Case Study #2
1. The household wood furniture industry is a very cyclical and tough business to get into. The industry is broken down into 3 categories: upholstered, wood, and other furniture. The other category includes “ready to assemble furniture and causal furniture”. Many of the wood manufactures today are very focused on quality of the product that they sell to retailers. Manufactures provide brochures with the quality of the material that they make their furniture with and how each piece is assembled, so they can better sell to retailers. In the industry today there are about 1,000 furniture manufactures. The top ten manufactures represent about a third of the industry sales in dollars. The top 25 manufacturers represent account for about half of the United States furniture sales. To be in the furniture industry these days is very tough because prices have decreased by 30% due to overseas manufacturing. Many of the large furniture manufactures are outsourcing the building or the furniture to another country and then importing the pieces back into the United States. This accounts for about 30% of the industry sales. As I said above, the furniture industry is cyclical, any change in disposable income, new housing starts, consumer confidence, and disposable personal income will have a dramatic effect on the furniture industry. Haverwood relative position in this industry is a high quality wood furniture manufacturer. They pride themselves on distributing their product to 1,000 high quality department stores nationwide. Since they have a high quality product they do not distribute to chain stores or discount stores. 2. Consumers buy furniture, as I said above, very cyclically. If any of the factors I mentioned above change, they will discontinue buying furniture until those factors turn around. About 1% of United States disposable income is spent for household furniture and home furnishings. The...