To: Joan Smithfield, CEO of Smithfield Custom Furniture
From: Reyan Edeza, Senior Analyst at Smithfield Custom Furniture
Date: April 5, 2022
Subject: Recommendations for Product Line
A. Explain, using the link provided to Porter's Competitive Advantage
Model, how Porter's Competitive Advantage model applies to the
Smithfield's Board of Directors' issue of deciding to produce a very
exclusive furniture line or a mass-produced, mass-marketed furniture
product line. Use in-text citations as appropriate.
Cost and distinctiveness are two techniques that firms may employ to gain
a competitive advantage, according to Michael Porter's Competitive
Advantage Model. The model also identifies two methods for marketing
targeting: appealing to a broad market or focusing on a specific market
(Lumen Learning, n.d.). These approaches result in four alternative
competitive strategies: low focused cost, focused differentiation, overall
low cost, and overall differentiation. A fifth technique, referred to as an
integrated approach, combines distinction and low-cost components.
When mass manufacturing, marketing, and selling furniture at the lowest
feasible price, Smithfield's Board of Directors employs the Low Price
Leadership Strategy. To use this approach, a corporation must produce
equivalent value services or items at a lower cost than its competitors. Low
manufacturing costs appeal to many market consumers, allowing the
corporation to benefit from the number of items supplied (Lumen Learning).
The Low-Cost Strategy focuses on a company's goal of becoming a market
leader by servicing a significant market share and providing low-cost items
to its customers. Smithfield Custom Furniture must establish itself as a
market leader in the industry it works for this approach to be successful.
The luxury line of furniture, custom-crafted and created from the most
expensive and exotic woods, is only offered to the top 7.5 percent of global
income earners and uses the Differentiation Leadership Strategy. The
furniture manufactured will be of great value and offer distinctive
characteristics to the target market. Customers should believe that the
attributes of the items supplied are superior to those of rivals and are worth
the extra cost, according to Porter (1986).
B. Select the best strategy for the Smithfield company to pursue from the
two strategies Porter presents in his model and explain why that particular
strategy is better than the alternative.
The Differentiation Leadership Plan, as opposed to the Low Price
Leadership Strategy, maybe the ideal strategy for Smithfield to follow.
Given that the reasonably priced furniture industry has grown crowded with
other rivals, the company's goal is to develop a strategy that would
differentiate its items. Based on the market study, the business has
established that a significant workforce sector has seen financial growth
because more women are working in professional and full-time positions. As
a result, the market's purchasing power has expanded, allowing more
individuals to afford the luxury line of furniture, which is custom-crafted
and made from the most exotic and costly woods. This strategy's success is
determined by the quality of the furniture offered and its marketing and
distribution.
C. Using this week's course readings, assuming Joan Smithfield accepts
your recommendation, what is the next action she should take to
determine if your recommendation is correct? Be specific. Use in-text
citations and list references from course readings as required.
The first technique will entail a thorough market analysis to establish
whether buyers are prepared to pay top dollar for custom-crafted furniture
made from the most exotic and pricey woods (Porter, 1986). The market
research results should determine the company's next course of action.
Suppose the firm decides that selling an expensive furniture line is a
realistic strategy. In that case, it should identify low-cost production
materials and figure out additional ways to reduce production costs. This
will aid in increasing profit margins. While the company's market share may
not grow considerably, its bottom line will improve.
References
Lumen Learning. (n.d). Principles of management.
https://courses.lumenlearning.com/wmopenprinciplesofmanagement/chapt
er/stages-and-
types-of-strategy/Porter, M. E. (1986). Changing patterns of international
competition. California ManagementReview,28(2), 9-40.
