The CEO at West Lake Home Furnishings LTD, Charles Bowman, came across with a proposal of reducing the retail price of a signature line of decorative lamps from $69.99 to $29.99 for a period of one year. This customer has a large U.S. based retail chain accounted for one-third of West Lake’s wholesale business in 2006. The company had to adjust by holding higher inventory levels in warehouses. West Lake Home Furnishings LTD is intending to stay at top of its business and is very eager to grow. After analyzing the benefits like increase in profit, growth of sales, market penetration, effect of reduced price on other businesses and the rapport with the wholesaler, it has been decided to accept the offer. Large and promised order for a year is the justification for accepting the reduced price in the offer. The main objective of the company is to maximize the profit. In order to achieve this at retail price of $29.99, quantity of sales should increase to a considerable level in order to accept the proposal. The current situation in Canada, there were several significant trends in the home furnishings market, 1. Baby boomers population with a higher income population 2. consumers tended to spend more money on home products in the first two or three years following the purchase of their home 3. new competitors had entered the industry with lower prices
Reducing the price leads to higher demand of quantity are in favor of higher quantity of sales. The proposal ensures the required quantity of sales.
1. In May 2007, the CEO of West Lake Home Furnishings LTD was analysis an offer that one of his top three wholesalers put on the table. List the advantages and disadvantages of the proposal. Advantages| Disadvantages|
Market penetration & Market Share this will impact in Increase in Profits and Growth in Sales| Retailer buyer had already contacted similar suppliers in Asia who would be willing to manufacture a...