Research Proposal: Business Value What Is England, Inc

Pages: 5 (1517 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Business  ·  Buy for $19.77

Business Value

What is England, Inc.'s value proposition? Is the company different from an average furniture manufacturer in value creation and capture?

The furniture company England, Inc. prices its products extremely low, based upon an industry average. Its products are priced around $500-$1,500 when sofas, especially custom-made, upholstery sofas, can easily cost several times over that amount. It also promises swift delivery, within a few days if shipping logistics allow. Low price and speed, rather than customization might initially seem to be the focus: yet the company still offers a tremendously varied array of frames and fabrics. In 2002, England, Inc. hoped to take advantage of budget-conscious consumers, and, at the time, capitalize upon the fact that so many people were buying new homes.

To ensure such swiftness, however, England operates on the antithesis of a 'Just in Time' model -- it keeps a large amount of inventory on hand -- 85 different types of frames and 550 types of fabric. This is to reduce the product's shipping time and permits England, Inc. To buy in bulk -- allowing for some 'dogs' of choices, as well as some inspired selections. The company inventory is large, yet it is fixed. The product is not perfectly customized, unlike many other sofas on the higher-end side of the market, where consumers can create any fabric and color combination in they desire. England, Inc. offers instant gratification in a way that few other manufactures can, even high-end manufacturers, and a reasonable customization compromise to 'capture value.'

But one disadvantage any sofa maker will invariably face is that because shipping large items is so expensive, it must wait until orders for the product reach a certain volume before it can send them to the customer. In contrast, Dell Computer, with its famously lean supply chain and use of component parts to create custom-made, inexpensive computer models, can assemble and ship its relatively smaller product almost instantly. This raises the question if England, Inc. is substantially 'different,' from other furniture manufactures who do not specifically position themselves as high-end retailers. After all, someone can go to Wal-Mart or Target and purchase a very cheap sofa, for $199 or less, made in China. England, Inc., although the Wall Street Journal article presents it as the 'lowest prices, all of the time' type of seller, is still higher-priced than some of its competitors on the lower-end of the market, and consumers not wishing to spend a great deal and get immediate gratification might not go to a specialty retailer of furniture at all. "Some retailers say the company -- in its quest for speed -- doesn't offer enough modern styles and fabrics to be a true custom player. Too frumpy," when compared to other sofa specialists (Morse 2002).

When compared with the lower segment of the market, "other retailers say England's furniture actually costs a bit much for middle-market shoppers. Indeed, because it offers more than 40,000 possible frame/fabric combinations, England must make short, and thus more-costly, production runs," hence its value-focused shipping obsession (Morse 2002). "The better strategy," one of England's industry competitors said, "is to offer far fewer models while staying on top of style…You can't offer all those fabric choices…it screws up your whole system" (Morse 2002).

However, while theoretically England's strategy should not work, it does (or did, in 2002) -- perhaps because it offered the attraction of customization to lower-market customers. Customization has become an obsession with many consumers -- everything from iPod playlists to the color of iMacs can be customized. The idea that one must skimp on customization regarding furniture is foreign to even low-price point consumers in the arena of home design. Also, the fact that the sofas are not 'made in China,' like Wal-Mart sofas, given the scandals regarding toxicity with many products from the region, could be an additional selling point.

Yet England's strategy of positioning is tricky -- certainly not high-end, not entirely customized, but not the very cheapest, off-the-rack styled furniture. Still, a consumer may be delighted that he or she can furnish a new home almost instantly, but not look as if he or she raided Wal-Mart to do so, by dealing with England, Inc.

How does England, Inc. orient its activities to support its value advantage?

Deploying its supply chain in an effective manner is one of England's primary value-maximization strategies. "England pushes fabric suppliers on speedy deliveries, dropping those it feels can't keep up. And it runs its own trucks, unusual among sofa makers. To recoup transportation costs, four England employees work the phones and the Internet seeking paying loads to haul back to Tennessee. Among recent cargoes: Sheep brains, competitors' furniture, frozen turkeys and a corpse. In order to handle more types of loads, England has equipped 22 of its 445 trucks with refrigeration" (Morse 2002). Once again, almost department-store style speed is its emphasis. And England makes use of a unique method of defraying its shipping costs, by allowing other types of products in the cargo. There may be a question, however, of liability, if any of the shipped cargo affected the sofa -- for example, what would happen if the sofa was stored in a truck that also contained nuts, and accidentally activated the allergy of a child who sat on it? But this is apparently necessary, given that minimizing shipping time and maximizing cargo load to defray fuel costs is essential -- even if it means someone's new sofa may lie wedged next to a corpse! England's ability to carefully plot out delivery schedules enables it to take full advantage of profit-maximization through shipping logistics.

Is England, Inc.'s position sustainable? Discuss factors that may influence the profitability of England, Inc. In the future.

Although its naysayers say that its business model is impossible, at the time Dan Morse authored his article on the company, England, Inc.'s sales were skyrocketing, "bucking the industry trend. Sales jumped 8.3% to $201 million for the fiscal year that ended April 27. Sales for the entire domestic upholstery-manufacturing industry fell 9.3% to $9.8 billion in 2001. England increased its workforce by 7.4% to 1,901 in 2001" (Morse 2002).

That was then, of course -- and this is now. Back then, the real estate bubble was beginning to build, not purse, and customers had been bitten by the home improvement bug -- shows on HDTV made fixing up homes, or furnishing new homes a trend and an obsession. Customers did not want the very cheapest sofa for their new 'castles,' even though many new and second home buyers could not afford high-end, luxury purchases. Thus it should come as little surprise that, at that time, England's sales were growing.

However, if sales volume for all industries is decreasing, without a precipitous drop in fuel and shipping costs, England's business model looks shaky. Its strategy of shipping sofa with other types of products is highly problematic as virtually every industry is suffering the effects of the recession. Almost every industry is reducing the overall volume of products it is transporting by truck. The middle-market, middle-to-lower class home buyers that were England's target audience were also the group hardest-hit by the recession and collapse of the real estate market, and when individuals are cutting back, new furniture is one of the first things they are likely to eliminate, as opposed to necessities like food, utilities and clothing.

Evaluate the corporate strategy of the La-Z-Boy Corporation (i.e. England's parent company). In your opinion, how is value likely to be created by holding this portfolio of brands/companies? How could value be destroyed?

The furniture business is likely to be hard-hit, given the contraction of both new home sales and in luxury purchases -- consumers are more apt to 'let their old sofa last another year' if they are worried… [END OF PREVIEW]

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