Retro Is Our Future
The management team at Bally Hoo Fashions was gathered in Puerto Rico for their annual February executive meeting. The sales for the previous year totaled $85 million, and net profits hit $11.2 million. Both figures were the highest in company history even after adjusting for inflation, putting CEO Julia and the rest of the team in a jubilant mood. During the first evening of the meeting, just before dinner, Julia addressed the team in these words: "You folks may have heard the rumor, but I want to confirm it and expand a little. I have spotted a great opportunity for Bally Hoo, and I have had to look in the rear view mirror to get a clear picture of the future. "A dominant trend in the fashion world, especially for people under age 30, is the retro look. I'm talking about designs that go back to the disco look of the 1960s, and the Elvis Presley craze. I am proposing that we invest about $10 million in setting up Bally Hoo Retro boutiques across the country and in Canada. We will also sell our retro fashions to our major retailers." "I have some concerns, Julia," said Kelly, the director of marketing. "What makes you so confident that there is a future in retro fashions?" Julia replied, "I'm getting all sorts of vibes in that direction. The Elvis impersonator festivals are stronger than ever. I am seeing more photos on the Internet of restored 1957 Chevys recently. My teenage daughter told me that tunes from Nat King Cole, Barbara Streisand, and Frank Sinatra are hot in her school. Her boyfriend has started to grow sideburns and productions of "Grease" are running across the country." Trent, the chief financial officer said, "You are our leader Julia, and you have shown great fashion intuition in the past. But despite our recent prosperity, $10 million is a big gamble on a long shot like bringing back styles from over 50 years ago." Julia replied, "The great companies became great by making big bets on long shots. Look at how well Apple did in betting on iPods and iPhones." With a concerned expression, Trent said, "Julia, Apple didn't invest in rotary dial phones or phonographs. Steve Jobs and company bet on leading-edge products." With an exasperated expression, Julia said, "Okay, I can feel the cold water splashing on my face. Tomorrow morning, we will spend a few hours trying to determine whether our future is in retro."
Discussion Questions
1. How should the management team at Bally Hoo make an informed judgment about the future demand for retro clothing styles?
2. What is your evaluation of the creative thinking of Julia?
3. Should Kelly and Trent be reprimanded for insubordination?
4. If you were a consultant to Bally Hoo Fashions, what would you advise them on the feasibility of establishing a chain of retro boutiques and selling retro clothing to retailers? What is the source of information for your recommendations?