Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
Gradable Assignment 2 Assignment 2: Case of “The Living Room: Redefining the Furniture Industry” (Case Reference from the Text Book: Strategic Management by Hitt, Ireland, Hoskisson and Manikutty) Answer all the following Questions
1. Identify the elements of its current corporate strategy in terms of (i) the kind of business, the company is in (ii) the current products’ scope for the next 4 years 2. List down the company’s strengths and weaknesses 3. Examine the growth options for the company in terms of (i) Product Range – Existing and New (ii) Customers Targeted – Current Customers and the for the New Products (iii) Geographic Coverage – Current areas and Proposed New areas
1. Identify the elements of its current corporate strategy in terms of (i) the kind of business, the company is in (ii) the current products’ scope for the next 4 years Answer: In the early days the brand name was not important. The products sold based on their designs. Over the years the brand “The living room” became synonymous with quality. Over the years the brand had changed owing to greater competition and more choices became available to the customers in Mumbai. The living room made a wide range of home furniture. It comprised of the Sofa set: 30%, beds, wardrobes, dressing tables and other Accessories. 25 %, dinning sets
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
20%, kitchen cabinets, wall units and study tables: 25%. TLR had also introduced office furniture like workstation, office tables, running tables, side runners etc. TLR typically caters to the small offices, which did not have the sufficient volume to buy other institutional sellers. Quality and long life was the core strength of the TLR products. This was ensured by high standard in manufacturing, workmanship and quality components. TLR had a variety of models in all its products. TLR recognized a sofa cum bed, introduced new models in in this product category. The designing was done in house after knowing the market trends and customer feedback. The designs were mostly standardized. However the product dimensions could change according to the requirements. Besides style, utility was most important aspect in design of TLR products such as wardrobes, kitchen, sets etc. Innovative designs were made for maximizing space utilization. TLR made different style dimensions to meet the changing customers taste. However changing customer perception was a challenge. 2) With the increasing number of information technology enabled services companies, the resident profile of many cities in India was rapidly changing. Thus TLR saw great opportunities in the cities like Bangalore, Hyderabad, Ahmadabad, luck now, Surat and Gurgaon. In these cities where already a well organized furniture business in prevalent, the challenge would be competition. In small cities the furniture market was still dominated by unorganized sector. The challenge would be to create a brand. In Mumbai TLR made a break through by a sofa cum bed. However in new cities it may not gain this type of acceptance and trust. Other related decisions will be to involve market communication, brand building and selection of retail channel to reach the customer most effectively. TLR could continue selling through its original model of exclusive showrooms, which are fully owned or franchised outlets. In the latter case, the issue of control of franchises would be important. TLR can also form partnership with the existing players in these cities.
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
TLR could also substitute the brick and mortar model with the web enabled business model. It could the customers the additional benefits of designing their furniture online. The showrooms could source the components centrally and assemble at the front end. On product offering TLR should decide either to standardize its offering across the cities or make it more localized responding to the culture and preference. 2. List down the company’s strengths and weaknesses Answer: The main strategy of TLR living room furniture is Hybrid, which means that the division wants to compete other competitors on price and as well to control the cost of furniture to maintain the gross margin of the company. There are a series of advantages and strengths as follows: Strengths: Good price to attract customers: After the recession of economy the price of goods, especially furniture, become the main competitive advantage to attract customers to consume products on company. As the main reason that led to the economy crisis is the subprime lending which is related to the housing industry; and makes a drop in the sales of houses in Mumbai. Although the recession had a negative impact on TLR living room furniture, good price of its products keeps attracting the customers to purchase TLR living room furniture. Variety of products: this means that based on variety of products, TLR living room furniture is able to survive during the crisis. Even one product fails in the market, there are still other products succeed in the market to make up the loss that cost by the failure of that product. Besides, different kinds of products make those brand loyalty customers to purchase more and also increase the image of the brand. This
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
helps the company achieve the mission of becoming the best furniture company all over the India. Maintain the gross margin: Obviously, this technique assist the company to maintain the gross margin by controlling the cost of furniture. By using Hybrid strategy, the division still possesses the ability to control the cost of products. On the other hand, by adding more value through design, build and deliver the furniture to the customers, the products of TLR living room furniture are still attractive.
