Dahlia Furniture Pte. Ltd. free essay sample

On August 1984, Mr. Chua Boon Kang and Mr. Leong Sim Lam bought over Peter Lim’s forty six percent (46%) stake at Dahlia Furniture Private Limited. Although co-owners at one time, Mr. Chua and Mr. Leong have found Mr. Lim’s management of the company to be unsatisfactory. Some reorganization took place as most of the production workers who were doing subcontracting orders solely for Dahlia had resigned due to poor company performance in 1982. Dahlia also sold off seventy five thousand dollars ($75,000) worth of machinery used for mass producing furniture which was previously purchased by a former Managing Director, who has since left the company. Now at the helm, both are uncertain about the long term direction of the company. Meanwhile, they are both concerned over maintaining sales growth in a highly competitive industry. Dahlia Furniture made its entrance into the furniture industry in 1972 as subcontractors to two large furniture concerns, Chin Lin and Diethelm. It supplied mainly wall units and kitchen cabinets while bedroom set and dining sets were subcontracted out or obtained from local suppliers. Business went well and the company decided to branch into retailing. Between 1979 and 1980, Dahlia acquired two factories at Ang Mo Kio and Upper Thompson at a cost of $400,000 and $300,000 respectively. The factory at Ang Mo Kio was rented out on a monthly basis to furniture makers who were also subcontractors to Dahlia. The company also acquired two or more showrooms in the Bukit Timah and Upper Thompson area in 1978 and 1982 respectively. Nevertheless, the company was constantly in search for the right person to manage the business considering the expertises of the owners were limited to production operations. Nobody was suited to oversee the entire flow of business activities, i. e. from production, distribution, administration and marketing. Several changes in management were made until such time the co-owners settled for hiring their own relatives to manage the day to day operations of the company. Although the company has a strong market base for high income families, the growing industry faced stiff competition from both local and foreign companies engaged into retailing and production of various classes and styles of furniture items made of wood or plastic. Given this situation, management now identified the following concerns: 1. What is the long-term direction of the company in the coming years? 2. How will it maintain its sales growth? 3. Will it eventually concentrate into retailing (distribution) and import goods? 4. Will it expand its domestic production of the furniture items? Problem of the Case How a market leader and an exporter manufacture a high-quality custom-made furniture? Objective of the problem 1. To manufacture high quality and custom made furniture items. 2. TO maintain consistent sales growth. 3. To engage into export of highly valued pieces of furniture. Courses of Actions With the identified problems and taking into consideration of the vision and mission of the company, Dahlia has to undertake a SWOT Analysis in order to come up with appropriate courses of actions benefiting the company in both short and long term operation. Strengths Weaknesses Highly skilled owners producing quality furniture items Availability of competent subcontractors Commitment of owners of maintaining consistent sales growth Resources are available to fund production Poor and inefficient company management Absence of suitable manager Opportunities Threats Growth in construction and building industry Growing demand for furniture products Market for middle and high income families Market for low income households Growing export market and revenues Influx of foreign manufactured items Presence of international companies Perceived domination of foreign brands Expensive foreign labor High import duties Longer period to generate sales of imported items Erratic pricing Loss of income of local subcontractors Unemployment The SWOT Analysis revealed strengths overwhelmed weaknesses which can be resolved by having the owners themselves undergo crash training programs in management and at the same time engage 3rd party auditors to properly assess business operations and management. In a growing industry and open market system, it cannot be argued that imported goods would enter the market given the high income and preferences of consumers. This can be resolved through the intercession of the government regarding tariff, custom duties and tax. Transforming Weaknesses and Threats Into Positive Actions Weaknesses and Threats Positive Action Poor and inefficient company management Implement organizational assessment and development scanning Absence of suitable manager Constantly look for applicants and undertake thorough background check Influx of foreign brands and companies Establish linkage and partnerships where applicable High import duties Assess actual cost entailed Longer inventory holding period Apply just in time inventory system on items intended for sale Erratic pricing Import only items as per request of customers and maintain regular contact with clientele Loss if income of subcontractors/rising unemployment Ensure domestic production of not less than 60% of the total production requirement Analysis, Recommendation and Conclusion By engaging solely in the distribution of imported items and assuming all other things are held constant (overhead costs), it will be costly in the long run if the items are not disposed within a period of holding inventory balance. While expanding its production unit proved to be costly due to expensive labor, the company has to consider that it is producing simply custom-made furniture product line and not items for mass consumption. In addition, it should also close its Upper Thompson Area since this showroom only contributes 10% of annual sales of the company notwithstanding an expensive monthly rental. The company should likewise occasionally advertise its products and at the same time actively participate bidding on both public and private government entities. To further cement its hold in the market, the company should realign its goals by having 40% of its product line imported. This is to provide additional options of consumers in buying furniture line according to their needs. The 60% domestically produced custom made furniture items will be for domestic and foreign distribution since there are already available international markets. As the company does not see itself as being in direct competition with these large foreign based companies since it has its own market niche for high end consumers it should also assess the feasibility of carrying additional product lines relate to furniture.