STRATEGIC MANAGEMENT

Case Analysis of City Furniture and Mattress (CFM)

Introduction

This paper discusses the case study of City Furniture and Mattress (CFM) and discusses various external and internal challenges faced by the company. This paper also discusses various alternatives, such as Store Network, Vertical Integration, and Global Sourcing.

Discussion

Company Background

In June 2003, City Furniture and Mattress (CFM) was launched to serve the retail market of furniture in the Greater Toronto Area (GTA), Ontario, Canada. The company was founded by Rajeev Singh and his father, Baskar Singh who began the necessity than desire, and the partners needed an outlet for unsold inventory in their warehouses. In January 2003, the two men started a business to get into the market of furniture import or wholesale, but because of the absence of important functions, the company broke apart. In particular, this was due to the lack of experience in both large quantities of Singh selection, which includes product in business-to-business marketing and international product management.

External Challenges

Price pressure

City Furniture and Mattress operates in a market segment where the supply exceeds demand thus creating price pressure, i.e. the price of the goods is a critical factor (as opposed to the markets in which the offer is too short: there is the availability of goods at the main criterion).

Accordingly, all competitors in the furniture and mattress market is forced to reduce the price of their goods, thus reducing the profit margins and resulting in a long term shakeout, where suppliers who can produce small number of goods are viewed at a less favourable stance and gradually removed from the market.

Low barriers to entry

High entry barriers limit the ability of a competitive attack from unexpected and new competitors by enacting higher costs of entering a market. Barriers to entry and exit serve as the obstacles that companies face when entering the competitive segment of the market, or wanting to leave. These barriers can be considered as an obstacle to the functioning of the free market, as increasing the costs (not just financial) of establishment or termination thereof. The purpose of the barriers to entry is a competitive handicap company to market. Barriers to entry can arise spontaneously (then we call it natural) or are the result of deliberate actions taken by companies operating in the sector (referred to as strategic) (Fine 2009, pp. 11-68).

Degree or height of entry barriers, and thus the predictability and intensity of competition in an industry depends on many variables:

Economies of scale of production (in conjunction with the experience curve)

Capital requirements,

Strength of product brands

Switching costs - that is, how much withdrawal from one supplier and the choice of another - the market of industrial goods are the high costs and the market of consumer goods low.

In this case, the furniture and mattress market is characterized by low barriers of entry, which means that City Furniture and Mattress might face new competitors in the future. This is also associated with the tendency of the customers to shop at small stores. Small upfront and initial outlay enabled various small ...