Description
This is documentation about western cabinets.
Western Cabinets
The Current Market Scenario The external environment for Western Cabinet can be assessed using Porter’s Five Force Framework. This provides a view of the threats that the firm and the industry on the whole is facing. This has been highlighted in the below table.
FORCE
Substitutes
FACTORS
Cabinets form an integral part of every household. Currently there are no substitutes for the product and hence the threat is negligible. With the increasing competition and the number of players in the industry, there is
RISK
LOW
New an erosion of margins and profits. Due to this, new entrants would be hesitant to Entrants enter the market as it is not a sufficiently attractive option of them. The industry has multiple players ranging from big box stores to smaller ‘mom and Rivalry pop’ stores to stores like Western Cabinet. The intense competition between these firms has reduced profit margins in this industry. The solutions provided by most of the firm are customized solutions. Due to the Customers involvement of customers in the whole process, there is always an issue of customer satisfaction. This along with the presence of other players increases the bargaining power of the customers and hence the threat due to them. Larger firms in the industry acquire larger lots from the suppliers. This provides better revenue for the suppliers than acquiring orders from the smaller firms. Suppliers Hence the suppliers have options to switch their customers to ensure their own objectives are met. UM MEDI HIGH HIGH LOW
Hence based on the five forces evaluation, it can be seen that the overall attractiveness of the industry is between low to medium. The Internal Environment of Western Cabinets The internal environment of Western Cabinet can be assessed using SWOT analysis. This will help to highlight the strengths and weaknesses of the firm while at the same time provide a view of the different opportunities and threats the firm faces. The table below highlights these factors. Strengths ? Good Brand Reputation: - Western Cabinets has a decent brand reputation with respect to its core value drivers: customer service, lead time, ? ? Weaknesses Low level of accountability and control: This has lead to varying levels of individual performance across the organization
thereby affecting the overall performance. Lack of communication between
operational efficiency and quality. ? Vast experience in the industry (27 years):- This has helped the firm set up a brand and is difficult to replicate. ? Good distribution network: - Selling through designers has helped the firm achieve larger sales volumes and also allowed them to expand their reach.
designers, plants and installers: - This has led to many customer complaints and warranty issues attributed to design issues. ? Informal Culture: - This has reduced the level of control the management has on the employees due to which the business is being run rather like an informal business i.e. ‘mom and pop’ shop. ? Reducing operational efficiency: - With the change in employees, there are
operational issues which are affecting the overall performance. This is highly
important as operational efficiency is one of the main core value drivers of the firm. ? Lack of standardized procedures: - This affects the way work is done by the employees. Opportunities ? Lack of quality of competitors: With big box players facing customer satisfaction and warranty issues and ‘mom and pop’ players having lack of professionalism and sophistication, it provides a vast opportunity to Western Cabinets to thrive in these areas. ? Need for more With value-creating the customers ? ? ? Threats Tight labor market: - This affects the quality of employees the firm hires thereby reducing their operational efficiency and overall performance. Competition from other players: - The low cost big box players provide intense competition to Western Cabinets thereby reducing overall profitability. Economic downturn: - This has lead to decline in the housing sector which in turn affects Western Cabinets.
products:
becoming more demanding, value creation is important to provide a more holistic solution rather than just a cabinet. Currently no firm provides this and hence provides an opportunity for Western Cabinets.
Western Cabinet’s Strategic Position The company Western Cabinets follows a differentiation strategy as its business model and positions itself in the industry as a provider of differentiated products. This is seen from the fact that in the model that is follows, it allows the designers to choose from a catalogue of designs but then this is tailored to the customer’s requirement and then manufactured. Also it differentiates itself based on the customer service that it provides to its customers. This is further proved when it is seen that customer service is one of the main core value drivers of the firm.
