TO: Joan Smithfield
FROM: Joseph Sandler
DATE: 02 April 2022
SUBJECT: aa Diversifying Product Line
a. Porter's competitive advantage model applies to the Smithfield's
board of directors issue or deciding between an expensive furniture
line or a mass-produced mass-marketed furniture line because it helps
decide what market they should focus their production on. Currently,
they have a competitive advantage in middle-of-the-line quality
furniture. They have the ability to produce more than the current
demand. Therefore it is to the benefit of Smithfield to add a new line.
Using the porter strategies of the factors of competitive advantage to
market scope, They should be able to find a middle ground of what
line makes sense to add to create an integrated system. I believe that
of the two markets that Smithfield can manufacture for, one appears
to be more profitable and reasonable.
B. The strategy that I believe that Smithfield should pursue of the two
strategies is adding a luxury brand. This is due to the ability of
Smithfield's branding as an international and substantial furniture store.
On top of that, adding a luxury brand has the potential to increase the
company's value of their other lines because it will give the company
more prestige. On the other end, the major reason that creating a
cheaper more affordable line would sell faster but have the potential
to decrease the value of the brand. On top of that, manufacturers like
Ikea have essentially cornered the market for cheap furniture, and it
would be near impossible to produce the quantity needed to gain a
competitive advantage in manufacturing costs, with just the extra
manufacturing ability of Smithfield currently. For these two reasons, it
does not make sense for Smithfield to add an inexpensive line. But
using Porter's competitive advantage model, if Smithfield makes an
integrated luxury product, there is a lot of potential for profits to be
made in with the value of the brand and product, without having to
increase the means of production.
C. Assuming Smithfield takes my advice of choosing the creation of a
more luxury line, they should try and do some market research within
a selection of their stores to see potential customer interest. Since
they have the ability to produce more in their stores, they should take
advantage of it. And since they have many stores all over the country
and world, it would be relatively easy to add a few more expensive
products to arias which are generally wealthier. As discussed it could
be good for the brand, and worst-case scenario the company is left
with extra high-end products, that it can move between stores till it
sells, and best-case scenario a new line can be added that seems to be
profitable. Once the decision is made, production and marketing of the
new line are the most crucial factors for getting the line off the
ground. And once it's off the ground and customer feedback is being
received, then an integrated strategy can be made to expand the
luxury products to all stores where it could be profitable. Without
reaching the limit to their manufacturing and without hurting the more
affordable sales of products in which they established themselves
within the market over the last 100 years.
Lumen Learning. (n.d.).
Stages and types of strategy | Principles of
management
. https://courses.lumenlearning.com/wmopen-
principlesofmanagement/chapter/stages-and-types-of-strategy/
