Memorandum:
To: Joan Smithfield, CEO Board of Directors
Date:
Reference: Strategy Analysis for New Product Line
A. Porter classified competitive strategies by cost and differentiation, with a focused
or broad market scope. He later recognized a fifth (integrated) classification. Porter’s
Five Forces are extremely useful at the industry level. It shows the industry in a
particular time frame. (Lumen, Module 4: Environments and Strategic Management).
Furniture that is massed produced, mass-marketed, and sold at the lowest price point
possible involves the Low-Price Leadership Strategy. When the company uses a low-
cost strategy, it strives to become a leader in offering low-cost furniture to its
consumers. An upscale line of furniture, custom-crafted and produced from the most
expensive and exotic woods, exclusively marketed to the top 7.5% of world-wide
income earners involves the Differentiation Leadership Strategy. The furniture
produced will provide exclusive features with high value for the targeted customers
of the top 7.5% of world-wide income earners.
B. According to research, it would be more beneficial for Smithfield to apply the low
cost-strategy. The use of this strategy will be to produce the same furniture at lower
costs than its competitors. The lower cost will attract majority of customers and allow
the company profits to increase through the volume of furniture sold; especially since
there are shops located in 50 different states and the other 27 in other continents
(Apriyanti, E. (2021) 4(2), 197-102).
Porter’s Five Forces are extremely useful at the industry level. For instance, Porter's 5
Forces to analyze the competitive environment within an industry, these forces are
generally external.
The threat of new entrants (or barriers to entry): very strong; there is little barriers to
entry for new furniture companies.
The threat of substitute products or services: There is some substitution threat, but
they are weak; there is a variety of differentiated products depending on the product
design and its quality. Furniture being used to sit, sleep, work, and do other activities
everywhere and nothing can substitute this furniture.
Competitive rivalry within the industry: number of the competitors can increase
because of the number of stores and a low switching cost make the rivalry competitor
in furniture industry become strong.
The bargaining power of buyers: There is a high demand in the furniture market. This
makes producers must compete to gain market share with other lower price products.
Consumers buy furniture based on their design preference and its price.
The bargaining power of suppliers: Very low. Furniture companies can easily find
substitutions kind of wood they used to make furniture. Plus the technology used by
most of the factories are relatively equal.
C. The five basic functions outlined by management theorist Henri Fayol: planning,
organizing, staffing, directing, and controlling have become default features of
managers. To help organizations meet today’s challenges, managers must move
from: direct to instructive; restrictive to expansive; exclusive to inclusive; repetitive
to innovation. They should become more of a “challenger” than a problem solver.
Business leaders are generally responsible for three basic components of strategy:
1) Formulation (e.g. SWOT analysis, determining competitive advantage, choosing
optimal strategies);
2) Implementation (e.g. ensuring culture supports strategy, stakeholder management,
allocating resources); and
3) Evaluation (e.g. determining strategic success, diagnosing failures, strategic
adjustments).
In the planning stage, managers form their strategic vision into concrete, time-bound
goals and objectives. Research and testing are vital in the planning stage, as managers
attempt to gain as much information as possible about the viability of the change. The
implementation phase sees the change put into action according to the plan.
Monitoring is a less of a phase and more of a continual activity that helps managers
to gain insight into how well their plans are working and pinpoint potential problems.
In the review stage, managers analyze information gained from monitoring activities
and decide whether the strategy needs to be altered (Lumen Learning. (n.d.). Stages
and types of strategy; The Strategic Management Process, para 4-7) .
Apriyanti, E. (2021). Marketing Strategy Using Porter's Five Force Model Approach:
A Case Study of PT M-150 Indonesia. Open Access Indonesia Journal of Social
Sciences, 4(2), 197-102
Lumen Learning. (n.d.). Stages and types of strategy | Principles of management.
Retrieved April 3, 2022, from https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/stages-and-types-of-strategy/
Lumen Learning. (n.d.). Principles of Management. Retrieved April 3, 2022, from
https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/common-frameworks-for-evaluating-the-business-
environment/.
Lumen Learning. (n.d.). Principles of Management. Retrieved April 3, 2022, from
https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/reading-mission-vision-and-values/