Business Model for Western Cabinets Mr. Smith’s idea of a business model is to provide complete solutions to the customer’s problems as he believes that the value creation is nothing but solving customer’s problem. The customer is just not looking for an end product as a solution but an end to end solution for all problems arising right from the stage of need arousal to the stage of need satisfaction. Hence the customer is just not looking for a cabinet but for an integrated solution for an array of problems across technology and entertainment. Hence, the business model of providing End to End solution is a good idea as it is very much in line with the company’s mission of customer satisfaction and their strategy of differentiation. The company is presently pursuing Cost Leadership strategy but has not been successful to a large extent. The budgeting process is not enhancing accountability and control in the organization and the target setting has not yielded results. A timely (Quarterly) Budget following a Top-down approach would make sure that the budget encompasses their value drivers like customer service, lead time, quality and operational efficiency. Operationally, there is no proper communication between the designers, the plant and the installers which is leading to many customer complaints and warranty issues. A separate level in the hierarchy should be created to enhance communication between the
different branches and this would add value by saving costs. Presently, it seems like employees who do not need the authority to purchase have been given the authority to purchase which is resulting in higher materials cost. Mr. Smith believes that there could be substantial savings by limiting access to purchase. The differentiation strategy that the company is following is adding value to its business and hence no changes are proposed except that the scope has now increased to provide end – end solution. This would lead to a Complete Customer Solutions business which would differentiate Western from all other in the industries. Under this, Western would not just sell cabinets but also illustrate the possibilities of embedding solutions into the cabinets. The business model should be changed to accommodate end to end solutions. The customer requirements are elicited in the first step which is later analysed by the analyst. If the requirement is just for a cabinet, then the Cabinet Production would takeover and if the requirement is for an embedded solution, then the embedded solutions group would takeover. If the requirement is both, then both the activities happen in parallel and are later integrated at the installing stage. After the installation, the final step would be to follow up with the customer for maintenance and warranty issues.
Customer Requirements Specification
R & D-new cabinet
Design
Cabinet Production
Order Entry
Manufac turing
Delivery
Analysts
Follow up with customer and Warranty the customer
Installing
EMBEDDED SOLUTIONS Group (Ex. Bluetooth, Wireless, consoles, etc.
The fundamental issue is with the business model which is later trickling down to the strategy and execution.
Implementing the Business model through MCS The purpose of management control system is primarily to help to implement strategy or a business model that would enable an organisation achieves its long term strategic objectives. To improve the execution we will look at how to improve our corporate and business unit strategy at Western Cabinets. Corporate Strategy Currently Western Cabinet has a single business of manufacturing furniture. They are planning to diversify into developing design and making technologically advanced furniture solution. The firm is diversifying into a related field. The corporate level managers may not have significant knowledge of the market in which the company is planning to diversify, so Western Cabinet should hire new managers who have sufficient knowledge in the design field so that he would be able to execute the new venture of the company in an efficient way. Business Strategy We would recommend Mr. Smith to go in for a build strategy as the manufacturing of cabinets has entered into a mature stage with little or no growth at all. The proposed business model of Mr. Smith is still at a very nascent stage of development with a huge potential to grow. Factors such as manufacturing process, product technology, market demand, and competitive structure changes more rapidly during the early stage of development. Moreover the objective here is value creation for the customer which is more likely to come when the company adopts build strategy. Mr. Smith should give high importance to
strategic planning; the capital investment analysis should be more subjective and quantitative as this would give a clear picture on where the company stands. The manager should recognise imbalance and should change for the better of the organisation. This can be achieved by developing a balanced scorecard system which would ensure that the firm matures and adopts its business model from the Financials, Customers, and Internal performance, and learning and growth areas. The key to successful balanced scorecard is to convert the strategic objectives into measurable KPI (Key Performance Indicators). The KPI’s selected by western cabinets should be able to measure the a) Operational performance b) Customer profitability and c) Budget efficiency. The performance indicators should be directly linked to the Vision and Strategy of the firm. A few sample performance indicators could be a) Profitability: ? This could be measured in terms of profitability index, ROI etc. Increase in either of them would help improve the image of the company in the market and all the stakeholder involved. b) Customer satisfaction/customer service ? No. of complains/day: This parameter will measure the customer satisfaction and the service and reducing it will increase the profitability, improve the internal efficiency c) New product development ? Innovation could be measured in terms of the number of ideas submitted and actual number of ideas implemented. Innovation is a critical component at western cabinets and would ensure a sustained competitive advantage for the firm.
Another key aspect essential in successful strategy implementation is the support from the management. The vision of Mr. Smith should be accepted by other senior management members to ensure successful implementation. Thus a combination of getting management support, aligning business goals to performance factors, measuring the key performance indicator and constantly taking feedback and evolving the strategy would ensure successful implementation of the proposed business model.
doc_627283613.docx
This is documentation about western cabinets.
