MEMORANDUM

MEMORANDUM Paragraph 1 – Overview, background of the company and industry Paragraph  2– Overview of the internal factors, providing the internal factor score and what it indicates about the internal environment. Identification of key internal analysis factors (3-4). Include the rate and weight of each of the identified factors and a brief explanation of why you selected the rate and weight. Paragraph 3 –Overview of the external factors, providing the external factor score and what it indicates about the external environment. Identification  of key external analysis. factors ( 3-4).  Include the rate and weight of each of the identified factors and a brief explanation of why you selected the rate and weight. Paragraph 4 – What was the I/E matrix score? What did the I/E matrix indicate about the future strategic direction for the organization. What should it do in the future? The following are EXAMPLES of a discussion of an internal strength and a weakness. Internal Analysis •    A major strength is the well trained, educated and knowledgeable CEO. The case indicated that Tom Smith got an MBA from Harvard and had several years of operational experience at XYZ corp before going out on his own. He has continued to stay current in his industry by availing himself of seminars, training and other venues. He takes this new knowledge and incorporates it into his company. This was weighted .08, a moderate sense of urgency, because while this is already in place and Smith is doing a good job, he must stay current with changes in the industry and competitive environment. •    A minor weakness is the inexperience of the other members of the senior management team.  (Elaborate)  This was weighted .12, a high sense of urgency, because immediate action should be taken to bring these individuals up to speed and ensure they have the necessary technical skills (discipline specific and general management) to be successful in these positions. I&E MATRIX ANALYSIS In this section, you need to identify what the strategy area score was and what it means. Remember you want to identify the cell the plot is in and what it represents (growth or retrenchment strategic approach). Appendices Include as attachments the IFEM, EFEM, VEETOWS, I&E Matrix. Remember to print out only Matrix A for the IFEM and EFEM. Remember to use the correct weighting numbers ( low .04 to .07, medium .08 to .11 and high .12 to .15) and the fact that the weights MUST add exactly to 1.0 DO NOT COPY S w 9B10B005 MARTEN ARTS GALLERY INC. Andrew Hines wrote this case under the supervision of Elizabeth M. A. Grasby solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation.  The authors may have d isguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission.  Reproducti on of this material is not covered under authorization by any reproduction rights organization.  To order copies or request permissio n to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail [email protected]. Copyright  ©  2010, Ivey Management Services                                                                                                 Version: (A) 2010-08-09 On July 26, 2009, Dennis Marten Pal, director and owner of Marten Arts Gallery Incorporated (MAG), a fine art and craft retailer, sat at his desk in Bayfield, Ontario, to make a difficult decision.  Recent changes in the industry and the economy had impeded MAG’s financial performance.  The business had regained profitability in the first half of fiscal 2009, but Pal needed a plan of action to return MAG’s sales to previous years’ levels.  Was there still a future for him in the fine art industry? MARTEN ARTS GALLERY Marten Arts Gallery (MAG) was a family-run, fine art and fine craft retailer, centrally located in the core of the downtown Bayfield shopping area.  The gallery was run by Dennis Pal and his wife, Judy Stephenson, with the help of a few hourly workers that had been with the company for several years. MAG was well known in the town and surrounding area as a respected provider of unique art, including niche Canadian art and, more recently, the works of a few Australian artists. The gallery typically carried between 100 and 150 different artists’ works on site.  During its 20 years of operation, MAG had displayed the works of over 500 different artists, some of whom had become world- renowned for their works.  Two out of three sections of the gallery were regularly dedicated to exhibitions, 1 where artists’ works were showcased for three-week periods.  Although MAG had exclusive rights to sell its artists’ creations within an 80-kilometre radius, artists usually sold their works through up to 20 different outlets. History Growing up, Pal had been passionate about both art and science and had a distinct talent for photography. By his late teens, he had turned this pastime into his first entrepreneurial experience:  a photography 1 Temporary displays of individual artists’ works designed to build awareness for the parties involved and to draw in art enthusiasts. DO NOT COPY Page 2 9B10B005 service for weddings and various other functions.  Pal graduated high school at the top of his class and subsequently attended the prestigious bachelor of fine arts program at Queens University in Kingston, Ontario.  Although Pal had always had a keen understanding of fine art, he commented that his time at Queens opened his eyes to the artistic process. With a family cottage in the area, Pal had become familiar with Bayfield at a young age.  Recognizing it as a developing tourist market and underserved with fine art, he started MAG in 1988, at the age of 20, shortly after completing his second year of university.  Pal rented space in a building near downtown Bayfield and established Marten Arts Gallery, featuring his middle name “Marten.”  Although Pal had intentions of returning to school to finish his degree, the time commitment required to run the business prevented him from doing so.  One year after opening, MAG moved to its current downtown location. In 1995, the building’s owner was looking for a quick sale, and Pal purchased it for $217,000, about half its appraised value at the time.  Shortly thereafter, he met and married Judy Stephenson.  Stephenson began working at MAG shortly after marrying Pal.  Despite a lack of formal training in art or sales, she was a good fit for the business with her outgoing nature, strong organizational skills and exposure to art while dating Pal.  On the job, Stephenson quickly developed an eye for art and eventually took on sole responsibility for showcasing decisions and artist relations.  In 1999, the couple built an addition onto the back of the building, where they planned to live and start a family.  Both Pal and Stephenson enjoyed running day-to-day operations at MAG, and they planned to continue indefinitely with the business. Now the father of two children, Pal enjoyed being an entrepreneur and considered himself to be a quick learner.  Self-taught in the area of technology, Pal handled maintenance, updating and general upkeep of the business’s networks, website and sales and inventory systems.  He was also MAG’s bookkeeper and had been making significant efforts to control the business’s operational- and inventory-related costs.  Pal had no intentions of retiring; in fact, he had aspirations of one day returning to his roots in photography. At the gallery, he enjoyed discussing art and interacting with his customers.  Regardless of what happened in the future, Pal believed he would always be involved with art in some form. Sales 2 Prices in the gallery ranged anywhere from $50 to $10,000, depending on the size and the artistic creator of the piece.  Fifty-five per cent of the gallery’s business was done on consignment, and MAG was paid a predetermined percentage commission based on the item’s selling price. 3 The other 45 per cent of sales came from art works purchased by MAG for resale.  The gallery applied a standard retail markup to these pieces and assumed full responsibility for the items regardless of their salability.   See Exhibits 1 to 3 for MAG’s financial performance for fiscal years 2006, 2007, and 2008. MAG Website In addition to exceptional customer service and the promotion of a unique collection of artists, MAG also provided its loyal customer base with a comprehensive website.  The website provided information on the gallery’s activities, profiled artists, and featured a link to an e-mail list where customers could register to be updated on the gallery’s latest news.  Pal believed that the website was essential to maintaining a strong relationship with the gallery’s artists, and he worked hard at keeping the site current and creating as much 2 Unless otherwise stated, all currencies are in Canadian dollars. 3 Artists displayed their pieces in the gallery and were paid only when their items sold.