Chad’s Creative Concepts designs and manufactures wood furniture. Founded by Cha
ID: 408731 • Letter: C
Question
Chad’s Creative Concepts designs and manufactures wood furniture. Founded by Chad Thomas on the banks of Lake Erie in Sandusky, Ohio, the company began by producing custom-made wooden furniture for vacation cabins located along the cost of Lake Erie and on nearby Kelly’s Island and Bass Island. Being an ‘outdoors’ type himself, Chad Thomas originally wanted to bring ‘a bit of the outdoors’ inside. Chad’s Creative Concepts developed a solid reputation for creative designs and high-quality workmanship. Sales eventually encompassed the entire Great Lakes region. Along with growth came additional opportunities.
Traditionally, the company focused entirely on custom made furniture, with the customer specifying the kind of wood from which the piece would be made. As the company’s reputation grew and sales increased, the sales force began selling some of the more popular pieces to retail furniture outlets. This move into retail outlets led Chad’s Creative Concepts into the production of a more standard line of furniture. Buyers of this line were much more price sensitive and imposed more stringent delivery dominate sales, accounting for 60 percent of volume and 75 percent of dollar sales. Currently, the company operates a single manufacturing process in Sandusky, where both custom furniture and standard furniture are manufactured. The equipment is mainly general purpose in nature to provide the flexibility needed for producing custom pieces of furniture. The layout puts together saws in one section of the facility, lathes in another, and so on. The quality of the finished product reflects the quality of the wood chosen and the craftsmanship of individual workers. Both custom and standard furniture compete for processing time on the same equipment by the same craftspeople.
As he reviews the progress of Chad’s Creative Concepts, Chad Thomas is pleased to note that the company has grown. Sales of custom furniture remain strong, and sales of standard pieces are steadily increasing. However, finance and accounting indicate that profits are not what they should be. Costs associated with the standard line are rising. Dollars are being tied up in inventory, both of raw materials and work in progress. Expensive public warehouse space has to be rented to accommodate the inventory volume. Thomas also is concerned with increased lead times for both custom and standard orders which are causing longer promised delivery times. Capacity is being pushed, and no space if left in the plant for expansion. Thomas begins a careful assessment of the overall impact that the new standard line is having on his manufacturing process.
QUESTION:
1. What are the reasons (both strategic and tactical) behind the company's problems? (1 paragraph)
Explanation / Answer
What are the reasons (both strategic and tactical) behind the company's problems? (1 paragraph)
As we know that the main reason beind the company's problem is that mainly two as given in the question but here we going to explained below:-
Strategic:
Achieving growth: Recommendations for increasing the probability of success
1. Strengthen the execution infrastructure by investing in ‘safe bets’.
2. Initiate a process to identify strategies with a high probability for success.
Customer-Focused Growth Strategies
The process of identifying profitable growth opportunities most often begins with the Core Business1, that is, the products, services, customers, channels and geographic areas that generate the largest proportion of revenue and profits. In-depth conversations with the senior leaders on the topic, “What is our core business?”, is the preferred starting point.
A second customer-focused growth strategy is based on the firm’s existing customers. This strategy involves creating High Impact Value Propositions for new customer sub-segments. Underpinning this strategy is the willingness to view customers through a different set of lenses.
A third customer-focused strategy is to enter businesses that have strong strategic links to the core –adjacent businesses1. This is a particularly appealing alternative when the core business is approaching its full potential, operates efficiently and generates surplus cash for reinvestment. It is also an important option when it is clear that the core’s future growth potential is weak.
Tactical reasons:
Lean on customers
Successful growth companies have a deep understanding of their customers’ problems. Many are embracing tools such as the customer empathy map to uncover new opportunities to create value. This customer insight is the foundation for their lean approach to product innovation: rapid prototyping, design partnerships with lead users, and pivoting to improve their product and business model.
I’m constantly amazed at how few companies invest the time to get out of the office and interact with customers (outside of sales situations). During the turnaround of IBM, Lou Gerstner launched Operation Bear Hug to get the company back in touch with its customers. IBM’s top 50 executives had to visit five customers per week and deliver a write-up to Gerstner.
3. Think like a designer
Managers are trained to make choices, but they don’t always have good options. Innovation involves creating new options. This is where designers excel. Apple’s exceptional user experiences were largely the creation of Jonathan Ive, a professional designer and Jobs’ righthand man.
Design thinking requires a different set of tools. Growth company strategists have abandoned Porter’s Five Forces Analysis because it assumes that markets have well-defined boundaries and competitors must fight for market share. Instead they search for uncontested market space and make competition irrelevant usingBlue Ocean Strategy and the Business Model Canvas.
4. Lead the way
Unless the CEO makes innovation a priority, it won’t happen. Innovation requires a level of risk-taking and failure that’s impossible without executive air cover. The best growth companies create a culture of innovation: