)
House of Fraser is the departmental store that belongs to the retail industry. It has around 55
stores in the UK and Ireland. It was established in Scotland in 1891. In the context of the strategy
of the company, it has been found that the company is made to renew its trade and product
strategy, from which it would convert its attention to provide the best selection of contemporary
brands. The stressed department store retailer stated that energetic signs a noteworthy step in its
entire transformation strategy, and will be helpful in highlighting exclusive partnerships and
products as well as trend alertness. The scope of the retail industry is expanded day by day and
for this, it is needed by House of Fraser to adapt to this fast-changing landscape for the purpose
to give it a future (Plummer, 2018). The company’s strategy is not effectual because it did not
approach the right strategy at right time. E-commerce roadmap has been made by the company to
establish its store online. In an endeavor to reduce the consequences of its store end on its online
business, the House of Fraser implemented this strategy within the business in order to amplify

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the online presence and message significance in store end areas to counterbalance any drop in
brand awareness.
Reasons for strategic failure
House of Fraser had to face failure due to not adopting the latest technology at the right time and
lack of management skills led business into the adverse situation. House of Fraser (HoF) is
bought by Sports Direct for £90m due to its strategic failure. HoF launched an agreement of
Company Voluntary Arrangement (CVA) insolvency process for the aim of closing its 31 stores
out of 59, intimidating job cuts to the 15,000 employees in the company. The discussion
regarding their strategic failures is mentioned below:
1- The rise of e-commerce
Online competition is considered as the major threat for the high street as a whole. Internet is a
major victim for failing stores and it forces retailers to adopt the amending customer landscape
(Lawlor, 2010). An effectual way to attract customers into physical stores is to provide an
effective strategy for experiential shopping. However, it is necessary for retailers to invest in e-
commerce sites. The strategy of HoF was slower in such context, as it did not start a main and
much-required upgrade to its website. Furthermore, the company invested only half of its sale in
online marketing, which led business into failure situation. Meanwhile, John Lewis outshined
them both with a whooping £500m investment in e-commerce.
2- Cash flow issues
HoF had been suffering from the issue of cash flow. As per Management Today, the company’s
cash and equivalents fell from £125.4m in 2016 and this rate increased year by year. The major

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issue came in the context of failure f the company that HoF showed an only £44m loss in 2017
(Murray, 2018). It showed as though HoF was moving to get the injection of the cash so
dreadfully required from the owner of Hamley who had agreed to buy a controlling stake of the
group of HoF in return for £70 million cash injection. The failure of the strategy of the company
occurred when a 70% share of the company fallen out of the plan (Global Banking, 2018). After
that, it has been stated by the owner of Hamley that it would be inadvisable and impracticable to
proceed.
3- Excess of stores
HoF had a number of stores or outlets within the UK and Ireland that was unable to handle by
the company in an appropriate manner. In specifically, HoF maintained their number of stores in
high street buildings and locations, which led to high rental costs. It has been analyzed that there
were around 59 HoF stores across the UK by 2018. However, this figure is equal to John Lewis
but not more than Debenhams, but in comparison of HoF, both competitors were more successful
in remaining genuine in a packed marketplace. On the behalf of CVA agreement, HoF reached
with its creditors in June 2018, it has been announced by the company to slash the number of
stores by around half of it (Jahshan, 2018). At that time, Ashley (British Entrepreneur) stated that
he had the intention to keep 80% of the stores open (Global Banking, 2018). This was more risky
but approachable things if the company is unable to innovate effectively and quickly.
4- Poor leadership
Leading the team by the leader is major task for the company to attain competitive advantages
within limited span of time. The leadership strategy of HoF was not appropriate. In 2016, Nigel
Oddy who was the CEO of the company resigned within 2 years of his working in the company

