Bed Bath and Beyond Case

Judy Lugasan

Stanton University

BU695: International Strategic Management

Dr. Marco Reburiano

Nov. 27, 2022

Introduction

A new strategy "to unlock growth and drive significant shareholder value" was

unveiled by Mark Tritton and his new leadership team on October 28, 2020, the first day

of his second year as CEO of Bed Bath & Beyond (BB&B). Since 2017, the shares of

Bed Bath & Beyond (BB&B), a major retailer of home furnishings, have been under

pressure from Wall Street for a while now. In fact, the large-cap stock, which was a must-

have brand in retail when the business went public back in 1992, has lost about 35% of its

value in the last year and is currently trading at a level similar to where it did at the

beginning of the decade. (Esty & Fisher, 2022, p. 1)

In addition, earnings appear to have plateaued, hovering around the $5 per share

level as same-store sales have slowed (falling a worse-than-expected 1.2% during the

interim in August) and margins have steadily decreased (Hellman, n.d.). Despite Tritton’s

optimism, analysts responded with both excitement and uncertainty. It remained to be

seen if Tritton had the appropriate strategy, team, and plan. Would this "full-scale

renovation," as he liked to refer to it, be a success or was it too little, too late?

(GlobalData, 2022).
I. Current Situation

    A. Current Performance

 Financial well-being is declining, intensified by the effects of the COVID-19

pandemic. (GlobalData, 2022)

 ROE is at -11.8% as of August 2022

 Operating Profit Margin is at -8.2% as of August 2022

 A decrease of 14.8% in revenue generated over Fiscal Year 2021

B. Strategic Posture

1. Mission       

 “Re-establish our authority and be the preferred omni-channel home

destination driven by teams consistently delivering balanced durable

growth”

2. Objectives

3. Strategies

 Delivering on our Promise to inspire customers to “Unlock the Magic in

Every Room.”

 Curating a differentiated Product assortment to capture market share.

 Offering a clear and compelling Price-value proposition to increase

relevance with customers while driving productivity and cost savings. 

  Leveraging our stores as a strategic asset in an omni-always Place growth

strategy that delivers fast and convenient shopping for our digital-first

customers.  

 Modernizing operational Proficiencies to deliver a technology-powered

foundation to support sustainable growth, improved margins and greater

cash generation. 

 Unlocking a virtuous cycle to deliver sustainable value creation. 

II. Strategic Managers

   A. Board of Directors (Names & Background)

 Sue E. Gove - Since 2014, Ms. Gove has provided clients with advice on

important issues affecting the retail industry as the founder of Excelsior

Advisors, LLC, a retail consulting and advisory company. From March

2017 to March 2019, she worked as a Senior Advisor for the international

professional services company Alvarez & Marsal.

 Harriet Edelman - Ms. Edelman is a successful senior executive with

more than 30 years of experience operating globally in the financial

services and consumer goods industries. She was the Special Advisor to

the Chairman from June 2008 to October 2010 and has been Vice Chair

of Emigrant Bank, a private financial institution, since 2010.

 Jeffrey A. Kirwan - Prior to this, Mr. Kirwan held the positions of

Senior Vice President-Stores & Operations at Old Navy (Canada), Inc.

and Global President & CEO-Gap Division at Gap, Inc. He graduated

 from Rhode Island College with a BA and the University of Maryland

University College with an MBA.

 Joshua E. Schechter - Chairman of Sunworks, Inc., Chairman of

Support.com, Inc., Co-President of Steel Partners Japan Asset

Management LP, Managing Director of Steel Partners Ltd., Executive

Chairman of Aderans America Holdings, Inc., Director of Jackson

Products, Inc., Associate-Corporate Finance Group at Imperial Capital

LLC, Director and Head-United States Business at Aderans Co., Ltd., and

Financial Analyst at Leifer Capital were among the positions Mr.

Schechter previously held.

 Marjorie L. Bowen - Marjorie L. Bowen serves on the boards of

Voyager Aviation Holdings LLC, Bed Bath & Beyond, Inc., CBL &

Associates Properties, Inc., and Illinois Power Generating Co.

She previously held the position of Managing Director at Houlihan

Lokey, Inc. She graduated from Colgate University with a bachelor's

degree and the University of Chicago with an MBA.

