Westlake Home Furnishing Case

Westlake Home Furnishings

Introduction

The purpose of this report is to analyze the West Lake Home Furnishings Ltd current situation. The bases of this analysis are to see how the company can maximize it profit. According to the present consumer income trend of Canada indicates that the WLHFL should accept the offer with the reduction in retail prices up to $29.99 for one year.

Discussion

Current strategy of WLHFL

The goals of WLHFL is to maximize the company profit and intends to stay on the top of it business which is related to the manufacturing of the table lamps as a wholesaler, retailer and interest sales. The strategy by the WLHFL has been such which will increase the profit of the company along with the maximization of the shareholder value. Currently, they have adopted competitive strategy.

Construction activity in the United States is the main determinant for industry demand, as lighting fixtures are generally installed during commercial, residential and infrastructural (i.e. highways, streets and bridges) construction. Therefore, during times of low construction activity, demand for lighting systems also remain low as there are fewer lighting systems to be installed. This has been the case since the recession, as tighter lending conditions have made it difficult for businesses and individuals to finance non-residential constructions. In addition, weak demand for housing has caused an excessive supply of new residential properties since 2007. As a result, industry demand has declined significantly over the five years to 2012. However, demand for building and developing is expected to increase at an annualized rate of 9.5% in the five years to 2017, resulting in a slight increase in demand for industry products. Unfortunately, the rapid development of light-emitting diodes (LEDs) technology during the recession will take a significant bite out of industry revenue going forward, especially in infrastructural construction.

On that note, demand for industry products is highly affected by the growth of its substitute, LEDs. LEDs are proven to be more energy-efficient than traditional lighting sources, such as incandescent lights and compact fluorescent lamps (CFLs), while proving greater flexibility in terms of color, dynamics and architectural integration. Therefore, as LEDs gain more popularity in the industry, demand for industry products is expected to experience a decline.

Mass merchandisers and home improvement stores, such as Wal-Mart and Home Depot, are anticipated to account for 26.0% of revenue. These large retailers sell light bulbs and other components for daily household consumption. In the five years to 2012, this market segment has experienced some growth, primarily due to large retailers omitting wholesalers from their supply chains. Since large retailers are able to purchase industry products at lower prices from manufacturers than from wholesalers, they have increased their inventory sourcing from lighting manufacturers.

The largest market for the Lighting and Bulb Manufacturing industry is electrical wholesalers, which is estimated to account for 47.0% of revenue. Electrical wholesalers supply a large percentage of light bulbs and parts to construction contractors. In the past five years, low levels of residential, commercial and industrial construction activities ...