Written Analysis and Communication I Assignment 3 West Lake Home Furnishings Ltd: Projections of the sales offer made by a Client
Submitted to Dr. Rohini Patel
By Rathod Manjeet R. Roll No. 144086 Section: P!P "014#16
$n %0.08."014
emorandum &o: 'harle( Bo)man* '+$* ,e(t -ae /ome urni(hin( -td. rom: Manjeet Rathod* +2ecuti3e ((i(tant to 'harle( Bo)man Date: 1th 5un* "00 Subject: naly7in the rojection( o9 the romotional o99er made by a .S. ba(ed retail chain client
Plea(e 9ind the attached reort* analy7in the 9uture imlication( o9 the (ale( romotional o99er on the (inature line o9 ,e(t -ae /ome urni(hin( -td.* ro3ided by a .S. ba(ed retail chain client* includin the 9inancial and maret (hare rojection(.
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!e"ort #ummary &he reort (ummari7e( the content o9 the document in a nut(hell to ro3ide the reader a comrehen(i3e er(ecti3e o9 the content(. #ituation Analysis: &he home 9urni(hin maret ha( )itne((ed comounded annual
ro)th o9 6.1; in recent year(. ,e(t -ae /ome urni(hin -td <,-/= doe( bu(ine(( in the (ame 3ertical. $ne o9 the retail chain )ho contribute( %%; o9 the )hole(ale bu(ine(( o9 ,-/ about reducin the rice and in turn it i( en(urin the increa(ed maret (hare and 9i3e time( larer con(umer (i7e. ,-/ i( un(ure about accetin thi( o99er a( it can a99ect all it( other cu(tomer( and it( credibility* )hile maintainin the current 9uture e2ectation( o9 (ale(. Problem #tatement: 'on(iderin the imact on 9uture (ale( and the maret (hare*
(hould ,-/ accet the deal o9 .S. ba(ed retail chain> $"tions:
1. ,-/ reject( the o99er and continue( )ith the (ame bu(ine(( oeration( ". ,-/ reject( the o99er and hire( a (ale( con(ultant to attract the bu(ine(( 9rom interior decorator( %. ,-/ accet( the o99er %&aluation Criteria:
1. ?ncrea(ed maret (hare 9or ,-/. ". ?ncrea(ed ro9itability and net earnin( by at lea(t 1; annually. %. ?ncrea(ed ood)ill and credibility. %&aluation of $"tions :
Rejectin the o99er and continuin )ith the (ame bu(ine(( )ould not increa(e the maret (hare* increa(e the net earnin( by only @;* no (ini9icant increa(e in the credibility accordin to the rojection(. /irin the (ale( con(ultant 9or retail (tore and rejectin the o99er )ould increa(e the maret (hare by 0.0%;* reduce( the net earnin( by 1%;. ccetin the o99er )ould increa(e( the maret (hare by %4;* increa(e( ro9itability to 40.;* increa(e( net earnin( by "%@;. &he credibility i( e2ected to ri(e becau(e o9 the increa(ed client ba(e* maintained hih Auality )hile the reduced rice. !ecommendations: ,-/ (hould accet the o99er a( it meet( all the criteria more
(ini9icantly than any other otion. &he otion al(o en(ure( the SP o9 ,-/ )hile achie3in the 9uture oal(.
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#ituation Analysis &he home 9urni(hin maret( (ale( ha3e (een a ri(e 9rom C.6 billion <"00"= to C@. billion <"006=* )hich include( annual ro)th o9 @.%8; in the year "006 <+2hibit 1=. &he ri(e can be attributed to the baby boomer(* no) in ae o9 4#64* earnin hiher income( and (endin on home o)ner(hi( and imro3ement(. ?n the (ame time* the a3erae rice( o9 the home 9urni(hin roduct( ha3e 9allen* but becau(e o9 the 1; increa(e in the number o9 unit (ale(* the maret ha( )itne((ed ro)th. naly7in the trend* it can be in9erred that by lo)erin the unit rice( e3en more* the ro)th in the (ale( 3olume can be achie3ed.
