The Transformation of Mudo

The Professor's Questions

1. What were the most critical challenges facing Mudo when Karakullukcu joined the firm?
2. What is your assessment of Karakullukcu’s performance to date?
3. How should Karakullukcu interact and build trust with the founder and his son? What goals should she try to achieve with each of them?
4. What immediate actions should she take next?

My Answers

Q1. What were the most critical challenges facing Mudo when Karakullukcu joined the firm?

Mudo faced a connected strategy and governance problem. Its model had outgrown a single decision-maker. The owners wanted professional management but had not fully separated ownership, board oversight, and daily operations. Managers had responsibility without enough authority, and several key roles were vacant or weak.

The retail proposition also needed repair. Apparel had lost its price-to-value appeal as competition intensified. Furniture and apparel served different customers and purchase cycles; one estimate put customer overlap at only 3%. Blended mall stores constrained furniture display and created storage costs. Personal lease relationships and exit penalties made closing weak stores difficult.

Finally, the operating base was unreliable: poor inventory control, about 200 monthly complaints, high loss rates, weak information systems, and employee retention problems. The family chose to undertake a private-equity-style transformation without the new equity capital. I would therefore rank cash, the apparel proposition, and decision rights ahead of an ever-longer project list. The challenge was not just to install systems, but to decide which stores and products deserved resources.

Q2. What is your assessment of Karakullukcu’s performance to date?

Her performance is mixed but valuable enough to support a focused second phase. Complaints fell by about 90%, apparel stock losses dropped from 7% to below 1%, and home EBIT improved from minus TL5.7 million to plus TL7.7 million. She built leaders, improved access to management, and applied accountability even to her own CIO hire. She also shifted real decision authority away from the founder.

However, transformation activity cannot substitute for commercial outcomes. Apparel EBIT fell from plus TL10.7 million to minus TL1.6 million between 2012 and 2014. Filling support functions before the key business roles delayed commercial learning; the apparel leader arrived only in late 2013. Fifty projects in 18 months and 54 ongoing projects in the later exhibit suggest attention was spread thin. Recruiting capable people without retail experience added a learning cost.

I would give her a strong score for institution building and an incomplete score for economic delivery. I would not endorse her near-perfect self-assessment. Nor would I dismiss all progress because group profitability disappointed. The owners also retained decision friction, and a clothing cycle takes about 15 months. Continue her mandate, narrow it to a few cash and customer outcomes, and agree a transparent review schedule. There is no clean causal estimate of what would have happened without her.

Q3. How should Karakullukcu interact and build trust with the founder and his son? What goals should she try to achieve with each of them?

With Mustafa, I would start from continuity: his product judgment and supplier relationships remain assets. Invite him to a regular product and location review, ask him to explain the signals behind his intuition, and test a few ideas. Discuss weak stores privately and preserve dignity when renegotiating leases. The goal is to turn his experience into an input that others can use, while ending direct instructions that bypass accountable managers.

With Ömer, I would acknowledge that his caution reflects past losses and his responsibility as the next-generation owner. Agree in advance what evidence is sufficient, the downside limit, a decision date, and which decisions the CEO can make alone. Give him a concise weekly cash and risk dashboard. The goal is a chairman who challenges assumptions and then supports a decision, rather than becoming a second operating CEO.

For all three, create a written authority matrix: routine decisions, material capital commitments, store closures, hiring, and brand choices. Set thresholds jointly rather than invent numbers from the case. Separate the advisory board's advice from the formal board's authority. Record exceptions and give staff one final instruction. Trust should grow through predictable behavior and admission of mistakes, not promises of certainty.

Q4. What immediate actions should she take next?

At the next board meeting I would present one page that separates home improvements, apparel deterioration, cash needs, and unresolved owner decisions. I would ask for a temporary hold on uncommitted new-store obligations, not an automatic rejection of all 50 locations. Existing binding commitments must be reviewed individually.