 Shelley C. Lombard - She previously was Principal at Drexel Burnham

Lambert Real Estate Associates II, Head of Research at Britton Hill

Capital, Research Analyst at Gimme Credit LLC, Principal at Voya

Capital LLC and Principal at The Chase Manhattan Corp. She received
 an undergraduate degree from Simmons University and an MBA from

The Trustees of Columbia University in The City of New York.

    B. Top Management (Names & Background)

 Sue E. Gove - Director, President & Chief Executive Officer

 Laura Crossen - Interim Chief Financial Officer

 Anu Gupta - Executive Vice President, Chief Growth Officer

 Arlene Hong - Executive Vice President, Chief Legal Officer &

Corporate Secretary

 Lynda Markoe - Executive Vice President, Chief People & Culture

Officer

 Rafeh Masood - Executive Vice President, Chief Customer &

Technology Officer

 Mara Sirhal - Executive Vice President, Brand President – Bed Bath &

Beyond

 Patty Wu - Executive Vice President, Brand President – buybuy BABY

III. External Environment (EFAS Table; see Exhibit 1)

  A. Natural Environment

 The Company is establishing significant benchmarks for the upcoming

decade and beyond while also taking a number of immediate actions to

increase its beneficial impact for people, community, and planet

 They intend to set a good example for future generations by reaching

Net Zero by 2040 and increasing access to sustainable products.

B. Societal Environment

     1. Economic

 Focus & Spending on Renewable Technologies - How much of the

budget is allocated to renewable energy sources, and how can BB&BY

make this investment as part of its competitive strategy?

 Environmental Regulation Impacting Absolute Cost Advantage

Dynamics in the Industry.

 Recycle Policies - What are the market's recycling regulations, and how

can BB&BY follow them?

2. Technological

 Transparency & Digital Drive – BB&BY can combat corruption in the

local economy by digitizing a variety of processes.

  Research and Development Investment Levels - High levels of

investment in the technology development sector increase the likelihood

of creating an ecosystem that supports innovation. A circumstance like

this presents an opportunity for Barron's Business to hire the top

candidates.

3. Political–Legal

 Attitude towards Health & Safety - The standard of the goods and cost

structures of production processes frequently reflect the attitude toward

health and safety. Since BB&BY must adhere to strict health and safety

standards, it may face competition in emerging markets from businesses

with lower cost structures.

 Role of Non-Government Organization, Civil Society & Protest Groups

– BB&BY should establish connections with the nation's thriving civil

society community and look for opportunities for collaboration. Groups

from the civil society have an impact on shaping the narrative of the

entire society as well as on policymaking.

4. Sociocultural

 Gender Composition in Labor Market – BB&BY can utilize the labor

market's gender makeup to gauge how liberal a culture is, how much it

values women's rights, and how much influence women have over societal

issues and consumer choices. The gender breakdown of the labor force is a
 reliable predictor of household disposable income, priorities, and related

demands.

 Level of Social Concerns & Awareness in Society - Increasing consumer

activism and pressure from non-governmental organizations and pressure

groups are frequently a result of higher levels of social issues in the

society.

    C. Task Environment (Industry Analysis)

1. Threats of New Entrants (Low) - New competitors to Bed Bath Beyond face

little risk because of its established reputation and sizable global distribution

network.

2. Rivalry among the Existing Competitors (High) - Price reductions and a

decline in the industry's overall profitability will result from fierce

competition among the existing companies. Home furnishing stores are a very

competitive market in which Bed Bath & Beyond Inc. competes. The total

long-term profitability of the company is affected by this competition.

3. Bargaining Power of Suppliers (High) - Most businesses in the home

furnishings stores sector purchase their raw materials from a wide range of

suppliers. Suppliers with market dominance may limit the profit margins that

Bed Bath & Beyond Inc. can achieve. Strong service providers utilize their

negotiation position to get higher fees from businesses in the home

furnishings stores industry. Higher supplier bargaining power generally has

the effect of decreasing Home Furnishing Stores' overall profitability.

 4. Bargaining Power of Buyers (High)- Due to fierce competition, buyers have

a strong negotiating position. Since many businesses sell a variety of similar

products, switching costs are relatively inexpensive for consumers. This

appears to be a great risk for any firm. Bed Bath Beyond ensures that its

customers are delighted as a result. Due to this, customers consider Bed Bath

& Beyond to be one of their most dependable brands.

5. Threat of Substitutes (High)- If a substitute product or service delivers a

value proposition that is significantly different from the current options in the

market, it poses a serious threat.

IV. Internal Environment

    A. Corporate Structure

 The company have been observing a decentralized organizational

structure for a number of decades until the late 2020 after it appointed a

new CEO, Mark Tritton.