Weaknesses: Inevitably, there are some negative impacts by using this kind of business level of strategy, which can be identified as weaknesses. And the weaknesses of using Hybrid strategy are presented as follows: More funds spent on implementing the strategy: In order to supply and offer more furniture products to the customers, more funds will be spent on Research and Development, Design to find more solutions offered to the customers. Besides, the division possesses its own stores which cost much of its capital on investing in purchasing fixed assets, which may become a potential problem to the cash flow of the company. Competition of the similar products in the company: It can be seen from its website that the division provides more than 100 furniture products to customers to find out the most suitable furniture for their living rooms. Therefore, this results in the competition among the products within the same category. Although from some perspective, this attracts customers to purchase in TLR living room furniture, it
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
increases the competition in the products of the company, which can not be ignored. Lack of quality: It can be known that the products of TLR living room furniture rely on quality and the mission of becoming the best furniture company in Mumbai and even all over the world rely on quality; meanwhile, the business model of TLR living room furniture depends on the quality of products. If the company concentrates on controlling the cost, such as the outsourcing price offered to those manufacturing companies, which may affect the quality of products of living room furniture. Then it will affect the paradigm of the division in the industry and then reduce customer brand loyalty.
2. Examine the growth options for the company in terms of (i) Product Range – Existing and New (ii) Customers Targeted – Current Customers and the for the New Products (iii) Geographic Coverage – Current areas and Proposed New areas Answer: TLR had a variety of models in all its products. TLR recognized a sofa cum bed, introduced new models in in this product category. The designing was done in house after knowing the market trends and customer feedback. The designs were mostly standardized. However the product dimensions could change according to the requirements. The living room made a wide rang of home furniture. It comprised of the Sofa set: 30%, beds, wardrobes, dressing tables and other Accessories. 25 %, dinning sets 20%, kitchen cabinets, wall units and study tables: 25%. TLR had also introduced office furniture like workstation, office tables, running tables, side runners etc. TLR typically caters to the small offices, which did not have the sufficient volume to buy other institutional sellers. Quality and long life was the core strength of the TLR products. This was ensured by high standard in manufacturing, workmanship and quality components. . Besides style, utility was most important aspect in design of TLR products such as wardrobes,
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
kitchen, sets etc. Innovative designs were made for maximizing space utilization. In the early days the brand name was not important. The products sold based on their designs II: TLR could extend its presence in the product spectrum, catering to the lower or higher value products. Moving lower would mean direct competitions with the local players, solely competing on price. In this case it would not be economical to provide the same product quality and after sales service that TLR currently provides. Not providing the same on the other side would dilute the brand. TLR could also have the option of moving up to high value products. The method of selling of these products is very personalized. The furniture will have to be designed for each of the home by an interior decorator, who then ordered the highly customerized products. TLR did not have adequate exposure in this market and hence would have to use the services of the interior decorator. The company would likely to face the challenge of control of relationship with the clients.TLR is strongly entrenched as a value for money brand trusted for the quality for longitivity of its products. From its experience in the industry there was another class- the aspiration driven upper end of the middle class segment. They would like to possess the upper class furniture and acceptability of the brand would not be an issue. TLR could upgrade to this segment by offering furniture that offer value for money. In 2005 TLR entered the office furniture market. It catered to small enterprises, which did not have the volume to go in for institutional segments. With the increase in number of BPO and IT firms, the market for office furniture was also growing. TLR could also venture into this market, increasing its customer market to a larger clientele. III) . In Mumbai TLR made a break through by a sofa cum bed. However in new cities it may not gain this type of acceptance and trust. Other related decisions will be to involve market communication, brand building and selection of retail channel to reach the customer most effectively. TLR could continue selling through its original model of exclusive showrooms, which are fully owned or franchised outlets. In the latter case, the issue of control of franchises would be important.TLR can also form partnership with the existing players in these
Business Strategy
Yogesh Khare
Gradable Assignment 2
150101619028
cities.TLR could also substitute the brick and mortar model with the web enabled business model. It could the customers the additional benefits of designing their furniture online. The showrooms could source the components centrally and assemble at the front end. On product offering TLR should decide either to standardize its offering across the cities or make it more localized responding to the culture and preference. With the increasing number of information technology enabled services companies, the resident profile of many cities in India was rapidly changing. Thus TLR saw great opportunities in the cities like Bangalore, Hyderabad, Ahmadabad, luck now, Surat and Gurgaon. In these cities where already a well organized furniture business in prevalent, the challenge would be competition.
