Filmore Furniture Ltd Case Study

1 Case Synopsis

This case is about Filmore Furniture Ltd. Manufactures colonial maple furniture and operates in furniture manufacturing and retailing industry. The company was incorporated in 1970 by Fred Filmore who later sold his business to his son Phil Filmore in 1983 upon retirement. In 1983 the annual sales of the business totaled $1,300,000, but with great business strategies and leadership skills such as: modernizing the plant, introducing new product designs, and implementing new marketing strategies, Phil was able to increase the sales to $5,100,000 by the year 1993. Although the business had grown significantly, the profits and cash flow were not enough to further invest in the modernization programs and as a result, Phil invited five professionals to become shareholders of the company. The new business structure consisted of: 63 percent of the shares owned by Phil, 31 percent by the five investors and 6 percent by the employees of the company. However, in 1999, Phil died in a car accident leaving his entire estate to his wife Lucinda. Lucinda, a housewife, has no knowledge of her husband’s business seeks advice from her close friends and business partners and must make an important decision regarding the ownership of the business.

2 Problem Statement

What can Lucinda Filmore do to improve her financial situation in order to live a comfortable life?

3 Situation Analysis

3.1 Summary

Filmore Furniture Ltd. is a furniture manufacturer that produces colonial maple furniture. The furniture is made from natural woods and makes it very attractive for buyers who look for natural based furniture. The company first incorporated in 1970 by Fred Filmore as a sole owner. In 1983 Phil Filmore took the ownership of the company after his dad Fred retired. He further modernized the plant and introduced new product designs and accessories. Phil also introduced new merchandising and marketing strategies ideas that helped in increase of sales by 3.8 million dollars within 10-year period. The business overall was successful; however, the profits were relatively low due to high competition. The company resulted in selling 31 percent of the shares to 5 investors because its profits and cash flow weren’t sufficient to pay for the modernized programs. In 1999, Phil Filmore died in a car accident, and left his debt as well as 63 percent of shares to his wife Lucinda who challenged with decisions of either incorporating with another company or selling it.

3.2 Industry Analysis

Filmore Furniture Ltd is falling under Furniture Manufacturing Industry. This industry needs a lot of marketing and advertising. This is big industry and there is a lot of opportunity for growth. They manufacture their own product, and they also supply to chain stores. This indicates that they are competing with the bigger competitors in the industry.

(i) Bargaining power of suppliers Filmore produces maple furniture. The main raw material involved in production are maple, foam, fabric and nails. The raw materials used are generic material that could be supplied by hundreds of suppliers. When materials are generic, that indicates that t they all compete on price. Therefore, Filmore can switch suppliers at any point if they are not happy with the priced. Filmore has the upper hand in this situation and they have the power.

(ii) Bargaining power of buyers Since Filmore wholesale they sell their products to retail stores. This indicates that the retail stores are look for low prices. Since the furniture manufacturing industry is very competitive. Filmore does not carry a unique product in the market, which means the buyers can switch manufactures to make a higher margin when they can. Therefore, Filmore has no control or power of their buys.

(iii) Threat of new entrants The Industry for manufacture furniture is huge. However, the startup cost is very high with low return on investment. New entrants to the industry does not impose a threat to Filmore. However, the biggest threat would be for retailers to import furniture for much cheaper.

(iv)Threat of substitutes There are no substitutes for furniture. Buyers only have a choice within the industry, but they cannot find anything other than furniture.

3.3 Company Analysis

In the following section we explore Filmore Furniture’s strengths, weakness, opportunities and threats to better understand the quality and standing of the company from internal and external aspects.

Strengths Filmore Furniture LTD, located in Canada,