IB Business and Management Case : simplebooklet.com

2 M N15 3 BUSMT BP1 ENG TZ0 XX CS LadyA Her real name is Mar a Immaculada Alejandra Gonz lez Carroccio but everyone knows her as LadyA 5 10 15 20 25 30 35 40 In 1973 her parents ed Cuba and moved to Florida United States US where they were granted political asylum The Carroccios had limited savings but were determined to succeed Mr Carroccio thought that working independently and operating as a sole trader would be the best way to achieve nancial security He wanted to set up his own business a small shoe repair shop in their Spanish speaking neighbourhood in Miami As his cash ow forecasts were weak he got turned down several times for bank loans however he managed to obtain a small grant from a government agency that helped entrepreneurs Mrs Carroccio also had dif culties at rst because she did not speak much English She attended classes organized by a local charity a non pro t organization whose mission statement was to help all adult immigrants learn English She eventually found a job in the cafeteria of a local school Although the wage was low she received training and some fringe payments such as health insurance With the pro ts from Mr Carroccio s shoe repair shop and Mrs Carroccio s wage the family eventually maintained an economically stable household In 1978 Alejandra their rst child was born Mr and Mrs Carroccio wanted her to have a normal American life Although at home they mainly spoke Spanish with each other they wanted Alejandra to speak English with them They encouraged her to sing in choral groups at school and at church and they paid for her after school dance lessons Alejandra was a beautiful girl At the age of 12 she started getting occasional jobs as a model for local fashion catalogues and magazines Her parents put her earnings into a college fund a special savings account that would pay for her to attend university later The modelling eventually led to small acting roles in lms when production companies recruited in Miami Then in 1994 a casting director needed a young Hispanic American woman who could sing and dance in one scene in the lm La Bella Rosa The lm proved very successful Although her part in the lm was small it led to many new opportunities for Alejandra Soon afterwards a music label offered Alejandra a contract to produce a CD album Unfamiliar with negotiation Alejandra needed an agent She found Gloria Woolrich a local Hispanic woman who worked with Spanish speaking performers Because Alejandra was not 18 years old yet her parents had to sign the contract on her behalf Gloria thought that Alejandra should target the Spanish speaking market in the US she promoted her as Lady Alejandra a name that emphasized her Hispanic origins with a touch of elegance Her rst CD album Presentaci n Lady Alejandra included one song that reached number one in the music charts in Florida Even with only one top hit she earned much income from the copyrights and royalties from the CD album For the rst time Alejandra needed an accountant to help her prepare her nal accounts manage the money and pay the appropriate taxes Like most immigrant parents Mr and Mrs Carroccio strongly emphasized education When they rst arrived in the US they struggled to satisfy even basic needs such as food and shelter only by working long hours did they achieve economic security They believed that if Alejandra went to university she would have a better life Although they celebrated her success with the CD album they did not want music to distract her from her studies Only with reluctance did her parents agree to a second CD album Viva Lady Alejandra which proved even more successful than the rst one royalties payments made to the performer of the music and the songwriter by a third party such as a radio or television station each time the performer s music is played in the public domain

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3 45 50 55 60 65 70 75 80 85 M N15 3 BUSMT BP1 ENG TZ0 XX CS In April of her nal year at high school Alejandra told her parents that she did not want to go to university she wanted instead to move to Los Angeles in order to build a career as a musician She wanted to be a star Her parents were very disappointed However because she was now 18 they could not stop her Alejandra left her previous agent Gloria Woolrich for a new one in Los Angeles Ruth Liebermann Ruth had successfully turned young stars into media sensations She would help Alejandra with everything buying an apartment in the most fashionable neighbourhood recruiting household employees getting agencies to establish concert tours producing more CD albums and more importantly promoting her Ruth explained to Alejandra that unless the product life cycle of music stars is carefully managed it is often short Alejandra needed a brand identity Her revenue streams would be based on that brand She would also develop strategies to extend the life of the product which was Alejandra herself Alejandra had an identity partly based upon her youthful and innocent look her powerful voice and her Hispanic heritage Ruth said that now that Alejandra was an adult she needed to dress more like a young woman and less like a child Nervous about this transition Alejandra agreed to a more glamorous image She began going to a famous hairdresser and style expert Gavin Pratt Soon she had another revenue stream appearing on the cover of high pro le fashion magazines Ruth also argued that Alejandra needed to be less ethnic The US was rapidly changing demographically The percentage of the American population that was Hispanic was small but it was rapidly growing thus expanding the Spanish speaking American market However this demographic shift was creating a negative political reaction in the US Focus groups showed that some English speakers did not like the name Lady Alejandra Ruth recommended a new name just LadyA as one word pronounced lay dee ay with equally strong emphasis on the rst and last syllables It worked By the year 2000 LadyA was one of the most successful musicians in the US Popular with English speakers especially teenage girls and young women she also appealed to many Hispanics Even though all her songs were now in English and were popular in the mainstream music charts Spanish speaking Americans were still fans They saw LadyA as a shining success story of a Hispanic American As LadyA grew more popular both her revenue and expenses increased By 2001 she was earning millions of dollars a year from CD album sales concerts magazine covers and music videos She employed a full time accountant to help manage her revenue and all the many expenses of her new life For her work she employed a band a group of dancers and a variety of musical and video technicians She asked Gavin to join her full time in order to plan all aspects of her clothing make up and hairstyle For her concerts she also had an events manager who arranged bookings of venues and hotels and who hired a company specializing in logistics who transported equipment and set up the stage at each concert location These were her core employees Temporary employees were needed at each venue to help set up the venue and stage She had many peripheral employees for her increasingly extravagant personal life two personal assistants two housekeepers one chef one personal trainer one driver and one chief bodyguard who supervised six bodyguards She was very inconsistent in her style of leadership with her employees Sometimes she was very direct giving detailed instructions and getting angry if they were not followed exactly At other times she adopted a more laissez faire leadership style The employees never knew what to expect Communication was poor Although working for a superstar had exciting moments the employees frequently complained behind her back mockingly calling her la princesa Turn over