In the first 30 days, build a rolling 13-week cash forecast and store-level contribution after rent, labor, logistics, markdowns, and inventory cost. Compare continue, resize, renegotiate, and close alternatives, including exit penalties and landlord relationships. Resolve the definitions behind inconsistent revenue figures before using them to set targets.

Over 30–90 days, concentrate on three workstreams: apparel assortment and conversion; furniture inventory losses and profitable formats; cash and store portfolio decisions. Pause low-value projects. Give each one a business owner, observable milestones, and a review date. Test apparel marketing only where product quality and availability can support the promise; a controlled campaign can learn, but a broad relaunch before product repair risks paying to disappoint customers.

Approve selected new stores only when the site economics, funding, management capacity, and downside case are clear. Preserve the founder's scouting role and require the same approval criteria for every idea. The cost is slower visible expansion, possible exit expenses, and difficult family discussions. The benefit is making the next phase accountable to cash and customers rather than to the number of initiatives.

Case Summary

Mustafa Taviloğlu founded Mudo in 1964, growing it from a small record and gift shop into a well-known Turkish retailer. Relying on his feel for trends and his network of relationships, he successively developed apparel, home and mixed store formats. After going through economic crises and difficulties with the franchise model, the company switched to company-operated stores. His son Ömer formally joined after graduating in 2005, working on the youth brand, e-commerce and the apparel business, and at one point served as interim CEO.

As the business grew, the founder still directly influenced a large number of day-to-day decisions; managers were used to carrying out instructions, and responsibilities didn't match authority. Father and son wanted both to keep control and to build a professional management system. Rather than taking private equity investment, they hired Accenture to design a transformation roadmap, and in March 2012 invited Barış Karakullukçu, the partner on the project, to become CEO. She had consulting and cross-cultural project experience, but had never before held operating responsibility at a retail company.

When she took over, the company had 119 store/channel counting points, 2,436 employees and annual turnover of about US$199 million. Apparel and furniture serve different customers with different purchase cycles, yet mixed stores accounted for a very high share of revenue. Apparel faced international and local competition, with pressure on value for money and positioning; furniture was more attractive in dedicated large street-front stores, but in mixed stores in shopping malls it was held back by space, storage and logistics.

The CEO first pushed forward operations and organisation-building: performance metrics, IT, supply chain, project management, renewal of staff. Fifty projects were implemented within 18 months. Monthly complaints fell from about 200 to 20, and inventory shrinkage improved markedly. The head of home cut redundant SKUs, improved pricing and delivery, and controlled store openings, achieving positive EBIT in 2014. The head of apparel arrived later and needed to go through a merchandise cycle of about 15 months; the business's financial performance was still declining.

The father's intuition and the son's caution made different demands. The CEO gradually won trust by admitting she didn't know retail, respecting existing staff, and proving her ability through real improvements. After two and a half years, she and the management team were independently handling about half of decisions, about 40% were discussed with Ömer, and the remaining 10% still needed the founder's approval. The three still met for three hours every week; the formal org chart had not entirely displaced relationship-based governance.

By the end of 2014, the capital budget was already tight. The founder still wanted to open 50 stores over the next three years, while the CEO's analysis supported only a few of them. She had to explain to the advisory board: the processes and the team had changed, so why hadn't profitability followed, and in the next stage what should be stopped, what should be done first, and who should decide.