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(Haliday, 2018). Over the Christmas trading time, all operation had been hand over to the
successor of the company named Alex, who had no experience retail industry. This instability
had influenced over the performance of the company, as the vision of new leader was different.
Frequent amendments in the strategy can lead the business into an adverse situation and hamper
the long term strategy.
Formulate recommendations
From above analysis, it is cleared that company was unable to handle the amendments in the
market and applied wrong strategy to maintain them. The discussion will be made regarding
what company could have been done at the time for defending themselves from failure.
Investment in e-commerce:
The company could have been invested in e-commerce as the technology has taken place in
today’s era, from which everyone wants to get benefit. Along with the company should maintain
the loyalty of the customer which can be applicable if company provides excellent services to the
customer. The company could have made an appropriate site to the customers in which the
proper detail of the company should have been represented included right address, support chat,
phone number, loyalty programs detail, company’s loyalty towards its customers and many
more. This strategy of the company could have been able to increase the customers within the
business.
Improvement in the cash-flow issues:
There are various approaches which can be applied by the company in the context of improving
the issues of cash-flow. There is a solution to getting a line of credit, negotiate with vendors, find

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additional revenue streams and develop and use a business budget. It is necessary for the
company to keep focus on another solution to low cash flows are to work with local bank in
order to set up the line of credit (Chen and Moham, 2010). There is one source of short term
loans is CAPLine loan financing by the Small Business Administration, which facilitates small
businesses to meet short term needs of capital. The company could have looked for this loan.
With respect to negotiating vendors, the company should have been made a good relationship
with their vendors and asking them to work with the technique of repayment of their bills. Trade
credit has fundamentally solicited the suppliers to finance the business so that the business can
put them at the top of the list to be repaid in case of coming cash (White, 2017).
Outstanding approach for leadership:
House of Fraser had an ineffective approach towards leadership which became a major reason
behind the failure. The company was not cleared on how to handle all employees and outlays in
an appropriate manner by applying approachable leadership style. The company could have
applied an effective approach for leadership such as transformational or democratic leadership in
which the leaders could involve employees in making decisions for the company.
Limited stores
The company had around 51 stores in UK and Ireland without having proper arrangement of
managing team and operation (Plummer, 2018). It was necessary for the company to keep the
focus on the output of the employees instead of focusing only on opening stores. The planning
structure of the company was inappropriate due to which company had to face a huge loss.

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Conclusion
It has been concluded that strategic management is necessary for the companies to get growth in
the industry. This assignment has taken consideration of the case study of House of Fraser and its
failure in strategic decisions. The depth information about the reasons behind the failure of
House of Fraser has been mentioned under the assignment. It has been found that due to lack of
involvement of e-commerce strategy, improper cash flow, poor leadership and excess store have
become the major reason behind the failure of the companies. At last, the recommendations have
been made in the context of defining what improvement could have been taken at that time.

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References
Chen, L. and Mohamed, S., 2010. The strategic importance of tacit knowledge management
activities in construction. Construction Innovation, 10(2), pp.138-163.
Global Banking, 2018. House of Fraser: What went wrong? Available [online]
https://www.globalbankingandfinance.com/house-of-fraser-what-went-wrong/ Accessed on 27th
Feb 2019.
Haliday, S. 2018. House of Fraser teases new brand-focused strategy ahead of crunch vote.
Available [online] https://uk.fashionnetwork.com/news/House-of-Fraser-teases-new-brand-
focused-strategy-ahead-of-crunch-vote,990405.html#.XHYL4sAzbIU. Accessed on 27th Feb
2019.
Jahshan, E. 2018. House of Fraser refreshes brand strategy ahead of CVA vote. Available
[online] https://www.retailgazette.co.uk/blog/2018/06/house-of-fraser-refreshes-brand-strategy/
Accessed on 27th Feb 2019.
Lawlor, J.E., 2010. The importance of strategic planning. London: Observatory on Borderless
Higher education Long Range Planning, 21(1), pp.73-81.
Murray, J. 2018. How to Solve Cash Flow Problems in Business. Available [online]
https://www.thebalancesmb.com/cash-flow-solutions-for-businesses-397476 Accessed on 27th
Feb 2019.

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Plummer, R. 2018. House of Fraser: Five things that went wrong. Available [online]
https://www.bbc.com/news/business-45127423 Accessed on 27th Feb 2019.
Robert Mitchell, J., Shepherd, D.A. and Sharfman, M.P., 2011. Erratic strategic decisions: when
and why managers are inconsistent in strategic decision making. Strategic Management
Journal, 32(7), pp.683-704.
White, J. 2017. 9 Ways to Solve Business Cash Flow Problems. Available [online]
https://fitsmallbusiness.com/how-to-solve-cash-flow-problems/ Accessed on 27th Feb 2019.