1.

INTRODUCTION TO THE CASE

Vitaloptics is an optic business located in Mallorca. The owner is Joan Beltràn, a well-
known and popular character around the sector who started this business with his ex-
wife: Óptica Inca. Vitaloptics is an optical equipment retailer, that provides really good
quality and affordable eye care items such as lens, glasses, optical accessories and
even audio devices around the territory of Mallorca.
When Joan got divorced, his ex-wife earned the most profitable and potential stores,
so he had to make changes and refresh his company. Once he did, he renamed the
company to Vitaloptics, but the business went really bad and was actually heading to
the bankruptcy.
There’s a total of six stores: two in the city of Inca, one in Binissalem, another one in
Manacor and a couple more in Palma, six stores in total. Each one has its own
advantages and mostly, disadvantages as a result of management issues and a wrong
behaviour of the employees.
The thought process to rescue the company of the incoming bankruptcy consists of
three steps:
1. Analysing and Identifying the problems step by step, keeping in mind general
issues of the company and internal lacks and cons of the stores. Because of
the amount of stores the company has and their different characteristics, each
one of them is going to be analysed individually.
2. Setting up a plan and its following strategy that solves the accounted issues,
both in a general and specific way for each store and the whole business.
3. Taking into account the expected results that are the reason why the previous
strategies have been applied.

2. VALUE PROPOSITION
What makes the difference between the competitors and Vitaloptics has to be showed
off to everyone, especially to the clients, so they rather choose to make business with
Vitaloptics than other brands.
One great strength of this company is the great quality price of lenses at an affordable
price, something that Mr. Beltran made sure to offer because he knows how important
is the company of the brand in order to succeed in any market.
The values that can make the difference are the following:
• To provide a high quality and affordable eye care to people in Mallorca.
• To supply the most advanced technology equipment.
• To offer a great shopping service, making it a whole experience, disposing to
give after-sale service to any client no matter what.
3. ANALYSIS OF THE MAIN ISSUES
During the most recent years, the company has been dealing with internal and
external problems that are leading the business to the bankruptcy. There’s still a
chance to save Mr. Beltran’s business, but several changes have to be done. In the
following study, the weaknesses and threats of the company will be talked about as
well as solutions for them will be presented in the same way.
Before going deep into an objective analysis, it’s key to keep in mind that there are
two kind of problems, which can be internal or external:
a) Internal issues are related to the management and the procedures by most
trusted personnel which Mr. Beltran confided to take his business. These
problems are going to be analysed in the general section.
b) External issues have to do with the sale of the products: the stores and their
characteristics, the perception of the brand and the products themselves, the
trust and the integrity of the company, etc. In order to get this straight, a store
by store analysis will be done below the general one.

3.1. GENERAL ANALYSIS

As a company, what should be handled first is the management. Mr. Beltran hired a
CEO for Vitaloptics who was graduated in a highly prestigious university, so he trusted
him the direction of the enterprise. The marketing strategies applied by this guy had
poorly shown their results due the lack of accuracy, capability and competiveness.
Some of the most noteworthy mistakes were:
- Stop working with Luxotica. Luxotica is one of the greatest worldwide known
distributors of high end sunglasses and glasses branding, and used to be who
distributed to Vitaloptics until the company started to accumulate a certain
amount of debt, so it wouldn’t distribute anymore until this was payed. The
CEO decided to ignore the deal, and not only that: when Luxotica decided to
stop making business with Vitaloptics, this one decided to not pay anything as
a knockback punishment. The reaction taken by the CEO leaded to an increase
of the debt plus the gain of a non-payer company’s reputation, something that
any other distributor would take into account.
- Hire Mr. Beltran’s brother in law as designer for the stock accounting software.
He generated a 300.000€ loss and didn’t come up yet with a software, so the
company didn’t have an inventory control with statistics of sells per product or
an adequate stock management.
- Fake prices and discounts. The products weren’t tagged with their price, so
when some client asks for it, the sales person would guess it, and also lie
saying that the product is on sale, sometimes up to 50%. This practice went so
far to the point that in different stores, the exact same frame could have totally
different prices.
- Misplaced advertising campaign. Some advertisement has been placed in the
Mallorca’s airport TVs, where almost nobody would care less about. The clients
targeted where tourists who don’t stay too long in the island and are not really
concerned about buying sunglasses. The campaign took 120.00€ to go ahead,
which without effectiveness would only be considered as a loss and a
complete disaster.
- Buying the same amount of stock, no matter what. To don’t transmit weakness
and the bad situation of the company to the suppliers, every the they used to
purchase more stock, the amount was always the same.
- The controller. An old woman without studies who worked for many years in
the company as a sales manager, became the responsible of stock control and
inventory tracking, asking store by store what do they need. Also, this
controller used to take notes of the lenses orders every store needed, by hand,
which lead to so many mistakes that pissed-off many clients.
- Accounting system. For the 6 stores of the company, there were two
accountants, who used to do their job accounting the sales revenue by
checking the ticket of every single product sold. That takes a lot of time and
it’s not even needed: the bank itself can do it for them by transferring the
money of each store at the end of the day, week or month, to a bank account.
- Not joining purchasing centrals. Some distributors of well-known and popular
brands use to ask for a huge minimum purchase, which could be way too
expensive and unaffordable for some companies like Vitaloptics. In place of
joining purchasing centrals and collaborate with others to purchase that certain
amount so they could share it, the decision was to not even thinking of doing
it.
- The “treasurer”. We found out that this sir used to go store by store to re-count
the cash and make sure everything’s on point with the accounting, but the
truth is that he was money laundering. Some employees were not paid at the
end of the month, so they got paid in black with cash, and when the
employees transfer these money to their respective bank accounts, at the end
of the year the Treasury would notice of the whole story.
 3.2. STORE BY STORE ANALYSIS

