A devastating fire and terminal cancer! Sometimes key decisions are forced by stochastic circumstances. M&D Supply is currently one of the premier hardware and industrial supply stores in Southeast Texas with four outlets. During its forty-three years, the company has succeeded against heavy odds. These include changes in the market, recessionary trends, competition from national chains and personal tragedies.
A series of case studies will highlight the entrepreneurial spirit and business acumen that has enabled M&D Supply to overcome its challenges. M&D Supply case "A" focuses on entrepreneurial behavior in response to challenge and adversity. It examines a family's path to business success despite overwhelming personal and professional odds.
Secondary issues include strategies and tactics that were employed to reposition the business in response to declining market conditions. This case has a difficulty level that is appropriate for a senior level free standing or capstone course in entrepreneurs hip or small business management. The case shows that accurate recognition of a target market opportunity is a key consideration for success. During the late 60's and early 70's, Case A sees the company changing its focus from farmers and ranchers to individuals interested in a wide range of hardware products for the household.
Choosing and aligning with the right partner is important for a business of any size. Case "A" illustrates that the partnership with Ace Hardware was instrumental in providing M&D Supply with brand name recognition and an efficient supply chain.
Students are provided an entrepreneurial dilemma requiring them to develop, analyze, and prioritize the entrepreneur's alternatives. Case "A" requires students to perform a SWOT analysis of the business and while considering the main character's personal dilemma, recommend a course of action. Students should also develop a plan to align the business with its market opportunity.
Jack Dyson moved to Southeast Texas in 1955 to partner with venture capitalists G.F. Mitchell and E. W. McCown. Mitchell and McCown owned numerous businesses related to the Southeast Texas agricultural industry, including farm production, aerial seeding, and fertilizer production and distribution. The two desired to own a farm machinery company and were seeking a partner who could operate the business. They partnered with Jack and opened Farm Machinery Company. The business operated successfully and was sold soon after G.F. Mitchell died. Building on their 10 year partnership, Jack Dyson, Mary Mitchell (G.F.'s widow) and E. W. McCown decided to incorporate M&D Supply.
M&D Supply's business-to-business concept targeted farmers and ranchers. Secondary markets included consumers with large properties and institutions whose responsibilities included maintaining large tracts of land. The store's product mix included maintenance, repair and operations supplies necessary to sustain agricultural, beef, and other farm production activities.
The Farm supply business in Southeast Texas was segmented. National chains like Sears Roebuck, White's, and Western Auto and independent operations such as True Value Hardware offered a limited number of agricultural products and a low level of service. Dyson and his partners were confident their product mix, experienced staff, and familiarity with customers offered a value proposition that yielded sustainable competitive advantage.
The store turned a profit during the first two years. However, by 1969, a decline in the region's agricultural sector began a sustained trend of diminishing business conditions that put farmers and ranchers out of business. M&D Supply's financial performance reflected shrinking numbers in its target customer sector, necessitating that Dyson considers change.
Jack Dyson's fledgling business, M&D Supply, was just a small metal building with bare concrete floors, an open ceiling, and florescent strip lighting, but for many farmers and ranchers in the community, this humble environment was HOME. Comforting smells of rubber tires and leather goods mingled with cigarette smoke, coffee and farm chemicals. Customers clad in khaki pants and shirts or bib overalls gathered around the long plastic table in the back, sipping coffee from a huge urn shaped like a Harvest King Tractor filter or chugging nickel cokes from glass bottles. The talk centered on rainfall, rice, the price of beef, politics, and the screwed-up younger generation. The atmosphere was Deep South, laid back, good ole boy. People browsed and did business as well as sharing their lives with each other. Jack loved the store, from the saddles and bridles to the cattle prods and stock tanks, to the tractor tires and mud grips to the spurs, boots, and horehound candy. It was in his blood and he yearned for M&D Supply to be successful as a resource for the community he called his own. However, Jack had weighty matters on his mind in the spring of '71 - M&D Supply was struggling. Harking back to his years in the implement business, Jack had initially figured his store's merchandise should reflect a farm supply orientation. Turns out he was wrong. The region's agricultural sector took a nosedive, and customers interested in tractor tires and horse chow was dwindling.
Jack sat in his '67 GMC step-side pickup, staring at the cheesy blinking arrow that pointed to M&D Supply, and pondered what to do. With a wife and three hungry kids to feed, he had to find another way to create value and get new customers. M&D Supply had the good fortune of being located on high traffic thoroughfare. How could he fully leverage its favorable location? Finally it came to him. Hardware! Just plain hardware! People always needed hammers and nails and lawnmowers. The retail hardware market was underserved, as the farm supply market had been, and retail customers were growing in number due to the region's expanding energy industry. His primary focus would be geared to a new target consumer, while continuing to serve his cherished agricultural sector.
Jack knew about the hardware distribution channel. Independents bought from wholesalers, then resold what they bought to consumers. Selling to consumers would mean changing M&D Supply from a volume focused business-to-business concept to a more value driven business-to-consumer model.