However, the new leadership team have observed that necessary changes have

to be made. Bed Bath & Beyond locations over ordered and stacked product

from floor to ceiling as a result of a decentralized approach to merchandising.

Pictures displayed to investors during the presentation were described as

"painful" by COO John Hartmann, who had only been with the firm for six

months at the time of Investor Day. Overstocked stores also resulted in steep

markdowns (Cosgrove, 2020).

  The business used centralized ordering and replenishment as well as a

digital forecasting tool to address this. According to Hartmann, quicker

replenishment should deter businesses from bulking up on the best-

selling goods while also decreasing stockouts.

B. Corporate Culture

 “We believe collective power makes a difference for associates, our

customers, our communities, and our business. Together we cultivate a

work culture that's inclusive and creates an environment where

associates can bring their whole selves to work, where hard work and

results are recognized and appreciated.

No matter your role or tenure, we are invested in your success. From

skills development classes that help you build capabilities in your role to

wellness, we partner to support your aspirations across the breadth of

opportunities we have available.” (Culture, 2022)

V. Analysis of Strategic Factors

   A. Situational Analysis (SWOT)

    1. Strengths
 A strong distribution network - Bed Bath & Beyond has built a strong

distribution network over the years that can reach most of its prospective

clients.

 Highly skilled workforce, thanks to effective programs of learning and

training - With its significant investment in employee training and

development, Bed Bath & Beyond has created a workforce that is not just

highly trained but also driven to achieve more.

 A Strong Brand Portfolio - Bed Bath & Beyond has made investments

throughout the years to create a strong portfolio of brands. This is only

confirmed by a SWOT analysis done as part of Bed Bath & Beyond. This

brand portfolio is especially helpful when a company wants to branch out

into other product categories.

 Reliable suppliers - The business can avoid any supply chain bottlenecks

because to its broad network of dependable raw material suppliers

 A track record of success in merging and integrating companies through

mergers & acquisitions - Over the last several years, it has successfully

integrated a number of technological companies in order to streamline

operations and build a reliable supply chain.

 The culture of distributors and dealers has been shaped by a strong dealer

community, in which dealers spend in training sales staff to help

 customers get the most out of the goods rather than merely marketing

them.

 Solid Free Cash Flow - High free cash flow makes it possible for Bed

Bath & Beyond to launch new businesses.

 Process automation has ensured that Bed Bath & Beyond goods are

consistently of high quality and allowed the company to expand and

contract in response to market demands. (Dane, 2022)

2. Weaknesses

 In terms of integrating businesses from various cultural backgrounds, it is

not particularly effective. Although Bed Bath & Beyond has historically

been successful at integrating small businesses, it has also had its share of

setbacks when it comes to combining businesses with various cultural

perspectives.

 Research and development spending is lower than that of the market's

fastest-growing businesses. Bed Bath & Beyond spends more on research

and development than the industry average, but it hasn't been able to keep

up with the most well-known corporations in terms of the rate of

innovation. It is presented as an established company that is eager to

introduce items based on tried-and-true marketable attributes.

  Bed Bath & Beyond is one of the top businesses in its industry, but it has

had only little success outside of its core sector due to the limitations of

its present business strategy.

 Many things about the manner the product was promoted were lacking.

Although the product has outstanding sales, its positioning and unique

selling proposition aren't generally understood, which could make it a

target for rivals.

 The products that the company offers have some inconsistencies. A new

rival could be able to obtain an advantage on the market due to a lack of

variety.

 The business has lost a minor amount of market share in small-scale

categories and is ill-equipped to handle the challenges posed by new

competitors. To address these problems, Bed Bath & Beyond created an

internal feedback system that is run by the local sales staff.

 Bed Bath & Beyond has a lower profitability ratio and net contribution

percentage than the industry average (Dane, 2022).

3. Opportunities

 Bed Bath & Beyond now has the chance to execute distinct pricing

strategies in the present market thanks to the new technologies. Excellent

 customer service will help the company keep its regular customers and

draw in new ones with other value-based solutions.

 Bed Bath & Beyond products can also be purchased through state and

federal government contractors under the government green initiative.

 Having a consistent cash flow makes it possible to make investments in

additional product categories. The company can invest in new product

categories and cutting-edge technologies when there is more money in

the bank. This will give Bed Bath & Beyond fresh opportunities in other

product categories.

