Why Is the Growth Rate Low for Sales in the Tokyo Area for the 2013 Fiscal Year?

Pipat J.

1. Put yourself in Mr.Ohsako’s position and formulate a framework for the business problem “Why is the growth rate low for sales in the Tokyo Area for the 2013 fiscal year?” Also, explain why you choose that framework. Please do not read Case B yet.

            According to the case, to answer the business question of why the sales growth rate for Tokyo area is lower for 2013 fiscal year, after reading the case A only, I decided to use the “3Cs” framework to identify the problem and come up with the preliminary hypothesis. From the information provided in the case A, it seems that Tokyo was the only area that encountering with the issue of reduction in sales growth. Thus, by using 3Cs, it will narrow down the analysis just for only customers, company, and competitors within Tokyo only. If I were to use PEST or Five Forces, it might take longer and too broad to specifically identify the problem within Tokyo area only, since the case also mentioned that Tokyo area is the only area that dragged down the average sales growth nationwide. So, by doing this, we will be able to scope down to customer’s behaviors or demand, how our company is doing and how our direct competitors are doing within Tokyo area. The analysis and preliminary hypothesis focus on service providing to various age range of customers, since, from the case, all of the product line and purchasing flow within the big three companies are merely the same, so the service might be the factor that varies the sales growth in Tokyo area, since there are more demands and expectation for glasses, especially when it becomes a fashion trend instead of just being a corrective glass for a better eyesight.

Referring to the Exhibit 1, the preliminary hypothesis for “Customer” is “The customer demand for glasses has changed rapidly”. The assumption is based on the context that other big competitors that are providing the same product line, service, and pricing strategy. So, the changes from customers might be because there are many age ranges and thus could lead to varieties needs and expectation of glasses and services provided in the store. So, when demand changes rapidly, it is might be hard to predict the pattern and encounter it instantly. The 20s-30s might want to have their own pace to choose and try the frame but the 40s and above might want to have someone to guide them and give some more recommendations.

The second is “Company” analysis for 3Cs. The preliminary hypothesis is “Our staffs are not well trained enough to deal with overwhelmed demands or preferences from the customers”. Based on the case, even though the service flows are the same for all players but when in action, the service satisfaction level will be based on customers demand and expectation for our product. So, my assumption is that our employees are trained enough to deliver the service to a variety of customers with different age group since each generation have different needs and expectations. Especially, in Tokyo where it is packed with populations of the different age range.

Thirdly, the preliminary hypothesis for “Competitor” is “Their staffs are well trained to cope with varieties of demands or preferences from the customers”. This was related to the “Company” preliminary hypothesis. So, basically, the competitors might have a better sense of how the demand varies for each age range of customers, especially in Tokyo, is changing and they were able to find a proper workflow to deal with it when providing the service.

            To sum up, as the environment and the target market are the same for EG and the others, two competitors, my hypotheses are focusing on the changes of customer’s demand or preferences due to the mix of age ranges in Tokyo areas. Thus, it also led to the assumption that due to those changes, we are not able to be adaptive enough to meets to those needs. However, our competitors might be able to adjust their service strategy to meet up with those needs.

2. Using the framework, you formulated in Exercise 1, formulate a conclusion for the business problem, “Why is the growth rate low for sales in the Tokyo Area for the 2013 fiscal year?” Using the Problem-solving steps as a guide, explain your conclusion and the thought process you used. Read Case B after created preliminary hypotheses from Case A.

            After reading the case B along with the data given, there is two major reason that I have assumed that it affected the declining on sales growth rate. Firstly, from the data given in Exhibit 3, I started to find the differences between 2012 and 2013 sales figures. Then filter those stores with less than 7.6% growth rate, which is the average of the total sales growth for domestic market nationwide. Then, I sorted it from largest to lowest number to see the differences between stores that are higher than the average and those with lower than the average. However, there is still no obvious reasons for the declining sales growth for 2013. So, I started to look at Exhibit 4 with the same approach. Then, highlight the stores with the growth rate that are more than 8% due to the assumption that these store with a higher percentage than the average are the one that is doing well and we should study more and adopt the same strategy to solve the problem for the others. From the data, it shows that there are stores that have even 9%-12% sales growth, especially in the customer with age 40s range. Thus, this leads to the assumption that those stores that are

Secondly, on the other hand, with thin the age 40s range in Exhibit 4, the rest of the stores with lower growth rate than average have a huge decrease growth rate, which is 2%-3%, compared to the average of 7.6%. By looking at the stores that are located near each other with #1 and #2 branches, it seems that there is a big difference in sales growth between those stores. As shown in Exhibit 5, the sales growth differs by 4%-5% for corrective glasses and 2%-3% for functional glasses and accessories in the total average. (Please see Exhibit 2 with refined hypotheses and conclusion)

Therefore, as shown in Exhibit 4, based on the preliminary hypothesis for “Customer” from “The customer demand for glasses are decreasing, so it is usual to see the decline in sales growth” will be refined as “The demand and preferences for customer who aged in the 40s blanket are increasing and thus, it takes more time to choose frames, lens and adjusting glasses. In addition, the demands also affect the higher sales growth rate for some stores and lower than usual for some stores”. This is because there was a clear distinction between those stores with higher and lower growth rate from the average. For those with higher, the assumption is that they are located with the area packed with those people aged in a 40s blanket and the stores with lower growth rate than average is located near the area with fewer people in age 40s blanket. To conclude, the hypothesis is based on the data provided that there is a significant change in sales growth rate for a customer in age 40s blanket, thus their demand and preferences are the factors that affect the sales growth.