To: aa aa aa aa aa aa aa aa aa Joan Smithfield, CEO, Smithfield Custom Furniture
From: aa aa aa aa James Higgins, Senior Analyst, Smithfield Custom Furniture
Date: aa aa aa aa aa April 2, 2022
Subject: aa Analysis of Diversifying Product Line
Mrs. Smithfield, this memo will answer the questions you have about
the decision to diversify our product line. It will use Porter’s
Competitive Advantage Model to analyze both proposals and make a
recommendation based on the results.
A. aa aa aa aa aa aa aa aa aa aa aa Porter’s competitive advantage model is one of the tools
used to identify how a company can position itself in the marketplace
by offering a greater value than the competition. There are two
distinct ways this can be done. The first is to offer greater value
through lower prices, the second is to offer greater value through a
higher perceived value. This perceived value is generally created
through differentiation that the customer is willing to pay more for.
This can be with higher quality, better features, distinct branding, or
ease of use. With these two strategies, Porter developed 4 categories
showing the high and low ends of each (Lumen, n.d., Para. 5). Since
there are companies that have strategies that lay somewhere in the
middle and have proven to operate with a high level of success he
developed the fifth category known as the integrated strategy (Lumen,
n.d., Para. 6). aa aa aa aa aa aa aa aa aa aa aa aa
aa aa aa aa aa aa aa aa aa aa aa aa aa aa We can apply Porter’s competitive advantage model to
our decision-making process for our new product line. On one hand,
we have a high-end, high-quality product line that will be marketed
towards the top 7.5% of our customer base. This product line will be
focusing on the greater value through the differentiation segment of
Porter’s competitive advantage model. The second option for the
product line is to mass-produce the lowest-priced product available.
This strategy will be focusing on greater value through the lower price
quadrant of the strategy. Both of these strategies have proven to be
successful hence their place in Porter’s strategy.
B. aa aa aa aa aa aa aa aa aa aa aa Given the two possible paths forward for Smithfield
Custom Furniture and the research I have conducted, I feel that we
would be best positioned in the market if we went with the upscale,
custom-crafted line of new furniture. While the low-cost option had
some advantages, they were outweighed by the possible damage that a
low-cost line could do to our strong market reputation. With the
market already being saturated with reasonably priced furniture, we
need to set ours apart. This differentiation can only come from
bringing the highest quality furniture built from the most exotic
resources available. By doing this we can maintain our reputation while
marketing to our top-tier customer base. With this, we will make it
difficult for our competition to imitate us thus reducing rivalry and
making it harder for our customers to find other alternatives (Lumen,
n.d., Para. 7).
C. aa aa aa aa aa aa aa aa aa aa aa If the leadership were to take my recommended actions
there would be a few more steps required to properly bring the new
product line to market. The first would be to conduct an external
market analysis for the new product line especially since we will be
competing against different companies and products in the industry. A
great way we can accomplish this would be to use a competitive
profile matrix (CPM). This will analyze our new market and look at the
strengths and weaknesses we will face and then allow us to decide
where to focus on with our strategy (Jurevicius, 2021, Para. 1). The
next step that I would recommend would be for us to perform an
internal factor evaluation (IFE). This would let us know what areas we
need to focus on internally and give us a more detailed result than a
basic SWOT analysis (Maxi-Pedia, 2017, Para. 15). Once we have the
results of both the IFE and CPM we can formulate a strategy,
implement that strategy, and finally perform a strategic evaluation to
correct the course if needed (Lumen, n.d., Fig. 1).
References
aa aa aa aa Jurevicius, O. (2021, Nov 11). Competitive Profile Matrix (CPM).
Retrieved from strategicmanagementinsight.com:
https://strategicmanagementinsight.com/tools/competitive-profile-matrix-
cpm/
aa aa aa aa Lumen. (n.d.). Principles of Management. Stages and Types of
Strategy. https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/stages-and-types-of-strategy/
aa aa aa aa Maxi-Pedia. (2017).
LFE Matrix (internal factor evaluation)
. Maxi-
Pedia. Retrieved April 2, 2022, from http://www.maxi-
pedia.com/IFE+EFE+matrix+internal+factor+evaluation