• INCA 1

The store’s furniture looks old and antique,

giving the perception of a classic brand: those
wooden dark desks, the stands and the
lighting just tell about the store as an
outdated one. The colours of the store are not
the most appropriate for nowadays. Mirrors
have no lights on top, and together with the
dark colours, the environment looks dusky
and shadowy.
Some empty stands are half-empty, and complementary products
that have nothing to do with the main source of the company, are
placed in great locations in the store, such as the telescope of the
picture. Bad distribution of stock overall.
The “luxury zone” of the store has several lacks: the luxury brands are
placed in a corner of the store into some weird glass boxes, and are
being watched with a shameless security camera, just like telling the
customers they are wannabes that can’t afford to purchase a luxury
brand of glasses, which makes them potential criminals threatening
the security of the store.
Too many employees: by just keeping a worker for each office plus
the store manager should be more than enough.

• INCA 2 (AMBULATORIO)
Located near to the social security’s ambulatory,
this store has similar characteristics of Inca 1, such
as odd furniture and dark lighting. That’s because
both stores were opened during the similar period
of time (1984 and 1990, respectively).
The most noticeable issue turns to be the outside
of the store: the yellowish sign outside saying
“Optica Inca”, the past name of the company. The
thing is that you don’t need to get in to know that
the store is outdated and old.
The only optician of the store only comes when he’s called, which makes totally no
sense. As we know, a client that wants to check his vision must wait for fifteen
minutes until the optician comes by.
 • BINISSALEM
The showcase strategy of the product and the distribution
in this store is probably the worst one of the whole case.
Some glasses are placed in the floor on a net, as the
picture shows, which relates the product to a perception
of trash, trash and scum that you can even step on if you
don’t walk carefully around the store.
Also, the shelves where most of the glasses are exhibited
to the customers are, together with the weird-form mirror,
shamefully ugly.

• MANACOR
Quite similar in the furniture aspect as the already seen stores. The biggest issue is the
location, that even if it’s a low-rent, the store is close but not quite in the main
shopping district of Manacor.
Once again, the yellowish sign of the store is not updated.
Lack of stock exposure.

• PALMA 1
The most disappointing and wasted store of the whole
company. Even if it has a great location in a secondary
shopping area of Palma, the sales have dropped.
The showcase outside the store is completely outdated
and has plenty of ugly signs. The shelves look super
ugly and fragile, and there’s a big lack of stock
exposure inside: the optician’s office is way bigger than
the area where products are exposed, which is a totally
waste of the store.

• PALMA 2
Opened in 2003, is the most luxurious and
good-looking store of the company. The
distribution, the furniture, the exposure, the
lighting and pretty much everything looks
great overall.
Regrettably, there’s a big and key con: the
location. It’s a big handicap to have the
greatest looking store away from any
shopping area and Palma’s centre, but even
though, the sales increased from 12.800 to
15.400 per month.
After discussing all the mismanagement of the company and what are the things
that go wrong with it, we came up with the conclusion of cutting off on some
expenses, investing in other areas of the company… so we present the following
solutions.

4. STRATEGIES

4. 1. DOWNSIZING STRATEGY:

Firstly, after the overlooking our portfolio in terms of stores, we reached to a

conclusion. Downsizing in the number of stores. As our analysis showed, all of the
stores show a number of disadvantages. In some of them, the disadvantages
outnumber the advantages so the best option will be to vacate them.
The stores that will be closed will be:

1. Manacor: for its bad location, even though the rent may seem as a positive
factor to take into account, for being too low. A lot of refurbishment should be
made in the store, and it would not have a big impact in terms to contributing
in the revenue of the company.
2. Palma 2: this store, as previously commented, is the luxurious one.
Showcasing a fashionable and actual image, does not necessarily show an
improvement in terms of sales (having invested a big amount in
refurbishment). Also, the location is very unfortunate because it is away from
any shopping area. The value of the store, now decreased, is 610.000€.

