Memo
To: c Joan Smithfield
From: David Tolbert
Date: March 30, 2022
RE: Smithfield Custom Furniture Product Expansion
A. Porter’s Five Forces theory takes two aspects, the size of the market and
competitive advantage, and breaks them down into four distinct categories
with a fifth category that can be applied across the other four. The value
can be broken down into high cost or low cost and the market scope is
either broad or focused, right now Smithfield’s is trying to decide if their
new line should be expensive and exclusive or low cost and widely available
(Lumen Learning, n.d.). Smithfield’s current line of furniture resides in the
reasonable price range so the next logical steps would be to either offer a
high-end exclusive option or a lower-priced option that is available to a
larger segment of the population.
B. In the case of Smithfield’s desire to diversify their current line-up they
should look to expand into the upscale furniture line. Currently, they
operate in the middle reasonable price range which is a market that is
quickly becoming oversaturated with other competition. It is not
unreasonable to assume that the low-end market is also becoming saturated
since it is easier for most of the competition to also mass produce cheap
furniture vice shifting the focus to expensive/exclusive furniture. While the
high-end furniture will only be marketed to roughly 7.5% of income earners,
where Smithfield’s is currently operating that might not be an issue.
According to the Pew Research Center’s World Population by Income
report 59.5% of Germans, 55.7% of Americans, 42% of English, and 37.9%
of French are all considered to be in the high-income range compared to
only 7% of the overall global population being considered high income (Pew
Research Center, 2015). While this data is a little over six years old it is safe
to assume that these countries continue to lead the world in high-income
percentages. Due to the current workforce having a larger amount of
disposable income it is in Smithfield’s best interest to expand into a focused
differentiation strategy for their new line of furniture.
C. Prior to taking on this new market segment Smithfield’s should conduct a
market analysis of who its competition will be in the high-end furniture
market and how their products and processes compare to Smithfield’s. A
useful tool to perform this is the Competitive Profile Matrix, this analysis
tool compares how the competition is performing in critical sections of the
industry and allows the preparer to assign weights to each category based
on the perceived importance of that critical success factor. Comparing the
competition across the same factors creates an accurate portrayal of their
industry and also highlights the strengths Smithfield’s currently has and
weaknesses that need to be improved (Jurevicius, 2021). This analysis will
give Smithfield’s the information it needs to determine if the company
should proceed with the new line of high-end furniture.
References
Jurevicius, O. (2021, Nov 11). Competitive Profile Matrix (CPM). Retrieved
from strategicmanagementinsight.com:
https://strategicmanagementinsight.com/tools/competitive-profile-matrix-
cpm/
Lumen Learning. (n.d.). Principles of Management: Module 4: Environments
and Strategic Management, Stages and Types of Strategy. Retrieved March
30, 2022, from courses.lumenlearning.com:
https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/stages-and-types-of-strategy/
Pew Research Center. (2015, July 8). World Population by Income.
Retrieved from pewresearch.org:
https://www.pewresearch.org/global/interactives/global-population-by-
income/