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4 90 95 100 105 110 115 120 125 130 M N15 3 BUSMT BP1 ENG TZ0 XX CS Alejandra originally operated as a sole trader However as the business grew it became clear that she needed the protection of limited liability and so she changed the business to a private limited company LadyA Management Limited LAM Alejandra herself owned 98 of the shares in LAM Her parents and Ruth Liebermann owned the remaining 2 Technology was changing the music industry In 2000 online le sharing software became widely available Though the le sharing of copyrighted material was usually illegal many people did it anyway especially young people The sales of CD albums began to fall This trend continued with the emergence of other new technologies such as MP3 players and smartphones Another important technological change was video hosting websites which effectively ended the direct pro tability of music videos Before video hosting websites musicians received royalties for videos that appeared on television Now artists such as LadyA had to produce their own videos and upload them to video hosting websites These productions were expensive but did not generate any direct revenue The de nition of a successful musician was also changing With falling sales revenue from music a problem made worse by the economic downturn that began in 2008 artists had to transform themselves into media personalities and nd ways to generate revenue from these branded identities just as Ruth had predicted In 2009 LadyA started appearing in many above the line and below the line promotions of various types of products LadyA was always very careful about which products she endorsed Each one had to strengthen her brand identity as a beautiful mainstream American yet one with Hispanic passion and intensity She also began communicating with her fans through various social networking websites In 2010 LadyA started offering her own product line of perfume and cosmetics promoted under the name LadyA Primary and secondary market research had showed that perfume and cosmetics would best connect with LadyA s established brand and help her reach her main target market teenage girls and young women The production of LadyA perfume and cosmetics was outsourced to an established manufacturer in Malaysia where costs were much lower Quality control could however be a problem The Malaysian manufacturer would produce LadyA perfume and cosmetics using batch production which would enable a variety of products to be made LadyA would have to pay 60 of the costs in advance The wholesaling and distribution was also outsourced to a company in Minnesota By 2011 LadyA perfume and cosmetics were sold in a nation wide chain of department stores in the US At the same time Alejandra decided to reorganize the business She continued to manage all of her household employees personally She appointed a Managing Director and a Human Resources Manager to assist in workforce planning and manage the rest of the business She delegated some business functions but kept a very close interest in all decisions through her meetings with the Managing Director One bene t of this reorganization was that with clear roles systems and procedures in place Alejandra s employees complained less On a personal level 2012 was a big year for Alejandra She married Rafaele Eco an Italian investment banker and they purchased a large mansion in Hollywood requiring an even greater number of peripheral employees Over the next few years LadyA was at the peak of her media power wealth and fame She was more mature and business oriented than when she was in her twenties Her leadership style had matured as well She became more consistent and paternalistic

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5 135 140 145 150 155 160 M N15 3 BUSMT BP1 ENG TZ0 XX CS Now she began to think about the next phase of her career and her life She was approaching her late thirties In the US many female musicians and lm stars struggle to remain popular in their forties modelling jobs are harder to get girls and younger women typically prefer younger musicians and stars and the idea of selling youthfulness becomes more dif cult as women grow older LadyA hired business consultants Kersey Joyce K J who specialized in the strategic direction of brands to help her consider her options K J identi ed three strategic options in their report to LadyA Option 1 Move into South American markets which generally accept older female musicians and lm stars Ever since Lady Alejandra became LadyA she had focused on the English speaking market in the US Though she had some fans in Spanish speaking markets she had never made them a priority For those markets LadyA would start using the name Lady Alejandra again conduct a major concert tour in South America and try to repeat her North American career building an increasingly powerful name through music downloads such as MP3s concerts lms product endorsements magazine covers and also perfume and cosmetics Option 2 Develop more products under the LadyA brand and develop a global market A possibility is a clothing range Other possible products include accessories such as LadyA shoes LadyA handbags and LadyA lingerie These products could be distributed in the US through the same department stores selling her perfume and cosmetics Other distribution channels would be required for the international market with e commerce offering many opportunities Family branding would be maintained Option 3 Re brand herself With this strategy LadyA would actually lower her media pro le for three years During that time she would associate herself with a charitable cause to tackle issues such as malnutrition in developing countries homelessness in big cities or international traf cking of children She would use her wealth to set up various non pro t organizations to support the charitable cause and utilize various techniques for marketing non pro t organizations She would then appear on American television talk shows and do magazine interviews building a new brand identity based on the image of a strong mature determined and compassionate woman This would allow for new revenue streams to be sought based on this new brand Additional terms not in the guide Brand identity Core employees Limited liability Paternalistic Peripheral employees Revenue streams Companies products or individuals named in this case study are ctitious and any similarities with actual entities are purely coincidental

IB Business and Management Case

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