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