2 Responses – Unit 1 DB 3
Coming off my long weekend with family I was shocked to hear the bad news from Anna. She explained that in the past quarter that our profit margin shrunk by 2%. This decrease is causing us to look even harder at the option of globalization in the coming months. We currently need to start benchmarking our internal and external processes to determine what are the next steps should be. The benchmarking process will help us speed up the improvement process because we cannot afford to have another quarter with negative profit margin figures.
In our brainstorming meeting we need to determine what processes internally could be changed or improved on to help the bottom line. We are going to have to do research on other organizations that have decided to go global so we can learn from their possible mistakes. If possible, we must meet with the organization and pick their brains on the ins and outs of this process. Once we have gathered all data and had time for analysis we can then determine what our next steps must be.
The main type of benchmarking that we must focus on is Process and Competitive Benchmarking. We need to look to our daily operations and possible changes that could lead us to increased productivity, cost reductions and new fresh ideas. I would have loved to be able to use Competitive Benchmarking, but our furniture manufacturing market is so close that our competition isn’t going to help us with any globalization information that they have acquired. We must do external research on our own to insure the process we must follow. We looked to the expansion of Richardson Brothers Furniture Co. They own a lumber mill in Sheboygan Falls Wisconsin and seven generations of family woodworkers known for baronial furniture. They have just unveiled a new collection with rave reviews, but the biggest change in the process is that Chinese works at low wage Chinese wood shops carved it, lacquered it and joined it. The U.S. Commerce Department stated that 55% of wooden furniture is imported from China today. The Richardson Brothers company moved to become a sales and marketing company because they moved production overseas. Keith B. Hughes states that “Within three years, 75% to 80% of wooden furniture sold in the United States will be manufactured in Asia”. Many companies have found that shipping wood halfway around the world can equate for a saving of 40% on their productions costs. Building on this we could sell off some of our internal sanders, molder and saws being that they will be used less in house for production. Sales have been declining and we are in need of a change to help pull us out of this domestic decline. We may have to lay a few factory works off if we decide to move to China wood manufacturing, but that could be the case if we do not make global expansion. We may need to let staff go if our numbers continue to decline.
When you move some manufacturing to China we could have loss or reduction of quality control. In addition to that, there could be longer production and delivery times. We will need to establish solid relationships with reputable and reliable suppliers and overseas business partners.
To help lesson our risk we could operate a small office in China to overseas to monitor quality control and on-delivery of overseas production. This can help protect all company design integrity. We will choose to only use reputable production facilities and we will require all product and quality specifications to be met. In the off chance of natural disasters, we may choose to use different production facilities so that no one facility would impact our total production.
Bullard stated “Perhaps the most important source of change in furniture and many other industries today is the new ability for suppliers, producers, distributors, and consumers to send and receive “rich” information instantaneously, worldwide, at very low cost”. In conclusion we need to open the floodgate of possibilities moving forward.
I would again like to thank Deborah, the board for giving me this opportunity to discuss our profit margins. After speaking with Anna regarding our quarterly report, we will discuss in depth why the potential of going into the global market for Newbury, INC is top priority. First, we must discuss fact, Anna was able to let me know that Newbury, INC has dropped profit margins over 2% this quarter. This is very concerning as Newbury, INC has always showed consistency in profit margins throughout the years. After the info was sent over to Deborah and the board we now have to think about if global strategy is the answer or if we should continue to focus on the domestic market.
As I was having a sidebar conversation with Tiffany (one of my team members), she stated that we needed to look at some of the internal factors. We know what are capabilities are on the domestic front but what about the global market? Tiffany let me know that we do have fairly strong market presence here in the higher-end markets but how would this translate globally? Today we will find out that answer.
First, we would have discussed what is our Benchmark. Ligne Roset is our benchmark. In order for us to understand why, we must understand who is Ligne Roset is a French Based high end contemporary furniture maker/manufacturer. They have been in business since 1860 along the Rhone River in French countryside. Ligne Roset implements strict environmental standards of manufacturing and production just like we do here at Newbury INC. This cutting edge ecofriendly design allows the company to be aware of its customers’ needs and environments that they live in. They operate in the US, Denmark, UAE, Germany, China, Japan, Australia, Mexico, and many other countries around the world. (Ligne Roset, 2018) Recently the company has spread its manufacturing to here in the United States.
Global Expansion has helped Ligne Roset grow into not just one of the premier High End Contemporary furniture manufacturers in the world, it now has enough influence on the marketplace that it can promote one of its products and create a aftermath of copycats in the industry. This is something that they use very similar to what we here at Newbury, INC does. At Newbury, INC we use our in-house designers to help influence our buyers and customers while at the same time staying on top of trends in the industry. Ligne Roset does this by premiering its products at the AIA, IDI, and Interior Designers expos every quarter around the world. This is what Newbury, INC should mimic as a potential Global expansion. (Ligne Roset, 2018). The expansion that Ligne Roset found after it started manufacturing in the United States was the growth of its customer base in the US, Canada, and Mexico by branching into retail stores in Chicago, NYC, Miami, Dallas, San Francisco, LA, Mexico City, Vancouver, Montreal, and many other cities over the years. Simply put, profit margins grow, and Ligne Rosets presence in the market continues to grow with it.
The large risk that comes with globalization when thinking about Newbury, INC expanding is the type of expansion we have. We have to think about our International Strategies. If we are to operate as an MNC, or Multinational Corporation, we will have to use a lot of our finances to push not only our products across to our consumers but also influencing the market enough that we don’t have to facilitate to the countries that we would be manufacturing in. Types of International Strategies. (2015). If we operated Newbury, INC as a multi-domestic, we would be at risk of not being able to facilitate to our new environment/culture of whichever country we decide to operate in. This could be a large risk for us if things to not go our way.
Ligne Roset minimized those risks by maintaining their product line as close to the trends as possible while at the same time creating their own trends to the market. This gave them the ability to have the same impact on customers from the United States to Europe and Asia. The department that was utilized the most was their designers and in house designers. This is something Newbury, INC does now and this is something that if we continue confidently, we will achieve our goal of bringing up our profit margins and expanding into the global marketplace. Newbury, INC has the assets, knowledge, and reputation to take that dive into international waters!