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City Furniture and Mattress
Team Edward: Ashley Clapham, Jacob Curtis, Tara Lappin, Brandon Kew, Marcus Kelly
Presentation Outline• Recommendations• Company Background• Finances• Internal Analysis• External Analysis• SWOT• Strategic Issues• Alternatives• Recommendations• Implementation
Recommendations
Increase the profitability with a long-term focus.
• Vertical Integration• New payment process• Relocate Pickering store
Where does City Furniture and Mattress stand?
Solid groundRun by father and son team:
Baskar and RajeevGoal is to be more profitableTwo Stores open
◦Toronto: great location, $50,400 profits per month
◦Pickering: $700 profits per month
Mission/Vision Statement
“Thiknk of some shit tom.”
Hambrick and FredericksonElements of Strategy
• Arenas◦- Product category: Home furnishings (Living
Room, Dining Room, Bedroom)◦- Market: Lower to middle income ◦- Geographic: Greater Toronto Area◦- Value Creator: Experienced management
team◦-Market Segment: low to mid price (price
conscious)• Ploy
◦- Vertical integration (gives us high margins)
Hambrick and FredericksonElements of Strategy cont.
• Pattern- Low-cost- Style
• Economic Logic◦ - Low-costs through scale advantages
• Plan◦ - Now-3 months: build manufacturing warehouse◦ -3 months-2 years: manufacture from warehouse/pay it off◦ -1-3◦ -2-5 years: Look to build additional stores and outsource
delivery services
Competitive Advantage
• Singh family’s combined expertise in the market along with Baskar’s legacy advantage- Baskar opened first retail furniture store (1986)
- Later opened manufacturing business producing mattresses and living room sets to support the retail area
◦ - Built relationships to allow leverage with business needs
S.E.P.T.
• Socio-cultural Consumer focus on low-cost, rather than brand loyalty
• Economic Interest rates (Loan)
◦ Unemployment◦ Foreign- Low-cost production in Asia
S.E.P.T. cont.• Technological
◦ Information Technology◦ Re-engineering
• Political◦ Taxes (State/Local)◦ Worker Safety◦ Minimum Wage
Porters Five Forces5 Forces in the
Industry Current FutureCustomers 4 4
Suppliers 2 1
Direct Competitors 5 5
Substitutes 2 2
Potential Entrants 3 4
Total 16 16
SWOT Analysis
Strengths Weaknesses• Experienced
managerial staff
• Direct global sourcing experience
• Toronto location
• Subpar profitability because of Pickering location
• Customer service issues with delivery
• Limited inventory space
SWOT Analysis
Opportunities Threats• Vertical Integration
possibility
• People willing to browse many stores
• Entering new markets or segments
• Negative price pressure
• Low barriers to entry
• Fragmented market share
• Tough market to find new workers
Strategic Issues
• Overworked and unhappy delivery workers
• Lack of brand loyalty
• Unsure how to obtain long run profitability
• Demographics outside Toronto vary
Alternatives
• Store Network Expansion
• Expansion of Global Sourcing Program
• Vertical Integration
Store Network Expansion
Advantages Disadvantages
• Past Experience
• Economies of Scale
• Wider reaching media
• Finding trustworthy, capable staff
• Costly investment• Not enough potential
reward for the risk• Staffing Issues
Expansion of Global Sourcing Program
Advantages Disadvantages
• Increased Margins (Higher % of high margin products)
• Connections globally
• Industry trend moving to global mindset
• Inventory Storage
• Significant Financial Commitment
• Product Selection Risk
Vertical Integration
Advantages Disadvantages
• Baskar Singh’s past experience
• Fragmented Industry
• Increase margin by 15-30%
• Long-term profit potential
• Staffing Issue
• Global Sourcing on the Rise
• Non-profitable in the short-run
AlternativesAlternative
sValue Added
Cost Fit Risk Total
Store Network
Expansion
3 2 3 3 11
Increased Direct and
Indirect Global
Sourcing
2 3 4 4 13
Vertical Integration
4 2 5 3 14
Recommendations
• Short Term• Vertical Integration• New payment process
• Long Term• Subcontract delivery services• Relocate Pickering store and staff to better
location• Begin selling to local competitors
ImplementationMcKinsey’s 7 S’s
• Strategy Create increased profitability through margin gains
• Structure Small top down authoritative company that can
adjust to the environment quickly
• Systems Centralized decision making due to the owners
strong background in the industry
ImplementationMcKinsey’s 7 S’s
• Staff Offer internship opportunities Subcontracted delivery Keep experienced personnel
• Style More authoritative and pressing
• Skills Competitive advantage found in expertise of the business
owners in retail and manufacturing of furniture
• Shared Values Passionate and knowledgeable about the family owned
business