Western Cabinets
The Current Market Scenario The external environment for Western Cabinet can be assessed using Porter’s Five Force Framework. This provides a view of the threats that the firm and the industry on the whole is facing. This has been highlighted in the below table.
FORCE
Substitutes
FACTORS
Cabinets form an integral part of every household. Currently there are no substitutes for the product and hence the threat is negligible. With the increasing competition and the number of players in the industry, there is
RISK
LOW
New an erosion of margins and profits. Due to this, new entrants would be hesitant to Entrants enter the market as it is not a sufficiently attractive option of them. The industry has multiple players ranging from big box stores to smaller ‘mom and Rivalry pop’ stores to stores like Western Cabinet. The intense competition between these firms has reduced profit margins in this industry. The solutions provided by most of the firm are customized solutions. Due to the Customers involvement of customers in the whole process, there is always an issue of customer satisfaction. This along with the presence of other players increases the bargaining power of the customers and hence the threat due to them. Larger firms in the industry acquire larger lots from the suppliers. This provides better revenue for the suppliers than acquiring orders from the smaller firms. Suppliers Hence the suppliers have options to switch their customers to ensure their own objectives are met. UM MEDI HIGH HIGH LOW
Hence based on the five forces evaluation, it can be seen that the overall attractiveness of the industry is between low to medium. The Internal Environment of Western Cabinets The internal environment of Western Cabinet can be assessed using SWOT analysis. This will help to highlight the strengths and weaknesses of the firm while at the same time provide a view of the different opportunities and threats the firm faces. The table below highlights these factors. Strengths ? Good Brand Reputation: - Western Cabinets has a decent brand reputation with respect to its core value drivers: customer service, lead time, ? ? Weaknesses Low level of accountability and control: This has lead to varying levels of individual performance across the organization
thereby affecting the overall performance. Lack of communication between
operational efficiency and quality. ? Vast experience in the industry (27 years):- This has helped the firm set up a brand and is difficult to replicate. ? Good distribution network: - Selling through designers has helped the firm achieve larger sales volumes and also allowed them to expand their reach.
designers, plants and installers: - This has led to many customer complaints and warranty issues attributed to design issues. ? Informal Culture: - This has reduced the level of control the management has on the employees due to which the business is being run rather like an informal business i.e. ‘mom and pop’ shop. ? Reducing operational efficiency: - With the change in employees, there are
operational issues which are affecting the overall performance. This is highly
important as operational efficiency is one of the main core value drivers of the firm. ? Lack of standardized procedures: - This affects the way work is done by the employees. Opportunities ? Lack of quality of competitors: With big box players facing customer satisfaction and warranty issues and ‘mom and pop’ players having lack of professionalism and sophistication, it provides a vast opportunity to Western Cabinets to thrive in these areas. ? Need for more With value-creating the customers ? ? ? Threats Tight labor market: - This affects the quality of employees the firm hires thereby reducing their operational efficiency and overall performance. Competition from other players: - The low cost big box players provide intense competition to Western Cabinets thereby reducing overall profitability. Economic downturn: - This has lead to decline in the housing sector which in turn affects Western Cabinets.
products:
becoming more demanding, value creation is important to provide a more holistic solution rather than just a cabinet. Currently no firm provides this and hence provides an opportunity for Western Cabinets.
Western Cabinet’s Strategic Position The company Western Cabinets follows a differentiation strategy as its business model and positions itself in the industry as a provider of differentiated products. This is seen from the fact that in the model that is follows, it allows the designers to choose from a catalogue of designs but then this is tailored to the customer’s requirement and then manufactured. Also it differentiates itself based on the customer service that it provides to its customers. This is further proved when it is seen that customer service is one of the main core value drivers of the firm.
