John Atherley is the owner of Atherley Furniture Company located near Orillia, Ontario. In recent years the progression of his chair division has had mediocre results and profits have been declining steadily each year. From the years 1995 to 1998 Atherley Furniture’s total profits have suffered a 24% loss within that time span. In the company’s chair division there are three models of chairs that have quite the reputation the “Caledonia”, “Atherley”, and lastly the “Parkdale”. Growing concern for the company’s performance led the executive team to analyze income statements for each model to determine the attributed expenses and revenues. With a decline in profits for the Atherley Company, it is crucial that they manage their chair line properly in order to increase profits and reduce costs and expenses. Problem Statement and Objectives
Problem: How to achieve a more assertive sales growth to provide an increase in profitability as well as how to improve management of chair division for better success. Objective: Upgrade manufacturing equipment and expand the company to keep up with the strong demand for the “Caledonia” and “Atherley” models. Objective: To manage chair division focus on the strengths of their bestselling model the “Caledonia”. Objective: Work on properly controlling cost-management for the “Atherley” model by cutting expenses and improving efficiency to increase profits. Objective: Completely remove the “Parkdale” model from the product line as its profits have been decreasing more and more each year. Objective: Focus more on manufacturing “Caledonia” models in order to remove backorder and provide retailers the chairs without having them wait weeks.
Atherley Furniture Company belongs to the furniture manufacturing industry, which is very competitive but desirable. Atherley is established and well known but has been losing sales for the past three years. There are many opportunities for success and Atherley can benefit from changing its current strategy to modernize its chairs and manufacturing practices.
Porters Five Forces
The company is in the manufacturing industry of furniture products. Buyers Power-The buyers are retail and department stores that carry chairs and furniture. They have high buying power because of their ability to purchase products from other manufacturers. Suppliers Power- Suppliers are raw material providers that supply wood, metal screws and fittings, and plastic. The raw materials are identical and there really is no differentiation so there are many suppliers willing to work with Atherley. Supplier power depends on the size of the suppliers, large suppliers exert power on Atherley while small suppliers have limited bargaining power. Substitutes- Substitutes would be cushions, bean bags, bolsters, pillows, pads and even the plain floor depending on the cultural background. Potential Entrants- Potential entrants would be already well-established furniture retail stores (backward integration) as well as new entrants looking to set up manufacturing plants and foreign companies. There is a moderate to low level of threat, as it would require a large capital investment and good customer and supplier relations that many foreign and existing companies may have. Industry Competition- The industry is very competitive with manufacturing companies both foreign and domestic as well retail stores who also manufacture themselves such as IKEA; there would be a high level of competition for products, which are not differentiated where as a moderate level for products that are differentiated.
Conclusion- This is would be a fairly unattractive industry to be in as there is a moderate to high level of threat from potential entrants and industry completion, although there is low substitute threat and low to moderate level of buyers power there is high level of suppliers power
Political- the main issues could be foreign...
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