By reducing the number of stores, not only we are cutting down on personnel
costs, and rent (though is a minimum amount), but also we are gaining the value
of the store sold.

In all of the stores, there are some irrelevancies, that may show an unprofessional
image in the company. This complements (telescopes, thermometers…), they
barely contribute in the sales percentage (with only a 0,5%). Downsizing in the
portfolio, by removing this section, would barely make a difference, and would
help have a cleaner, and more modern image in the stores.

Moving on, we would like to focus on the managing team of the company. Due to
the lack of effectiveness of the director of the company, the lack of tasks
accomplished by the director, and moreover the unjustified high amount payed to
the software designer (who is the brother in law of the director), without, again,
results that have benefited the company, he or she will be dismissed from his
responsibility, and a new director with more experience in the area and of course,
with reviewed recommendation letters from previous companies will be hired. The
latter, and newly hired director, will manage the day-to-day business activities and
finances, and meticulously make decisions that will benefit the company.

A company's controller is the chief accounting officer and heads the accounting
department. The controller is responsible for the company's financial statements,
general ledger, cost accounting, payroll, accounts payable, accounts receivable,
budgeting, tax compliance, and various special analyses. That being said, the
actual controller of Vitaloptics, not only does not complete this tasks (wrong
positioned), but also is under qualified for the role. In the case of a small company,
as in this case, the controller’s position is often covered by the accountant, who
will respond directly to de director or the owner.
Given that the company, has three accountants, which as previously mentioned, is
unnecessary, one of them will be kept. With the raise of station, a considerable
salary raise is made due to the changes of position (he or she will go from
receiving the salary of accountant, to a salary of a controller, which is higher).
In terms of reduction in personnel of accountants, this is due to the simplification
of their role by having implemented the previously mentioned software. Accounting
records will not be made for each article sold, returned… but more as in a daily
review of the store’s sales.

A treasurer will no longer be needed, again, having implemented a manager in

each store, they will be in charge of depositing the cash of the store directly to the
bank account.

Moreover, the “boy”, that delivers all the orders and recollects the money, will not
be needed anymore. By making directly the orders from the stores to the offices of
Prats (lenses company), not only the ratio of mistakes in lenses will be reduced but
also the delivery will be directly made to each store. This way more efficiency is
achieved, in terms of time, diminishing an error margin, and cutting on expenses.

WAGES/MONTH YEARLY COSTS

Director €6.400 €83.200

Controller €2.800 €36.400

Administrative €1.200 €15.600

Fiscal Stewardship YEARLY €6.500

Social Secretariat YEARLY €4.800

Total yearly costs: €146.500

The initial costs of personnel, were of about 890.000€. By shutting stores, and
cutting on staff. The company has now about 39% less in personnel. This means,
that approximately only in personnel costs the company is now spending
approximately 540.000€, which translates in about 350.000€ less in expenses.
(not an exact number, but only an overall outlook).
 4.2 REFURBISHMENTS:

As previously mentioned, all of the stores (the ones being kept), need
refurbishment. But before everything, starting from a superficial point of view. All of
the stores don’t share the same name, (for personal reasons of Mr. Beltran, the old
name “Optica Inca”, was changed to Vitaloptics). This doesn’t fulfil Mr. Beltran’s
aim to change his optician’s store chain name, in order to differentiate his from his
former wife’s.
At the same tame, by just the simple act of not changing the name for all the
stores, for the clients that might be familiar of the chain might give a sense of
“abandoning” and just old-fashioned stores.
With the term old fashioned, come other facts to take into account. Per example
the internal image showcased in each store that we have talked about is also of a
very unprofessional, not updated and old-fashion company.

In all of the stores, there is a common problem. How the portfolio of the products
are viewed. From cluttering the frames so clients can barely see them, to putting
the frames on the floor in the store front, to misused sideboards, all the stores
need serious changes.

As a general image, all of the boutiques, should have a common predominant

colour; white. It is related to technology, sanitary purposes, professionally and all in
all it gives a clean impression to the environment.

With a clear and visible organisation of the frames, where it’s easy for clients to
see and chose from the variety. Apart from this, all stores should count with an
exclusive exhibit of the luxurious frames. This exhibition, should be easily
accessed by clients, and should be presented in the most lavish, but still
minimalist way possible.

Inca 1 store, is the biggest store. With over 300m2, it leaves space for two optical
offices, an audio office and a workshop, besides of course the necessary space to
showcase all of the frames. Inca 1’s refurbishment would suppose a cost of about
40.000€.
Inca 2 store, is at a key position, being able to receive recommendations from the
doctors working at the hospital located next to it (with incentives of course). Its
refurbishment would suppose about 25.000€.

