Introduction
As one of the divisions of Hawthorne Corporation, Limited (Hawthorne), General Merchandise (GM) earns about 63.86% of Hawthorne’s annual revenue. All of the 450 GM stores are operated as dealer owned and operated franchises. Strategically, Hawthorne’s GM division is formed to attract more hobbyist and commercial businesses, and to reinforce the entrain barrier of Canadian market for the US competitors. During the mid-1990s, Hawthorne realized that its GM division is not addressing the needs of the two key customers segments in the automotive parts industry – ‘do-it-yourself’ hobbyists and commercial consumers. Plus, the fact that Hawthorne’s commercial consumers dislike its expansion of stores, Hawthorne has decided to open a separate company to focus on this industry – Part King, Inc (PK).
PK is wholly owned by Hawthorne, and opened its first Canadian store at Guelph in 1996. Its objective is “to be the most recommended auto parts store in Canada by carrying parts that customers demanded, hiring employees who are knowledgeable and offering prices that were affordable”. PK stores target both the hobbyists and commercial customers, which both have specific and very different needs. Like GM stores, all PK stores are franchises. However as the contracts with GM franchisees are renegotiated in early 2005, Hawthorne decided to pursue a corporate store model for PK. Hawthorne believes that PK business has the potential to be extremely profitable. Currently existing PK franchises can be converted into a corporate-owned store, if a franchisee wants to leave for any reason.
To aid in this transition, Kevin Bachand has been pointed the Ontario Operations Manager, who would be involved in the planning, launch, and on-going operations of the three corporately owned PK stores. After looking over the new corporate-owned store system proposed by Mr. Bachand, we