Carrington Furniture
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Situation Analysis
Carrington Furniture is a manufacturer of medium- to high priced wood bedroom, living room, and dining room furniture. Carrington sells its furniture through 1,000 high-quality department stores and independent furniture stores nationwide. The company is very selective in choosing retail outlets. The company is known for their quality and knowledgeable sales team. Currently, Carrington employs 10 full time salespeople and two regional sales managers, which are paid in a base salary, and a small commission based on sales. In 2002, Carrington had $75 million in sales, and the company spent $3.675 million in advertising, or 5% of 2002 sales. On average, furniture companies spend 3.5% of their sales in advertising.
The household furniture industry is divided into three categories: wood, upholstered, and other (ready-to-assemble furniture). In 2002, the sales in the furniture industry were estimated to be $23.9 billion at manufacturerÐŽ¦s prices, where 48% of the furniture industry sales were household wood furniture. CarringtonÐŽ¦s products fall into the 48% category, since they manufacture all wood furniture. The industry is moving towards an increased emphasis on premium quality products, given the fact that some baby boomers at this stage in life are interested in higher quality furniture.
Carrington has received a proposal constructed by the ad agency, Hervey and Bernham. The proposal states that the company should increase their advertising expenditure by $225,000. In the coming year the company is going to allocate an extra $300,000 to advertising, based on the projected increase 2003 sales. Alternatively, John Bott, CarringtonÐŽ¦s Vice President of Sales wants to allocate $135,000 to sales and administrative expenses, leaving $165,000 of the additional money to be allocated in other areas. The $135,000 includes: the forecasted increase of $65,000 for 2003 in sales expense and administrative costs, and the $70,000 cost for hiring and training a new representative. The ad agency is proposing that all the $225,000 should be allocated to the consumer advertising program for ads in several shelter magazines. Carrington must decide how the funds will be allocated within the chosen promotion budget.
Allocation of CarringtonÐŽ¦s Promotion Dollars in 2002
Sales expense and administration
$ 995,500
Cooperative advertising allowance
1,650,000
Trade advertising
467,000
Consumer advertising
562,500
$ 3,675,000
SWOT Analysis
Strengths:
Family owned since the early 1900ÐŽ¦s
Positive brand name and image
Carrington sells its furniture through 1,000 high quality department stores
Company is selective in choosing its retail outlets
Carrington provides fully trained sales representatives, who educate and assist in the displays
Maintain their own sales force that only sells Carrington products
Unique high quality products
Weaknesses:
Lack of market presence
Carrington does not sell to furniture chain stores or discount outlets
A small sales force
Carrington does not have outside sales reps, therefore limiting their covered areas
Wage increase for employees
Limited product line, manufacture only wood furniture
Poor distribution network
Costs of delivering and returning heavy items are a concern
Wood furniture is expensive and often sold in sets, such as a dining room table and chairs
Opportunities:
Wood furniture sales represent 48% of total household furniture sales
Wood furniture sales are expected to rise by 6% in 2003
Target market mostly consists of baby boomers with incomes over $100,000
Expanding product line into the upholstery and other category
Potential to increase presence in galleries and upscale furniture and department stores
Threats:
Furniture industry is very cyclical and is highly correlated with the welfare of the economy
It is estimated that only 1% of US householdÐŽ¦s disposable income is spent on home furnishings
Decline in independently held furniture chains while furniture store chains have grown
Competition ÐŽV there are more than 1,000 furniture manufacturers in the United States
Higher material costs
SWOT SUMMARY
The SWOT analysis portrays a strong image for Carrington Furniture in the industry. Carrington is well known for its high quality furniture and family name. Because Carrington has been family owned for almost a century, it prides itself on its unique sales style with an emphasis on superior customer satisfaction. Unlike other sales reps in the business, the Carrington family has a policy that its sales representatives can only sell the Carrington product. In addition to making a sale, they are required to assist retailers with the display of the product and give advice on other matters as necessary. These strengths will benefit Carrington when it comes to the opportunities available within their market.
The furniture sales are forecasted to increase by 6% giving Carrington the opportunity to increase its market presence, which is