,e(t -ae /ome urni(hin -td. <,-/= deal( in the -ihtin ?ndu(try and ha( 1; o9 maret (hare. ,-/ (ell( the roduct( by either (ulyin the retailer( or (ellin in their o)n retail (tore or thouh ?nternet )eb(ite. &he uniAue (ellin roo(ition o9 ,-/ i( their modern de(in( and rea(onable rice(. 'urrently* ,-/ i( achie3in the annual net earnin( at a ro)th rate o9 1; and they )ant to maintain thi( ro)th in the 9uture. @0; o9 the ,-/( roduction i( (ourced 9rom 'hina* )hich ha( 9orced the hiher le3el o9 in3entory le3el( to en(ure the in#time deli3ery. ,-/ hold( C1.6 million o9 in3entory* )hich account( 9or 1; o9 the (ale(. +3en thouh ,-/ i( reluctant to increa(e the in3entory le3el* they can increa(e it )ithout (ini9icant 9inancial imlication(.
,-/ ha( no lon#term debt(* a( the home 9urni(hin indu(try i( not caital inten(i3e and yet hihly ro9itable* )hich re(ent( threat to ,-/( maret (hare* by ne) entrant( and increa(ed cometency to ,-/. 'urrently* ,-/ ha( 9i3e main cometitor( and t)o ne) 9irm( are enterin the maret* )hich re((uri7e( ,-/ to imro3e their SP to imro3e the ro9itability and increa(e the maret (hare.
%%; o9 ,-/( )hole(ale bu(ine(( i( attributed to a .S. ba(ed retail chain* )hich i( a(in 9or rice reduction 9rom C6@.@@ to C"@.@@. ,-/ roduce( a (inature line 9or thi( retailer. &he retailer i( ready to reduce the ro9it marin by 0;. ?9 ,-/ accet( the o99er* then the '$!S )ould 9all 66;* unit( (old )ould increa(e by 9i3e time( and the other e2en(e( )ould ri(e (lo)ly. &he retailer )ould ro3ide a
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rominent (hel9 (ace to the roduct. Summin u all the(e 9act(* )ould re(ult in the boo(ted (ale( and deeer maret enetration 9or ,-/* but 9ollo)in thi( mo3e* all the other )hole(ale retailer(* (tore cu(tomer( and internet cu(tomer( )ould a( 9or the (imilar le(( rice* )hich )ould in turn reduce the ro9it marin er roduct 9or ,-/. ,-/ ha3e ro3ided the in9ormation about the 'hine(e manu9acturin 9actory* co(t* roduct (eci9ication( )ith the buyer* )hich can lead the retail chain to (tart directly buyin roduct( 9rom 'hina. ?9 ,-/ doe(nt mae the deal* then ,-/ (tand( chance o9 lo(in a hue cu(tomer. No) ,-/ need( to mae a deci(ion in accordance )ith their ambition(* )hether they (hould accet or reject the o99er.
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Problem #tatement 'on(iderin the imact on 9uture (ale( and the maret (hare* (hould ,-/ accet the deal o9 .S. ba(ed retail chain>
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$"tions 1. ,-/ reject( the o99er and continue( )ith the (ame bu(ine(( oeration( ". ,-/ reject( the o99er and hire( a (ale( con(ultant to attract the bu(ine(( 9rom interior decorator( %. ,-/ accet( the o99er 4.
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Criteria for %&aluation 1. ?ncrea(ed maret (hare 9or ,-/. ". ?ncrea(ed ro9itability and net earnin( by at lea(t 1; annually. %. ?ncrea(ed ood)ill and credibility. 1.
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%&aluation of $"tions WLHF rejects the offer and continues 'ith the same business o"erations . &he
rojected ro)th o9 the 'anadian retail indu(try i( 10; in "00<+2hibit 1=. ?t )ould increa(e the ,-/ (ale( to C1"."6 million <+2hibit "=* but the maret (hare )ould remain unchaned at 1."4; a( in "006<+2hibit %. /ence* thi( otion )ould not en(ure the increa(ed maret (hare 9or ,-/. +2hibit 4 (ue(t( that the rojected ro)th in the net earnin( )ould be @; to C"*""*0 <+2hibit =* )hich i( le(( than the 1; ro)th that ,-/ )ant( to achie3e. &he ro9itability o9 ,-/ remain( unchaned at %;<+2hibit =.
WLHF rejects the offer and hires a sales consultant to attract the business from interior decorators in order to le3erae uon the oortunity o9 increa(ed home
o)ner(hi( o9 baby boomer(. +2hibit % (ue(t( that the maret (hare )ould increa(e by 0.0%; to reach the le3el o9 1."; in "00. &he e2ected le3el o9 increa(e in the (ale( i( C%*00*000* but it )ould increa(e the '$!S and e2en(e( (uch that the rojected net earnin( 9all( to C1*6*1 <+2hibit =* cau(in 1%; decrea(e in the net earnin( <+2hibit 4=. By (electin thi( otion* ,-/ )ould lo(e the (inature line( (ale and the con(umer rou* )ho )ere the buyer( o9 tho(e roduct(. +3en i9 ,-/ 9ocu(e( al(o on ?nternet ba(ed bu(ine(( to maintain the con(umer le3el* the nelient (ale( (hare o9 1.;<+2hibit = )ould not let the total (ale chane by a (ini9icant marin.