Key Data

Fact/Calculation	Content	Source
2012 store count basis	The total of 119 already includes 21 outlets, and includes 1 Internet line; it can't be written as 21 additional stores, nor strictly as 119 physical stores	p.5, Exhibit 8, p.19
2014 store structure	City 57, Concept 12, Marina 11, Outlet 17, Apparel 24, Internet 1, total 122	Exhibit 8
Weight of mixed stores	In 2014 the City format contributed 52% of revenue; dedicated Concept format 16%	Exhibit 8; store formats are not product categories
Overlap between the two customer groups	About 3%; the material is an insider estimate, not a precisely verified statistic	p.5
Home revenue	2012 TL135.9m → 2014 TL171.2m; growth 171.2÷135.9−1≈25.97%	Exhibit 14, p.24
Home EBIT	−TL5.7m → +TL7.7m, improvement of TL13.4m; gross margin 52.3%→59.5%, operating expense ratio 56.5%→55.0%	Exhibit 14
Apparel revenue and EBIT	Revenue TL219.6m→212.2m, −3.37%; EBIT +10.7m→−1.6m, a deterioration of TL12.3m	Exhibit 14
Both categories combined, exhibit scope only	Revenue 355.5→383.4, +7.85%; EBIT 5.0→6.1. This can't be used to claim group net profit is positive	Derived from Exhibit 14; lacks full basis such as group costs
Discrepancies between text and exhibits	p.13 says revenue grew 33% over two years, inconsistent with the exhibit totals above; p.9 says home is about 40%, while the simple ratio of the two categories in the exhibit is 44.7%. Keep the discrepancies; don't force them to reconcile	pp.9, 13 and Exhibit 14
Complaint improvement	200→20/month, a reduction of about 90%, but order volume is missing, so a complaint rate can't be derived	p.10
Inventory shrinkage	Apparel 7%→below 1%; home 9.5%→4.5%; the latter still above the roughly 0.5% industry reference in the text	p.10, manager statements
SKUs	Home about 25,000, at least 200 kinds of sofa; target to cut SKUs by 10% a year	p.9; a target, not an achieved ratio
Staff changes	Narrative says 80% management turnover; elsewhere says 17 of 25 senior positions changed hands, 17÷25=68%; not the same denominator	pp.10–11
Project load	50 projects in 18 months; the 2014 exhibit lists 54 in progress, 76 completed, etc., with a printed total of 148, but the status counts add up to 149	p.7, Exhibit 10; don't calculate a completion rate from the discrepancy
Decision allocation	Initially the founder about 80%; later CEO and team 50%, consult the son 40%, father's approval 10%	p.12; interview estimate, not a formal authority matrix
Next-step conflict	Founder wants 50 new stores in three years; CEO's analysis finds only a few viable	p.13

Key People

Person/Organisation	Stance and resources	Relationship the CEO needs to achieve
Mustafa Taviloğlu, founder, honorary chairman	Trend intuition, brand and network; prefers fast expansion	Respect his experience while establishing operating decision boundaries that can't be bypassed
Ömer Taviloğlu, chairman	Succession responsibility, strong risk awareness; once had to clean up after bad decisions	Jointly set standards for evidence and risk, avoiding endless re-analysis of every decision
Barış Karakullukçu, CEO	Systems, talent, execution; retail learning curve	Take responsibility for profitability, and also secure authority to match that responsibility
Five-person advisory board	The founder's business friends, offering advice; unpaid	Distinguish advice from formal decisions; the formal board is the three of father, son and CEO
Tarkan Özkan / Hakan Kavaklı	Heads of home / apparel	Held accountable according to each business's different rhythm and contribution, avoiding averaged evaluations
Long-serving staff and new team	Experience, relationships, skills and different senses of identity	Retain knowledge through fair standards and collaboration, avoiding treating seniority or old/new identity as a verdict on ability

Core Tensions

1. Protect the valuable results of the transformation, or keep relying on store openings to chase financial targets. Opening 50 new stores would add cash and organisational burdens.
2. The founder's experience should be preserved, and the professional manager's authority must also be real and effective.
3. Building systems requires up-front investment, but customer positioning and merchandise quality can't wait until all processes are perfected to be fixed.
4. Home and apparel belong to the same brand, but have different paths to profit, shopping contexts and turnover cycles.
5. Respecting the successor's risk awareness, and avoiding the decision paralysis caused by repeated proof, need shared rules.