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CITY FURNITURE & MATTRESS Case Solution & Answer

CITY FURNITURE & MATTRESS Case Solution

Definition of success

City furniture and mattresses need to improve the company’s profitably and volume with in a year in order to ensure the success of its business.  The following issues need be addressed by the company to improve its business conditions that is currently being faced.

Critical issues:

  1. Singh attempt to increase the profit margin through retail expansion, led him to significant operating loss, putting more stress on the company’s profit.
  2. Manufacturing operations of the company are facing low volume concern, due to which the manufacturing operations are facing significant losses and utilizing the profit being earned from the retail side in order to perform smoothly.

Situational analysis

Internal and external challenges

The challenges currently being faced by CMF are:

Sales:

CMF after closing down the stores that were no longer profitable is currently operating in two different locations. One is located in Pickering and other is in Toronto. Among the two stores Toronto succeeded in generating sufficient amount of sales, mainly due to its location and demand for the particular type of furniture in that area. However Pickering is still struggling to even meet its breakeven point, due to unsuitable location and demand concern in that area.

Such had been an issue, since the cash being generated from the profitable operation is being utilized to cover the cost of Pickering location and apart from this significant amount is also tied up in inventory. It is in the best interest of the company to shut it down. So the cash being generated from the profitable stores can be utilized in an efficient manner.

Customer service:

The company is facing issues related to its customer services, mainly because of the limited number of employees and their motivation level. The company is also facing difficulties in appointing the ideal employees that could represent the company in an appropriate manner in front of their customers. As rude behavior with the customer will eventually affect the company’s name within the market.

Since it’s a retail business, customer service plays a significant role and help in differentiating between the companies. Therefore, the attitude of the sale person may take away the value preposition of the business, affecting the profit margin and creating difficulty in creating a name among its customers.

Inventory:

The inefficient management of the inventory is another key issue being faced by the company. A major part of the company’s cash is already tied up in the inventory. In addition to it the company is also facing space concerns, he current space is already been utilized to its maximum, making it difficult to store additional furniture, to meet the demand.

Delivery:

Timely delivery of products has also become a great challenge for the company. Since delivery is a substantial part of the overall customer purchase experience, the delay in such areas often lead to dissatisfaction among the customers. The main cause of the inefficiency in such areas is the lack of cable staff that possess substantial experience to run the entire process smoothly.

Recruiting and retaining of capable staff has become a challenge for the company, the delay in searching of such employees can lead the company to incur further losses. As such situation are alarming for the company, due to the fact that the company is facing some critical issues any negligence in this domain can make the business conditions more vulnerable.

Competition

The competition is getting fiercer and challenging for CFM. Since the companies are competing on the basis of price, the profit margin of CFM are shrinking over the period. Most of the key player’s insource furniture from the Asian market in a sufficient quantity, due to which the cost of the product becomes less comparatively. On the basis of low price most of the competitors are trying to rule over the market, increasing the pressure on the company, to increase the quantity being insourced. So it can compete on the basis of price.

For advance SWOT refer to Exhibit 3

Alternatives

In order to overcome the issues being faced by the company, Singh has come up with following alternative that can be considered by the company, keeping its current position in mind:

Alternative 1-

Store expansion strategy

Pros

  1. It will benefit the company by reducing the overall production cost of the company by increasing the overall sales of the company in the following years.
  2. The better location of the store will help in bringing more traffic and will provide them with better opportunities to increase their sales.

Cons

  1. The concern to find quality employees will increased, as the expansion would require new staff.
  2. Another failed attempt to increase the sales through store expansion could lead the company into a pool of losses.
  3. Finding a suitable rent and location for the store itself is an issue for the company, making the option difficult to pursue………

 

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