Problem
Case Scenario: Smithfield Custom Furniture
Smithfield Custom Furniture has done extremely well since its founding in 1903. Smithfield has focused on selling reasonably priced furniture since its inception. Now 2001, the company has been headed by the founder's granddaughter, Joan Smithfield (CEO). She has run the company for the past twenty years. Today, the company has 247 retail stores. 220 stores are spread throughout the 50 states, and 27 stores are located in England, France, and Germany. Each country has 9 stores. The company employs 13,000 people.
For the past 20 years, Joan Smithfield has been aware of the financial growth in a large workforce segment, primarily due to more women in the workforce holding full-time and professional occupations. She knows, too, that the reasonably priced furniture market has become saturated with other competitors during this time.
The company does all its manufacturing in the United States at six facilities, which recently were modernized with the latest equipment. Although recently modernized, Smithfield's production plants are not producing at maximum capacity. Joan realizes the plants could produce more and different types of furniture.
The Board of Directors is pressuring Joan to diversify Smithfield's product line. Everyone on the board, including Joan, agrees diversification is needed. Everyone agrees, too, a new line of furniture needs to be added.
However, the 12-member Board of Directors is evenly divided on whether the new line of furniture should be 1) massed produced, mass-marketed, and sold at the lowest price point possible or 2) whether the new line of furniture should be a very upscale line of furniture, custom-crafted and produced from the most expensive and exotic woods, exclusively marketed to the top 7.5% of world-wide income earners. The Smithfield plants have the capacity and capability to develop and produce either but not both lines of new furniture.
Joan Smithfield has been a longtime admirer of Michael Porter. She met Porter a few times over the years at various seminars and business functions.
1. Select the best strategy for the Smithfield company to pursue from the two strategies Porter presents in his model and explain why that particular strategy is better than the alternative.
2. Using this course readings, assuming Joan Smithfield accepts your recommendation, what is the next action she should take to determine if your recommendation is correct? Be specific
3. Multiple locations of Smithfield make it advantageous to sell more product to more people. With low cost strategies, profit is based on volume of goods sold (Bruton, n.d., para. 6). This places pressure on sales and marketing, however, to constantly drive the sales of a high volume of product. Would that pressure on the "front end" of the business be an advantage or disadvantage for Smithfield?
Bruton, J. (n.d.). Module 4: Environments and Strategic Management. In Principles of Management. Lumen Learning.