A few of the wholesalers, like True Value, were dealer-owned co-ops. Such entities united retailers under a common name to simulate the buying efficiencies of national chains. Coops also emphasized a common store identity. They were bound together by their names and advertising efforts. Jack knew a growing number of consumers were reading and hearing about stores affiliated with a co-op called Ace. Ace used direct mail circulars and catalogs, as well as radio and television with one goal in mind, to convince the American consumer its members had the best prices, best quality, and best service. Peers at a recent farm supply show were considering joining Ace and told Jack he should too. They liked the fact that Ace was established and big enough to command manufacturers such as Stanley and Black and Decker to give Ace dealers the same price they gave to large retailers Sears and Western Auto. Jack liked that too, plus the fact that Ace was owned by its dealers, meaning any profits earned would be distributed to members, including M&D Supply. Jack grabbed the notepad off his dashboard and made a note: CALL ACE HARDWARE!
Within a month, Jack contracted with Ace. He liked Ace Hardware's brand recognition and national advertising that tagged Ace Hardware as "The Place with the Helpful Hardware Man." Thanks to Ace, traffic-building advertising programs were now available at a lower cost. A few of Ace's practices were troublesome. Jack disliked the merchandise purchasing process. He had been accustomed to dealing with traditional wholesalers who provided representatives to recommend products and place orders. This necessitated the hiring of Harry Christian, an experienced buyer, recently forced out his own business by a big discount store in another market. Deliveries were also problematic. Ace's rapid growth strained their distribution system. Lacking a distribution center in the south, deliveries from Chicago were erratic and sometimes required unloading during the middle of the night.
On the plus side, Ace proved itself a lean operation, providing merchandise at much lower costs than traditional wholesalers. This gave M&D Supply the opportunity to price competitively and increase its gross margin. In a few months' time, Jack had re-invented his company as an Ace Hardware store. Best of all, customer counts increased, reflecting growing consumer traffic. Business began to build.
In the fall, following a battery of medical tests, Jack got the diagnosis no one wants to hear - CANCER. His Doctors in Houston stopped just short of delivering a death sentence, but Jack saw the Grim Reaper lurking in the shadows.
Then one night, less than three months after the cancer bombshell, Jack got the call no one wants to get - FIRE! By the time Jack and his family jumped into his 67' GMC pickup and roared to M&D Supply, flames had melted the tin roof of the building and were leaping ten feet into the sky. Firemen from three units fought their way into the building by chopping a hole in a large rear sliding door and then unlocking it. But as they made their way inside, many were blinded and overcome by smoke from the burning tires at the rear of the store where the fire had started. Again and again firemen called for more oxygen tanks. Twenty minutes after the first alarm, a second alarm went out and two more fire engines arrived. Thousands of feet of water hose snaked around the building as 40 men battled the blaze. An hour later, most of the flames were extinguished. Jack stood with his head bowed, tears rolling down his cheeks, his dreams literally in ashes. At sunrise the next day, Jack returned to survey the damage and found the rear interior of the store including offices containing vital business records, completely destroyed. As a result, Jack had no idea how much money he had, how much he owed, or how much was owed him. A thick layer of tire soot covered everything. Later, a call to the insurance company confirmed what he suspected - M&D Supply was pitifully underinsured. Only half of the 50,000 in damages would be covered. Jack was forced to liquidate the inventory and start over. The owner of the local True Value Hardware dropped by, in sympathy and with an insulting offer to buy M&D Supply for pennies on the dollar. Jack planned and executed a fire sale. The sale ran for a month, drew huge crowds, and brought both greedy vultures eager to take advantage of misfortune and kind longtime customers, lending a helping hand.
Both Jack's investors elected to move on. They were maturing in age and scrutinizing their portfolios. Progress with Ace had not come fast enough, and they were uncertain about the viability of the new concept. They declined to invest in re-opening the business and walked away. Having dodged bullets on Iwo Jima several decades before, Jack decided his present situation wasn't the worst he'd faced. He determined to beat cancer, bring his company out of the ashes, and make it the best hardware store in Beaumont!
Between chemotherapy treatments, Jack hit the streets looking for a lender. His initial efforts proved unsuccessful; then his fortune changed. A favorable medical report that his cancer was in remission and a call from a kind-hearted local banker helped him secure a SBA loan. Things looked hopeful. But shortly before M&D Supply's grand re-opening eight months later, Jack learned his cancer was back with a vengeance, the tumor inoperable. He sat in his 71 ' F-150 with his head in his hands. Bad things were happening. If the doctors were right his time was short. Should he liquidate? Sell to Harry? Sell to the owner of the local True Value? Or could he position the business to survive beyond his earthly existence, as a family legacy? His fondest wish was to leave a thriving business to pass on to his son. But how could he do it?
Jeff Dyson, Lamar University
Vivek S. Natarajan, Lamar University
Kabir. C Sen, Lamar University…