Business Model for Western Cabinets Mr. Smith’s idea of a business model is to provide complete solutions to the customer’s problems as he believes that the value creation is nothing but solving customer’s problem. The customer is just not looking for an end product as a solution but an end to end solution for all problems arising right from the stage of need arousal to the stage of need satisfaction. Hence the customer is just not looking for a cabinet but for an integrated solution for an array of problems across technology and entertainment. Hence, the business model of providing End to End solution is a good idea as it is very much in line with the company’s mission of customer satisfaction and their strategy of differentiation. The company is presently pursuing Cost Leadership strategy but has not been successful to a large extent. The budgeting process is not enhancing accountability and control in the organization and the target setting has not yielded results. A timely (Quarterly) Budget following a Top-down approach would make sure that the budget encompasses their value drivers like customer service, lead time, quality and operational efficiency. Operationally, there is no proper communication between the designers, the plant and the installers which is leading to many customer complaints and warranty issues. A separate level in the hierarchy should be created to enhance communication between the
different branches and this would add value by saving costs. Presently, it seems like employees who do not need the authority to purchase have been given the authority to purchase which is resulting in higher materials cost. Mr. Smith believes that there could be substantial savings by limiting access to purchase. The differentiation strategy that the company is following is adding value to its business and hence no changes are proposed except that the scope has now increased to provide end – end solution. This would lead to a Complete Customer Solutions business which would differentiate Western from all other in the industries. Under this, Western would not just sell cabinets but also illustrate the possibilities of embedding solutions into the cabinets. The business model should be changed to accommodate end to end solutions. The customer requirements are elicited in the first step which is later analysed by the analyst. If the requirement is just for a cabinet, then the Cabinet Production would takeover and if the requirement is for an embedded solution, then the embedded solutions group would takeover. If the requirement is both, then both the activities happen in parallel and are later integrated at the installing stage. After the installation, the final step would be to follow up with the customer for maintenance and warranty issues.
Customer Requirements Specification
R & D-new cabinet
Design
Cabinet Production
Order Entry
Manufac turing
Delivery
Analysts
Follow up with customer and Warranty the customer
Installing
EMBEDDED SOLUTIONS Group (Ex. Bluetooth, Wireless, consoles, etc.
The fundamental issue is with the business model which is later trickling down to the strategy and execution.
Implementing the Business model through MCS The purpose of management control system is primarily to help to implement strategy or a business model that would enable an organisation achieves its long term strategic objectives. To improve the execution we will look at how to improve our corporate and business unit strategy at Western Cabinets. Corporate Strategy Currently Western Cabinet has a single business of manufacturing furniture. They are planning to diversify into developing design and making technologically advanced furniture solution. The firm is diversifying into a related field. The corporate level managers may not have significant knowledge of the market in which the company is planning to diversify, so Western Cabinet should hire new managers who have sufficient knowledge in the design field so that he would be able to execute the new venture of the company in an efficient way. Business Strategy We would recommend Mr. Smith to go in for a build strategy as the manufacturing of cabinets has entered into a mature stage with little or no growth at all. The proposed business model of Mr. Smith is still at a very nascent stage of development with a huge potential to grow. Factors such as manufacturing process, product technology, market demand, and competitive structure changes more rapidly during the early stage of development. Moreover the objective here is value creation for the customer which is more likely to come when the company adopts build strategy. Mr. Smith should give high importance to
strategic planning; the capital investment analysis should be more subjective and quantitative as this would give a clear picture on where the company stands. The manager should recognise imbalance and should change for the better of the organisation. This can be achieved by developing a balanced scorecard system which would ensure that the firm matures and adopts its business model from the Financials, Customers, and Internal performance, and learning and growth areas. The key to successful balanced scorecard is to convert the strategic objectives into measurable KPI (Key Performance Indicators). The KPI’s selected by western cabinets should be able to measure the a) Operational performance b) Customer profitability and c) Budget efficiency. The performance indicators should be directly linked to the Vision and Strategy of the firm. A few sample performance indicators could be a) Profitability: ? This could be measured in terms of profitability index, ROI etc. Increase in either of them would help improve the image of the company in the market and all the stakeholder involved. b) Customer satisfaction/customer service ? No. of complains/day: This parameter will measure the customer satisfaction and the service and reducing it will increase the profitability, improve the internal efficiency c) New product development ? Innovation could be measured in terms of the number of ideas submitted and actual number of ideas implemented. Innovation is a critical component at western cabinets and would ensure a sustained competitive advantage for the firm.
Another key aspect essential in successful strategy implementation is the support from the management. The vision of Mr. Smith should be accepted by other senior management members to ensure successful implementation. Thus a combination of getting management support, aligning business goals to performance factors, measuring the key performance indicator and constantly taking feedback and evolving the strategy would ensure successful implementation of the proposed business model.
doc_627283613.docx