L.L.

Bean: Case Study

Presented By:
Nikhil Aggarwal-11201004
Shrieya Kanwar-11200129
Karan Khanna-11201920
Anchal Devgan-11202516
Pratima Ghosh-11101940

Introduction
The company L.L.Bean was founded in 1912 by its namesake, avid hunter
and fisherman Leon Leonwood Bean in Freeport, Maine.
The company began as a one-room operation selling a single product, the
Maine Hunting Shoe (known currently as the L.L.Bean Boot). Bean had
developed a waterproof boot, which is a combination of lightweight
leather uppers and rubber bottoms, that he sold to hunters.
Defects in the initial design led to 90% of the original production run
being returned. Bean made good on his money-back guarantee, corrected
the design, and continued selling them.
In the past five years, L.L.Bean has donated over $6 million toward
conservation and land stewardship. The 220,000 sq. ft. L.L.Bean retail
store campus in Freeport, ME, is open 24 hours a day, 365 days a year
and welcomes more than 3 million visitors every year.

Facts about company:

Number 9 sporting goods retailer in the U. S. behind Wal-Mart,
Target, Dick's Sporting Goods, Sports Authority, Foot Locker,
Bass Pro Shops, Cabela's, and Academy Sports.
259th largest privately owned company in 2005.
73rd largest mail-order house company.
Ranked number 8 in best apparel, fashion, textile, and
department store companies.

Challenges....
Competitive environment becoming much more complicated.
Consumer tastes are beginning to change.
Evolution of the Internet, e-marketing, and e-commerce.
Growing popularity of retail stores and retail shopping.
L.L. Bean, in the 1980s and 1990s, had become very popular
in Japan. Japan was doing well at the time and it's people
were buying from Bean's left and right, that is, until their
economy started to shift.

Overview Analysis
Strength
1. A well established outdoor brand since a century
2. Has a global presence
3. Is a trusted brand in quality
Weaknesses
1.Since has established a niche in outdoor, it will become difficult
to diversify in new segments
2. Less international presence as compared to leading brands
Opportunities
1.To become the brand known for outdoor all over the world
with its hundred year heritage
2.To expand its business using the digital revolution
Threats
1.Ease of access to materials due to world converging into a
global village

Problems in this case:

Question1:
How does L.L.Bean use past demand data and a specific
item forecast to decide how many units of that item to
stock?

Solution1:
When there is an established item, L.L Beans uses the trends b
ased on past demand to forecast future sales these trends being
mostly seasonal and therefore generates enough information t
o know how much stock is needed.
On the other hand, for new items, which do not have sufficient
past demand data, L.L.Beans uses the A/F ratio which is based
on past behavior of individuals with the actual demand.
Once this is done, LL.Beans must calculate the profitability of
the item and the overstock and under stock costs which calcula
tes the optimal amount of the item.

Problems in this case:

Question2.What item cost and revenues are relevant
to the decision of how many units of that item to sto
ck?
Solution:
The manufacturing cost for LL Beans and the price at which t
he item is sold are relevant to the decision of how many units
of that item to stock because with this the profit margin
of each item is calculated giving an optimal balance of how m
uch to of the item to stock.

Problem in this case:

Question 3.What information should Scott Sklar
have available to help him arrive at a demand
forecast for a particular style of means shirt that is
a new catalog item?
Solution:
Scott sklar needs the forecasted demand and the actual
demand of the past new items of LL beans because he does
not have access to past demand of the item. Moreover
because not enough information is available, Scott Sklar can
use the trends of similar products that competitors offer.
With these collected information Sklar can analyze and find
a trend in particular items.

Problem in this case:

Question 4. What should L.L.Bean do to improve
its forecasting process?
Solution:
The company needs accurate data of each item proposed to
have better business decisions. These data include a better
market research, which seems to be weak at L.L. Beans and
an easy system built for input information.

Recommendations
Must Formulate a Strategy to Fulfil Needs.
Should have Understand customer needs and behaviours.
Should have Implement Effectively and Efficiently.

Conclusion:
L. L. Bean was (and still is) a company that knows what it's like to be able
to grow.
When times started changing, Bean's at least knew that they had to
change/modify some things.
While their first attempts may not have been so great, they learned from
their mistakes and figured out how to climb out of the hole they'd dug.
Their first website wasn't too great, but less than a year later, after seeing
the response, they jumped on creating a full-featured site to draw in more
revenues.
Their first attempt at opening retail stores (other than Freeport) wasn't
too great either, but eventually they got the hang of it, and now have 36
stores worldwide (27 in the U.S. And 9 in Japan)