Digby Jones: The New Troubleshooter: Episode 1
In Great Britain over 180,000 people make, build and sell furniture. The
marketplace accommodates for over £7 billion spent yearly by consumers, the
equivalent of £100 for every person in the UK. Within this competitive
environment is Hereford, a manufacturing furniture company questioning its
survival among other major players in the industry. Having made a
loss of £80,000 for the first time last year, there are questions that
need answering. Lord Digby Jones is first to the scene to transform a
wounded business into a strong sustainable competitor.
As a generic principle, no business can succeed without understanding its customers, its products and services and the market in general. Competition in the furniture industry is often fierce, especially for a family run business like Hereford with no real financial backing from investors to help fund operations and growth. Within the industry, major players such as IKEA have a commanding presence and market share due to their resilience and constant need for innovation. In Hereford’s case, the market around them is contracting due to the influx of players in the market. IKEA for one have dominated through their ‘flat-packed’ products, offering customers affordable furniture. A major concern for Hereford is the huge product lines they offer, currently at 2,000 products in their portfolio, which is thought to be ‘killing the business.’
A question to be considered, 'how could the management at Hereford Furniture allow its company to approve over 2000 products into its portfolio and have no financial implications to the effect this would have?' It can be seen that managing production and range has had a dramatic impact on profits, perhaps a reason for an £80,000 loss last year. A solution to the company’s problems would be to cut its products down a sizable amount in order to cope with orders and to reduce costs. Such an operation would involve indicating which products are bestselling to worst selling. Unilever in the late 90’s had the same issue and cut 700 brands and saved over £1billion in the process, certainly something Hereford should consider. Certainly a lack of communication can be considered here between management and employees. Lord Digby’s response was to trim the products down considerably and focus on a small number of products and implement a make-to-order system. This is one way the company can cut back on costs and improve its profits for next year.
On first impressions of the workforce, the systems in place were not conducive to productivity enhancement, as departments were working independently from one another with no cohesion. Immediately a concern area here as a problem in one area could potentially stop all other operations. Digby’s response was to consult all departments in the business, only to find that everyone was unhappy with management decisions due to lack of factory floor appearances and lack of communication. Meetings were scheduled with managers from every department and also from top management in order to talk over improvements. A fun morale boost was to shut the factory for the day to organise a staff trip to an art college to build team cohesion through designing a new stamp for the furniture. Although only a few changes were made, it’s certainly a step in the right direction.
In terms of value management, the future of Hereford will depend upon its ability to diversify and innovate. Currently, the company doesn’t put its name on any of its products therefore not creating any value for its brand, which is why I named the title of my blog ‘How can you build a brand when you value it so little.’ Reflecting back to earlier in this blog about the importance of understanding customers and products and services, I don’t believe Hereford has a full understanding of its marketplace. The strategy seems to be focusing on profit maximization, hence three different business channels. This strategy has been beneficial in the short term; however the company has ignored the long term financial implications, another reason for its £80,000 loss.
Reflecting upon the operations of the company, Hereford had managed to over complicate it through operating three different channels; manufacturing, importing and retailing. Although Digby said to focus on one area (manufacturing), it can be argued that importing from China would be a route to take; UK manufacturing is still booming, but arguably it is cheaper to outsource. With the rise of IKEA and its flat packing, this can be considered an obvious concern for Hereford as they cannot be as competitive in their pricing as IKEA, therefore reducing their profitability and consequently, market share. From a shareholder wealth perspective, Hereford should be exploiting the opportunity to expand, however first must consider if it has the resources to continue operating three businesses, or whether one is more logical. Having researched into what the company is today in 2015, its original idea of changing the brand name to ‘Hygge’ has collapsed due to the brand already being owned by a Thai furniture store and Instead has become Oak Furniture Solutions. In terms of its products, there seems to be no indication of a decrease in its product portfolio however the company has decided to innovate with alternate colours and designs.
Overall I would rate Oak Furniture Solutions 5/10 for its little improvements.
As a generic principle, no business can succeed without understanding its customers, its products and services and the market in general. Competition in the furniture industry is often fierce, especially for a family run business like Hereford with no real financial backing from investors to help fund operations and growth. Within the industry, major players such as IKEA have a commanding presence and market share due to their resilience and constant need for innovation. In Hereford’s case, the market around them is contracting due to the influx of players in the market. IKEA for one have dominated through their ‘flat-packed’ products, offering customers affordable furniture. A major concern for Hereford is the huge product lines they offer, currently at 2,000 products in their portfolio, which is thought to be ‘killing the business.’
A question to be considered, 'how could the management at Hereford Furniture allow its company to approve over 2000 products into its portfolio and have no financial implications to the effect this would have?' It can be seen that managing production and range has had a dramatic impact on profits, perhaps a reason for an £80,000 loss last year. A solution to the company’s problems would be to cut its products down a sizable amount in order to cope with orders and to reduce costs. Such an operation would involve indicating which products are bestselling to worst selling. Unilever in the late 90’s had the same issue and cut 700 brands and saved over £1billion in the process, certainly something Hereford should consider. Certainly a lack of communication can be considered here between management and employees. Lord Digby’s response was to trim the products down considerably and focus on a small number of products and implement a make-to-order system. This is one way the company can cut back on costs and improve its profits for next year.
On first impressions of the workforce, the systems in place were not conducive to productivity enhancement, as departments were working independently from one another with no cohesion. Immediately a concern area here as a problem in one area could potentially stop all other operations. Digby’s response was to consult all departments in the business, only to find that everyone was unhappy with management decisions due to lack of factory floor appearances and lack of communication. Meetings were scheduled with managers from every department and also from top management in order to talk over improvements. A fun morale boost was to shut the factory for the day to organise a staff trip to an art college to build team cohesion through designing a new stamp for the furniture. Although only a few changes were made, it’s certainly a step in the right direction.
In terms of value management, the future of Hereford will depend upon its ability to diversify and innovate. Currently, the company doesn’t put its name on any of its products therefore not creating any value for its brand, which is why I named the title of my blog ‘How can you build a brand when you value it so little.’ Reflecting back to earlier in this blog about the importance of understanding customers and products and services, I don’t believe Hereford has a full understanding of its marketplace. The strategy seems to be focusing on profit maximization, hence three different business channels. This strategy has been beneficial in the short term; however the company has ignored the long term financial implications, another reason for its £80,000 loss.
Reflecting upon the operations of the company, Hereford had managed to over complicate it through operating three different channels; manufacturing, importing and retailing. Although Digby said to focus on one area (manufacturing), it can be argued that importing from China would be a route to take; UK manufacturing is still booming, but arguably it is cheaper to outsource. With the rise of IKEA and its flat packing, this can be considered an obvious concern for Hereford as they cannot be as competitive in their pricing as IKEA, therefore reducing their profitability and consequently, market share. From a shareholder wealth perspective, Hereford should be exploiting the opportunity to expand, however first must consider if it has the resources to continue operating three businesses, or whether one is more logical. Having researched into what the company is today in 2015, its original idea of changing the brand name to ‘Hygge’ has collapsed due to the brand already being owned by a Thai furniture store and Instead has become Oak Furniture Solutions. In terms of its products, there seems to be no indication of a decrease in its product portfolio however the company has decided to innovate with alternate colours and designs.
Overall I would rate Oak Furniture Solutions 5/10 for its little improvements.
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