Acce"ting the offer by WLHF )ould increa(e the maret (hare to 1.66; <+2hibit %=*
)hich i( an increa(e o9 %4; 9rom the "006 le3el. naly7in the 9inancial a(ect* the rojected net earnin( in "00 are C6*8@*@0 <+2hibit 8=* )hich i( an increa(e o9 "%@; <+2hibit 4=. Moreo3er the ro9itability al(o increa(e( to 40.; <+2hibit 8=. &hi( otion )ould reduce the rice o9 the (inature line roduct( to C"@.@@ 9rom C6@.@@ that can rai(e doubt( about the Auality o9 ,-/ roduct( in the mind( o9 con(umer(. But the increa(e in the number o9 con(umer( by 9i3e time( in the )hole(ale bu(ine(( reduce( the threat o9 reduced credibility amon the con(umer(.
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!ecommendations ,-/ (hould accet the o99er 9ollo)in the rojection( o9 increa(ed maret (hare* increa(ed net earnin( and increa(ed ro9itability. Moreo3er by choo(in thi( otion* the retailer )ould ro3ide increa(ed (hel9 (ace and 9i3e time( more client ba(e to it( articular bu(ine((* the hih Auality roduct( )ould be (old at lo)er rice maintainin ,-/( SP o9 rea(onable rice(E all the(e )ould (um u to the increa(ed credibility and ood)ill amon the con(umer(. ( thi( otion roject( more maret (hare* ro9itability and credibility* ,-/ (hould de3elo the action lan re3ol3in it.
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Action Plan •
Mae a detailed lan )ith the retailer about the increa(ed (hel9 (ace and ho)
•
it )ould en(ure the 9i3e time( increa(e in the client ba(e. Plan out the increa(ed roduction )ith the 'hine(e manu9acturer* alon )ith
•
the reAuired increa(ed labor (trenth* (hiin (chedule and other e2en(e(. +n(ure the increa(ed (trenth o9 in3entory and the )arehou(e to accommodate
•
the increa(ed roduction. -ay do)n a lan to neotiate )ith the other retailer( and (mall (ho( o)ner( 9or the (ub(eAuent reduction in the roduct rice( alon all the 3ertical(* )ithout the reduction in the credibility o9 ,-/.
Total Word Count: 1096
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+2hibit.1
Fear "00" "00% "004 "00 "006 "00
Projected Home Furnishings #ales Sale(
((umtion: 1. Ba(ed on the re(ence o9 Baby Boomer(* it i( a((umed that the ; increa(e in the (ale( )ould not 9all and )ould remain almo(t at the (ame le3el in "00 a( )a( in "006.
+2hibit." Projected #ales of West Lake for 1)), 2,-/ reject( the deal and continue )ith the (ame bu(ine(( oeration( "00 "006 &otal Sale( o9 /ome urni(hin ?ndu(try
&otal Sale( o9 -ihtin and -ihtin i2ture(
@86 @.%";
@00 @.%";
(1/14
((/1
1."4;
1."4;
((umtion: 1. &he @.0; increa(e in the &otal (ale( o9 /ome 9urni(hin indu(try
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+2hibit. % arket #hare of WLHF in 1)), under 5ifferent #cenarios "00 /irin ccetin No chane in 'on(ultant $99er oeration( &otal Sale( o9 -ihtin and -ihtin i2ture(
"006
@0*00*00*000
,-/ Sale(
1*"6*"0*000
1*6"*%*%01
(*13*1)*)))
(*(1*))*)))
(/1,0
(/440
(/160
(/160
Sale( o9 other 9irm(
@*6*80*000
@*6*80*000
@*6*80*000
88*88*00*000
Note: Data re(ented in the e2hibit i( (uorted by 3ariou( e2hibit( <%* and 8=* con(i(tin o9 detailed rojected ,-/ (ale(.
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+2hibit.4 Projected Change in the 7et %arnings under 5ifferent #cenarios
Net +arnin( ; Fear
Note: Data re(ented in the e2hibit i( (uorted by 3ariou( e2hibit( <* and 8=* con(i(tin o9 detailed rojected net earnin(.
