Circuit City Analysis

Circuit City Analysis

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Circuit City Analysis
Issue
At the beginning of the 2007 fiscal year, Circuit City (CC) announced that it would layoff more than 3,400 of its highest paid employees (Business Week, 2008). The goal of this reduction in personnel was to reduce internal costs by eliminating a large percentage of CC’s upper and middle management. The main issue with this reduction is CC has lost most of its skilled employees and customer satisfaction has plummeted. CC needed to make changes in order to cut costs, but it failed to integrate staffing practices with strategy (Dreher & Dougherty, 2001). The result of this and many other failures at the upper management level is CC shares have fallen 28% in the last year.
Strategy
The strategy CC chose to use seemed quite simple. Fire its employees and re-hire them at a lower “market rate” wage (Business Week, 2008). This would undoubtedly save the organization a great deal of money and CEO Philip Schoonover thought it was an excellent solution. The problem was CC failed to realize it was firing its key customer service representatives. The employees who made contact with the customers on a daily basis were being let go.
Results
The result of CC firing thousands of employees is it saved money on salaries, but lost a great deal more in sales while increasing customer dissatisfaction. CC failed to integrate staff practices with strategy. These practices require an organization to characterize explicitly its business strategy then make judgments about if existing staffing practices appear to be aligned with strategic orientation. CC fired personnel but failed to see the effects these cuts would have on staff and its ability to satisfy customer needs. The result of this decision is CC shares tumbled to $4.80 during trading on December 21, 2007 hitting a new 52-week low of $4.76 earlier in the session (Business Week, 2008).
AT&T: Anabel Garcia
Issue
AT&T, BellSouth and Cingular are in the final stages of merging. The companies see a merger as combining the largest backbone for data with the larger local data provider to increase service capabilities, increase profits and become a global leader. These companies will operate as AT&T to take advantage of the oldest and most well-known brand in telephony. Some analysts believe the Cingular brand appeals more to the “in crowd” of today’s technology users and AT&T recognizes this fact.
These companies want to reduce redundancies in vendors, employee tasks and marketing; doing this will cause layoffs of over 13,000 employees.

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Initially the announcement was analysts thought only management would lose jobs, but this has not been the case as positions from engineers to administrative roles are slated to be eliminated, (Converge Network Services, 2005).
Strategy
The first part of the strategic plan is to layoff 13,000 workers of all ranks. The layoffs result in nearly 60% of cost reductions planned for the merger. The next step is to use the AT&T brand in a new image. It will revamp the logo to be 3-D, use the orange color from Cingular, and use “at&t” in lower case letters for marketing purposes while the AT&T, Inc. will be retained for the corporate name. Another part of the plan includes positioning the combined companies as the lowest cost service provider for all communication technologies globally.
Results
The implementation of the strategic plan has left over 10,000 people out of a job. AT&T has allowed some attrition to take care of cutbacks in employee count and it also plans to repatriate some 3,000 jobs currently outsourced by BellSouth in foreign countries.
New efficiencies using AT&T’s automation realized “…by building work processes around a single network view and not an artificially imposed long haul and local hierarchy,” (Converge Network Services, 2005).
The new AT&T used executives from all three companies to form the governing leadership in the newly formed company softening the blow of the power struggles.
The shareholders are thrilled with the financial results. The mere announcement of the merger made stock prices rise for both companies. The Consolidated statement of income for AT&T, Inc. showed a 97.1% increase in net income from March 2006 to March 2007. The earnings per share are now $0.46 an increase of 24.3% from same period last year. However, not all stakeholders are happy. A blog from a consumer in Lafayette implied Cingular misled the people about the loss of jobs, (www.lafayetteprofiber.com/Blog). The strategic plan is working.
Compare and Contrast Intersect Investment to Benchmark Companies
Circuit City: Anabel Garcia
InterClean needs to make a revolutionary change in how it does business. It must shift from a product based business to a solution based business in a short time in order to stay competitive in the sanitation industry. The result of this change will define InterClean in the years that follow. CC faced a similar situation where it found itself needing to change in order to stay competitive in the sales field. The solution CC moved forward with was firing high paid employees in order to save money. It failed to analyze personnel in the organization and the effect such a change would have on the business. The result of such a move has been customer service complaints, a poorly trained staff, and rapidly falling share prices. InterClean can learn from CC’s failure by conducting a thorough hiring and training process. This internal focus on employees will help ensure future success as it transitions.
AT&T: Anabel Garcia
AT&T has implemented more than one merger over the years and the success demonstrated with the BellSouth and Cingular acquisitions proves this to be accurate. InterClean should use AT&T as a benchmark for strategic plans for mergers. InterClean must develop a new culture, new products, and package new services while integrating EnviroTech into the newly developed InterClean culture. It also must develop a leadership team combining leaders from both companies. The main issue is keeping good employees while being fair to those not kept. AT&T put upper senior management in place for the new company as well as keeping some of the current management staff. InterClean should consider creating a whole new company image as did Cingular and AT&T have done. The financial reports for AT&T prove the plan is a good one for InterClean to adapt.


References
AT&T Website. (2006, March 5). AT&T, BellSouth to merge. AT&T – News Room. Retrieved October 9, 2008 from http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=22860
AT&T (2008). AT&T, Inc. financial data. Retrieved October 10, 2008 from http://www.att.com/Investor/Financial/Earning_Info/docs/IS_IB_1Q07.xls
Business Week (2008). Circuit City Gets Crushed. Retrieved October 10, 2008from http://www.businessweek.com/magazine/content/06
Converge Network Digest. (2005). SBC – AT&T merger to result in 13,000 layoffs, reduced CAPEX. Retrieved October 10, 2008 from http://www.convergedigest.com/Bandwidth/newnetworksarticle.asp?ID=13617
Dreher & Dougherty (2001). Human resource strategy: A behavioral perspective for the general manager. New York: McGraw-Hill.
Lafayette Pro Fiber Blog: (2004, September 26). Cingular merger with AT&T threatens Cingular jobs – including those in Lafayette! Retrieved October 9, 2008, from http://lafayetteprofiber.com/Blog/2004/09/cingular-merger-with-att-threatens.html
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