West Lake Home Furnishings Ltd.

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West Lake Home Furnishings Ltd.

Written Analysis and Communication - II

Instructor

Submitted by

Section- D
2/08/2008

Date: May 30, 2007

To:
Charles Bowman,
CEO, West Lake Home Furnishings Ltd., Ontario, Toronto.

From

Subject: Advice on whether to accept the offer of reducing the price of signature product to $29.99 for a year. This report is a summary and analysis of current situation on West Lake Home Furnishings Ltd. (WLHFL) The analysis is based upon the basic objective of economics that is profit maximization. Based upon the present trend of consumer income and preference it is recommended that WLHFL should accept the offer to reduce the unit retail price to $29.99.

As a student of WIMWI, I thank you for providing opportunity to learn about the situation at WLHFL. This has taught me a lot.

EXECUTIVE SUMMARY
Whether to accept the proposal of one of the retailers, to reduce the price to $29.99 by WLHFL, thereby boosting the sales, has to be evaluated on the basic objective of economics of a firm. The main objective of the firm is to maximize the profit. In order to attain this at retail price of $29.99, quantity of sales should increase to a substantial level. The present situation at Canada, higher disposable income with Boomer population and reduced price leads to higher demand of quantity are in favour of higher quantity of sales. The proposal ensures the required quantity of sales. Hence, accepting the proposal is recommended.

Word Count: 107

Table of content
SITUATION ANALYSIS.........................................................................................1 THE PROBLEM STATEMENT…...................................................................2 OPTIONS..................................................................................................................2 CRITERIA FOR EVALUATION...........................................................................3 EVALUATION OF OPTIONS................................................................................3 RECOMMENDATION...........................................................................................6 ACTION PLAN........................................................................................................6 EXHIBIT-1…………………………………………………………………………..i EXHIBIT-2…………………………………………………………………………..ii EXHIBIT-3………………………………………………………………………….ii EXHIBIT-4………………………………………………………………………….iii

SITUATION ANALYSIS

Outlook of Lighting and light fixtures industry in Canada

The market for Lighting and light fixtures in Canada is quiet competitive. There is large number of firms having small market share. Hence, this market can be considered as a Monopolistic competition. Product differentiation enables West Lake Home Furnishings Ltd. ( WLHFL) to compete with other firms in three areas: product quality, price and marketing. Price plays a major role

To have an impact on price, most of the firms have outsourced production to Asia, especially China. There are two new entrants in 2006, implies that still in the market there is scope for earning. Price plays a major role. It is reflected by average prices for home furnishing items had fallen down during 2002 to 2006 but sales had grown at 6.1% of compounded average growth rate. Consumers in Canada

Consumers in Canada are at the Esteem and Aesthetic needs level (see Exhibit 1). Due to which purchases from large “big-box” retailers get patronized. This makes large retailers in a strategically important position for the manufacturer like WLHFL.

Significant trend which is at advantage for the industry is the Baby Boomer; they are now having higher disposable income and demand for home furnishings. Exhibit 2 suggests that Boomers’ earning will peak in 2015 for the Early Boomers (born from 1945 to 1954) at $90,000 per household, and in 2025 for the Late Boomers (born from 1955 through 1964) at $106,000. Present situation of WLHFL

Sales Boost
Considering...
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