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+2hibit. Projected Income #tatement for 1)), 2WLHF rejects the deal and continue 'ith the same business o"erations ?ncome Statement 1)), 1)), 1))4 #tore Wholesale Internet 8otal "6.8 1.4 "*18*@" 1.8 Sale(
Sale(* !eneral* dmini(trati3e +2en(e(
%"*8%*@"@ @*08*4 %*4"*6"% 1*1@*@18 1*11*,)+
((umtion(: 1. Sale ha( increa(ed by @.; o3er "006 ". ?ncome ta2E Sale(* !eneral and dmini(trati3e
((umtion: 1. 'alculated 9rom the ?ncome Statement o9 "00 and "006 ". ((umed that the re(ecti3e ercentae( remain (ame 9or "00
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%0*00*000 8*%0*000 %*1%*000 1*0@*0 1*)3*6+)
+2hibit. Projected Income #tatement for 1)), 2WLHF rejects the deal and hire a sales consultant to attract the business from interior decorators
Sale(
?ncome Statement 1)), #tore Wholesale Internet "*18*@" %*8%*@"@ "8.; 8**14% 6@.; @ 1.; "%**000 "@.8; %*6%*0 6.8; 6"*%@ 0.8; 1*6*% 10*0@*"86 "1.; %%*@%*%@% %.0; 4 %.4; "8."; %8.8; 1.;
Sale(* !eneral* dmini(trati3e +2en(e(
1)),
1))4 8otal
1*"*60*000 @*1%*@"1
1*1"*00*000 0**000
46*46*0@ %.0;
41*4%*000 %.0;
%4*44*"86 @*%0*86 "*1*00 @4*8% (*,4*(++
%0*00*000 8*%0*000 %*1%*000 1*0@*0 1*)3*6+)
Note(: 1. &he con(ultant )ould chare C80*000 )hich )ould be included in S!G e2en(e ". &he (ale( 9or the retail (tore )ould increa(e by C%00*000 ((umtion(: 1. &otal Sale( ha3e increa(ed by @.; o3er "006 in "00 ". ?ncome ta2E Sale(* !eneral and dmini(trati3e
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+2hibit.8 Projected Income #tatement for 1)), 2WLHF acce"ts the deal
#tore
Sale(
%"*8%*@"@
'$!S
""*@8*0
!ro(( Marin
@*8*1@ %0.0;
"0.% ; "4.0 ; 14.@ ;
?ncome Statement 1)), Wholesale Internet 8.4 1*"6*@4*080 ; "*18*@"@ .4 "*%*6"6 ; 6"*%@ 8". 4*8*4 ; 1*6*%4 4%.0; 1.;
1)),
1))4 8otal
1.4 ; 0. ; ".4 ;
Sale(* !eneral* dmini(trati3e +2en(e(
1*61*@6*@%8
1*1"*00*000
@*@6*1
0**000
66*00*16 40.;
41*4%*000 %.0;
4%*%8*46 1"*00*%0@ 10*61*%@% %*1*488 4*-.*.)+
%0*00*000 8*%0*000 %*1%*000 1*0@*0 1*)3*6+)
((umtion(: 1. Sale( o9 the retail chain* main the o99er ha( increa(ed by time(. ". Sale( o9 other retail chain(* internet and (tore ha3e increa(ed by @.; %. '$!S o9 the retail chain main the o99er ha( reduced by %%; <9rom 6%; to 4";= )hile the '$!S 9or other retail chain( i( (till 6%; o9 (ale(. &hu( the '$!S 9or )hole(ale ha( aro2imately reduced to ; 4. Sale( o9 ,hole(ale H C1*"6*@4*080 i( deri3ed in the %9hibit/. . S!G e2en(e( and Shiin and ,arehou(e e2en(e( ha3e increa(ed in the (ame roortion a( the (ale(* "; and ; o9 (ale( re(ecti3ely.
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+2hibit.@ Change in the Wholesale #ales* because of the change in the "er unit "rice to the deal making retailer 2WLHF acce"ts the deal 1)), ,hole(ale (ale(
!i3en act: 1. Retail 'hain( Sale( H 1; o9 <,hole(ale (ale(= ". Price er unit o9 roduct 9or (inature line reduce( to C"@.@@ 9rom C6@.@@ %. nit( bein (old at o99erin retail chain )ould increa(e by 9i3e time( 4. &he retail chain main the o99er con(titute( %%; o9 the )hole(ale maret (hare in "00 6.
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+2hibit.@ Change in the Wholesale #ales* because of the change in the "er unit "rice to the deal making retailer 2WLHF acce"ts the deal 1)), ,hole(ale (ale(
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