It is of a smaller size, so
a more efficient location
of products and also
more advantageous
location of the material
should be made. (a bit
more compact, but at
the same time a more
dynamic and profitable
showcase).

Binissalem store, is the only optician’s store in the city, which gives it significant
advantage. It is located in one of the best locations possible but has still managed
to make losses. Its refurbishment would suppose 25.000€.
Palma 1 store, a very small but strategically well located store. In this case, with a
similar size as Inca 2, a more
competent display of the products
should be made. There should be
an advantage taken over the walls
and show all the portfolio (that is
updated and will be liked), in order
to exploit the space as much as
possible.

4.3 DEPHT OF LINE IN THE PORTFOLIO

In Vitaloptics, the portfolio is divided in the following:

Lenses: the company works with the best producer of lenses in the world; Prats.
This boast an image of higher quality for Vitaloptics. It is essential and should not
change, because it consists on a 51% of the total sales and it stands at a 300% in
the contribution margin.

Glasses frames: here is where the major disturbance is taking place. Most of the
stock, are frames that have been there for 10 years. Not only that, but they are the
frames that are mostly shown in order to get rid of them, or sell them. New frames
are normally saved, and only shown to the client if they ask for them. A solution to
this is take them out of stock by selling them in a wholesale, of course they will be
sold at a ridiculously low price, but they weren’t getting sold either way.
In the case of the glasses frames, there are two divisions the brands (21% in
sales, 150% in contribution margin) and then the distributor brands (12% in sales,
but 300% in contribution margin). There should be a focus over the distributor
brand, by exposing them right next to the brand ones, because these are the
ones that will benefit the company the most (from whom it’ll get more revenue).
Luxotica, the company who distributes the higher brands of frames, should also
be worked on relations with. In order to receive new shipment, debt has to be
payed and come into a new agreement to reestablish connections.
Sunglasses: representing only 7% of the sales, and with a contribution margin of a
220%, sunglasses should be a focus of improvement too. This article is more of a
fashion statement. So in this case, there should be also applied the same policy
as the previous one, to renew the models and try to array them in order for them
to catch the client eye.

Ear aids: in Vitaloptics, ear aids only represent 8% of the total sales. Working with
only the best brands, such as Phonax, the company has a high comparative
advantage compared to the competitor (GAES), due to the similarity of the prices.
The use of doctor’s recommendations via commission for them, should be used in
this case too, in order to potentiate sales.

4.4 SHOP WINDOW SHOWCASE:

The arrange of the shopwindow showcased, should be professionally made each

season. With a model, that is to be followed by all stores, unification will be
achieved and also a more accurate exposition will be made. Prices vary from 150
to 200€, in the case of small windows. Which would consist in a small investment,
rather than having it done and planned by the shop assistant working in the store
(that to this day only generated losses due to the lack of attraction).

4.5 ADVERTISEMENT:

Vitaloptics is a company that would highly benefit from TV advertisement in the

local channels. Local channels don’t usually have high fees (they are not as
watched as the national ones), but they target the clientele that it should be
looked for.
Along with this, radio advertisements of offers (if they are made, which would be
very beneficial for word to mouth advertisement), or new openings after the
refurbishments, would be highly auspicious.
Normal methods, such as fliers and so on, would also be effective in the beginning
of seasons with the upcoming lines.

4.6. NEW SOFTWARE:

A new software with a tagging system should be implemented. CEGID RETAIL

OPERATIONS & POS is a system that offers integrated omnichannel, e-
Commerce, clienteling & CRM, loyalty & gift card, mobile POS, Inventory, payment
integration, replenishment, promotions, staff, analytics and international
capabilities.

With the former controller, doesn’t have to go from store to store to ask what is
that they need in the inventory and stock. Constant analytics are made, that can
be checked from the main office.
Staff analytics help to see the improvement, or even who is a feeble and non
beneficial worker.
Moreover if, in the future, the company wants to expand in the e-commerce
business, the software also keeps track of it, so it would also suppose an
investment for the future.

5. CONCLUSION:

The corporation, is coming from a level of bankruptcy. In order to avoid it a few

policies and changes have to be implemented. Following the formerly declared
changes that need to be established, the company will withdraw from the estate
of insolvency, and could considerably recover.

With the downsizing, more liquidity in money is accessible. This money can be
used to whether cover all the costs of refurbishment (which could be seen as
internal investment), or cover the already existing debts.

The renewal of the image and display of the products, will be the key factor in
order to achieve a higher amount of sales.

A complete change of the management team and methodology should be

expected to not only show progress, but also avoid future downfalls and have a
resilient approach to future setbacks.