Canadel is a privately owned, consumer focused, customized furniture assembler, operating in Canadian casual dining furniture industry. The industry is in the maturity stage of the life cycle and firms need to continually introduce new technologically advanced production methods in order to stay competitive. (Exhibit A - 5 forces framework). With ever increasing costs of materials and supplies, competitively priced inputs becomes a critical success factor, which leaves room only for larger firms who can afford and budget these expenses. Sales are decreasing with the social trends of families with few or no children; creating demand for smaller table and chair orders. However, the trend of open-space architecture has increased the demand for everyday use dining room furniture. In order to remain a market leader Canadel has to play its strength and understand its weakness and take appropriate steps. A full SWOT analysis of Canadel’s current environment is shown in Exhibit B.
Resources and Capabilities (Refer Exhibit C)
An outline of Canandal’s current Resources and Capabilities are in seen in Exhibit C below which include an analysis of how resources could be used for competitive advantage.
Sustainable Competitive Advantages
Canadel’s most sustainable competitive advantages stem from the past acquisition of the Kennebec wood-mill and very close relationship with its suppliers and buyers. In tribute to these accomplishments, Canadel has managed to accomplish high quality furniture, low defect and repair cost, shorter delivery time all with a lower cost of goods sold. These sustainable competitive advantages have aided the company by lowering raw material cost, higher customer loyalty, low capital expenditure, no debt, higher ROE (at least twice higher than industry), and higher inventory turnover (45 times vs. 15 times (industry)). With continued focus on these strategic initiatives, it should allow Canadel sustain these advantages in the future, ultimately limiting market entry and allowing them to gain market share.
Limitations to Canadel’s Competitive Advantages
There are many serious weaknesses that place a limit on Canadel’s competitive advantages. To start with, Canadel’s business model is built upon a core of suppliers, which allows the company to essentially be an “assembler of furniture” and equaling lower overhead cost as mentioned above. Although lower overhead cost is a clear advantage to its competition, it will present Canadel with many limitations in the future. The limitations include the ability to replicate these suppliers in an international environment of which accounts for only 5% of their current sales. With most current suppliers being within -50-kilometer radius of their headquarters, it would be very hard for them to replicate a Just-in-Time manufacturing model internationally. Additionally, the Just-in-Time process doesn’t allow for very much variation of demand, which could cause ripple effects in the process if demand happens to suddenly spike. Additionally, this simplistic concept of being only the assembler has allowed for imitators to enter the market.
Additionally, with its “Workshop Concept”, Canadel could experience push back from expansion internationally. While this concept may work well in the US and Canada, it could be very likely that consumers in other countries may not want these same customizable options and may only focus on price, an area in which Canadel is clearly not the leader.
Although Canadel has strategically acquired a woodmill to secure raw material prices for the future, it has also given the impression to its retailers that it will not raise prices when wood prices increase. If wood prices were to rise in the future, it would most likely face the same issues of losing large retailers to credit tightening and also having to take from the bottom line as its current retailers would not be expecting any major price...