Economics and Dahlia Furniture Private Essay

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, Ching Lin and Diethelm. It supplied mainly wall units and kitchen cabinets while bedrooms sets 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 198, Dahlia acquired two factories At Ang Mo Kio and Upper Thomson 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 Bukid Timah and Upper Thomson area in 1978 and 1982, respectively. I. TIME CONTEXT The Dahlia Furniture Private Limited Case (Case) was developed in 1985 by Mr. Ch’ng Hak Kee and Ms. Jeannie Teoh from the National University of Singapore. (Reference: Book) The case, as described is dated in the 1980’s in which Singapore’s economy was dependent on external markets and suppliers pushed. In the 1980s, Singapore was a free port with only a few revenue tariffs and a small set of protective tariffs. It had no foreign exchange controls or domestic price controls. There were no controls on private enterprise or investment, nor any limitations on profit remittance or repatriation of capital. Foreign corporations were welcome, foreign investment was solicited, and fully 70 percent of the investment in manufacturing was foreign. (mongabay.com) This shows that there is quite a contrast with regards to foreign policies as compared to the Philippines which has more stringent rules with regards to foreign investments considering that both countries are within the same region and are at the time regarded as developing nations. For the first two decades of its independence (1963, Britain and 1965 from Malaysia), Singapore enjoyed continuous high economic growth, largely outperforming the world economy. Its GDP growth rate never fell below 5 percent and rose as high as 15 percent. At the same time, Singapore managed to maintain an inflation rate below world averages. However, the 1985 international recession severely affected the economy as Singapore is dependent on foreign investments. However, due to better policy making, the country, on the same decade experienced a rise of the construction and manufacturing industries. By 1988, Singapore has rebounded. (wiki) II. VIEWPOINT As the more important decision makers for the company, Mr. Chua and Mr. Leong have to decide on the direction of the company where they want to be. Since the case does not directly supply a problem, it is presumed that the students are to make decisions based on the interpretation of the case. III. MAJOR POLICY STATEMENT The furniture business industry vision, the philosophy is built upon providing tailor-made business furniture solutions that exceeds our client’s unique needs and expectations whilst remaining cost competitive. IV. CURRENT BUSINESS POLICY V. STATEMENT OF THE PROBLEM VI. STATEMENT OF OBJECTIVE a. Long Term i. To develop strategies that will enhance and raise sales figures ii. To be highly competitive aginst both foreign and domestic competitors b. Short Term iii. To improve company’s position in the market iv. To exceed sales figure from the previous year VII. SWOT ANALYSIS STRENGTHS| WEAKNESSES| 1. Target Market is well defined 2. Multiple supply/inventory sources 3. Stable Management (as of 1984) 4. High quality Image 5. Highly profitable Branch (Orchard Area)| 1. Limited Market 2. Slow moving imported inventory 3. Primary Decision Makers are indirect Competitors 4. Low Profit Branches| OPPURTUNITIES| THREATS| 1. Re-exportation 2. New design trends 3. Improve profits from weaker branches 4. Open market for imported furniture| 1. Conflict on interests between the decision makers and the company 2. Loss of competent managers 3. Gradual changes in economic policies of the government 4. Loss of clients to competitors| VIII. ALTERNATIVE COURSES OF ACTION 1. Import all products and continue its high quality and fairly expensive image with middle and upper income family’s clientele. 2. Expand its production unit and contend with competitors through lowering of prices to reach a larger market, the mass. 3. To formulate a proportionate inventory acquisition with some products imported and some manufactured, to drive away competition and at the same time, maintain its present image, also to reach all brackets of prospective clientele. IX. ANALYSIS OF ALTERNATIVES X. DECISION STATEMENT XI. IMPLEMENTATION PROGRAMS XII. PROPOSED BUSINESS POLICIES XIII. MANAGEMENT LESSONS LEARNED Dahlia Furniture Private Limited I. Problem : What way of acquiring inventories should Dahlia employ to maximize profit and improve the company’s position? II. Alternatives : A. Import all products and continue its high quality and fairly expensive image with middle and upper income family’s clientele. B. Expand its production unit and contend with competitors through lowering of prices to reach a larger market, the mass. C. To formulate a proportionate inventory acquisition with some products imported and some manufactured, to drive away competition and at the same time, maintain its present image, also to reach all brackets of prospective clientele. III. Advantages and Disadvantages * Advantages for Alternative A * Dahlia would be free from hiring more labor. * Will maintain its present image for quality and pricing. * No overhead costs. * Smaller units of products are needed to be sold because of its price * Problems about filling their showrooms are rapidly solved. Disadvantages for Alternative A * Would turn out costly if not sold two months or more. * Dahlia would be driven away by competitors because of erratic pricing. * It could not cater to the mass market. * It will be pinpointed by government for using foreign labor and might affect its credibility. * Advantages for Alternative B * Will not incur large cost, even inventory remain idle for quite some time. * The company can now afford to cater the mass market. * Can now drive the competition. * Will not violate government’s policy on foreign labor. Disadvantages for Alternative B * Will incur large overhead cost. * Company’s current image might be at stake. * Has to hire more labor that will boost costs. * Might incur losses if driven away by erratic pricing. * Advantages for Alternative C * Lower risk for the company. * Will neutralize all costs. * Will have a larger†¦ [continues]