 Through government agreements, new markets are opening up; the

adoption of new technology standards and a free trade agreement has

offered Bed Bath & Beyond a chance to enter a developing market.

 Lower inflation: A lower inflation rate will stabilize the market and make

loans available to Bed Bath & Beyond customers at a lower rate.

 A potential for Bed Bath & Beyond to boost its profit margins or pass the

savings on to customers in order to gain market share would be provided

by lowering the price of transportation as a result of decreased shipping

expenses.

 Online channels are where the company finds new clients; during the past

few years, it has heavily invested in its online presence. Due to this
 investment, Bed Bath & Beyond now has access to a completely new

sales channel. The business may take advantage of this potential in the

coming years by better understanding the demands of its clients and

satisfying those needs through big data-driven analytics.

 Consumers of Bed Bath & Beyond may have new opportunities as a

result of recent shifts in consumer behavior. It is a fantastic chance for the

business to develop new revenue sources and diversify its product

offerings.

4. Threats

 Bed Bath & Beyond's products may be at risk from copying of subpar,

phony goods, especially in developing and low-income regions.

 The profitability of Bed Bath & Beyond may be seriously impacted by

pay hikes, particularly ones like $15 an hour, and rising prices in China.

 The profitability of Bed Bath & Beyond may be impacted by the rising

cost of raw materials.

 In the short to medium term, disruptive technologies created by

competitors or market disruptors could constitute a serious threat to the

sector.
  The Paris Agreement's (2016) new environmental restrictions may

threaten several established product categories.

 Due to the seasonal nature of the high-profitable product demand, any

uncertainty during peak periods may have an immediate or long-term

effect on the company's profitability.

 International sales may suffer if other governments respond similarly to

the growing tendency of economic isolationism in the United States.

 Due to differing regulations and ongoing changes affecting the caliber of

items offered in particular marketplaces, the corporation may be the

target of lawsuits in a number of jurisdictions.

B. Review of Current Mission and Objectives

 The Mission statement needs to be more clear and updated to address the

fast-changing needs of the market.

 The Company goals should be stated in the Company website.

VI. Recommended Strategies

A. Business Strategy (Focus, Differentiation, Cost Leadership)

  Recommended Differentiation strategy. By offering a valuable value

proposition to customers, Bed Bath and Beyond can aim to stand out

from the competition in its industry. BB&BY can choose one or more

characteristics that will help it stand out from the competition in the eyes

of its clients for a certain requirement. Due to the differentiation and

uniqueness of the providing, the objective is to seek a premium price.

BB&BY can avoid areas that are already overrun by competition by

conducting an industry analysis using the Porter’s Five Forces.

B. Corporate Strategy (Growth, Pause, Retrenchment)

 Recommended Pause strategy. To further stabilize the recent financial

declines of the company, it is recommended to take a step back before

pursuing any growth for this year. The said strategy will eliminate

unnecessary layers pertaining to sales volume, store footprints, etc.

C. International Strategy (Franchising, Licensing, Acquisition, Joint Venture, etc)

 Looking at the current Financial plight of Bed Bath and Beyond,

expansion is not a recommended move. Instead, the company can focus

on the existing branches by improving supply chain systems, remodeling

its stores, optimize banners, and develop customer-centered marketing

strategies.
VII. Implementation

 There is a need to remodel their online market strategies since

competition is rapidly increasing in today’s market.

 Capital structures should also be distributed and invested well to secure

liquidity for future operations.

 Pay attention to urgent matters and maximize the value of Bed Bath &

Beyond and Buy Buy Baby banners.

VIII. Evaluation and Control

 With the new leadership team, Bed Bath and Beyond has been doing well

so far in its control system. Learning from the past downfalls, they are

now more transparent with their strategies and financial state in

consideration of their Investors.

 Bed Bath and Beyond needs to continue this system to immediately

identify which strategies need to be corrected or eliminate.

Conclusion

The previous CEO of Bed Bath and Beyond Mark Tritton said:

“[T]he history and brand of our company, our house, is beloved by so many, but a house reliant

on positive memories from the past won’t weather any storm. This house had to evolve and be
made relevant. It needed to be fortified for today and the future. And in short, this isn’t a

renovation for the faint of heart, and I’m honored to lead it” (Esty & Fisher, 2022)

Bed Bath and Beyond have faced several downfalls from the past several years and even

though leadership teams have been updated once again, the challenge is still the same—will they

be able re-establish the Brand’s role in the market as their Mission statement claims?