I.

Facts of the Case

In 1972, Dahlia Furniture Private Limited entered into the furniture industry of
Singapore as subcontractors of Diethelm and Ching Lin, the two giant furniture
companies at the time. They primarily supplied kitchen cabinets and wall units, and
subcontracted dining and bedroom sets from local suppliers. Since business was
picking up, Dahlia Furniture ventured into retailing. When Singapore invested in
colossal public housing programs, Dahlia Furniture gained more success as sales rose
from $ 4,800,000 in 1980 to $ 5,500,000 in 1981. However, sales dramatically waned
to $ 289,000 in 1983 mainly due to the mismanagement of Mr. Lim, General
Manager. Consequently, Dahlia Furniture had to undergo reorganization as a response
to problems on employee retention where workers resigned one after the other due to
poor performance of the company. Furthermore, the company sold its machine worth
$ 75,000, which is used for furniture mass production. While the company was in a
crisis, the competition of the furniture industry became vicious. As a result, Mr. Chua
and Mr. Leong decided to assume control over the company and reassess its status.
Both expressed doubt over the survival of the company, and are now considering
strategies to maintain, even increase, sales growth in an extremely competitive
industry.

II.

Point of View
Mr. Chua Boon Kang and Mr. Leong Sim Lam, the owners of Dahlia Furniture
Private Limited

III.

Problems
1. Major
How to improve sales growth in a highly competitive industry starting 1985?
2. Minor
A. How to improve the existing marketing strategies to boost company sales?
B. How to get competent and skilled key personnel, and retain them in the
company?

IV.

Objectives
1. Long-term: To become the number one manufacturer and exporter of furniture in
the country
2. Short-term: To maximize profits of the company

V.

Areas of Consideration
1. Environmental Analysis
A. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
i. Strengths
Products of the company are unique and of superior quality compared

to other retailers.
Dahlia Furniture is a furniture dealer known for its refined taste and

exclusive designs.
The company is an established and experienced entity in the furniture
industry

with

activities

ranging

from

importing,

retailing,

manufacturing, and subcontracting.

Dahlia Furniture is supported by local manufacturers who are also

their local subcontractors.

Management is wise to venture into retail to better reach its targeted
market - the middle and upper income earners.

ii.

Weaknesses
Dahlia Furniture is in dire need of proficient managers to handle key
positions of the company.

The company has difficulty retaining its employees, especially key

personnel.
The company lacks an alluring compensation package to assure

employee retention.
The company has no other advertisement of its products to effectively

access its targeted customers other than its showrooms.

The company is selling only few products.
Evident in its 1983 sales drop, the company has partially lost its
market share in the industry.

iii.

Opportunities
Local demand is annually increasing by twelve percent (12%).
Customers are willing to splurge money to adorn their homes with

furniture.
Australia, Western Europe, United States, Canada, and the Middle East

have increasing demand for imported furniture.

Retailing markets have ventured into a wider range of furniture, which
includes bedspreads and curtains, and even household appliances.

iv.

Threats
Prices of furniture are fluctuating due to stiff competition in the

industry.
Some manufacturers opt to sell below cost, and sometimes conduct

clearing sales to avoid incurring storage costs for imported furniture.

The competition in the furniture industry is rapidly growing evidenced
by foreign manufacturers coming into play such as Ikea, Fly, and
Homestead.

B. Furniture Industry
The furniture industry of Singapore started as a consequential industry of its
oldest industry - sawmilling. As the furniture demand skyrocketed since 1979,
it became the leading local industry with a whopping market of $ 300 million.
Demand for furniture is expected to last at least until 1992. The striking
demand growth of this industry is strongly correlated with the fast
development of the building and construction industry of Singapore.
i.

Competition
As of 1984, the competition is shared among two hundred (200)
manufacturers of furniture where fifty nine (59) are manufacturers and
exporters of furniture. Of the 59 entities, thirty five (35) are producing
wooden knock-down, twelve (12) are producing rattan, and another twelve

(12) are producing steel furniture. Furthermore, foreign manufacturers and

retailers have joined in the race such as Fly, Homestead, and Ikea. It is
expected that more competitors are coming in the rivalry.
ii.

Trend
Attitude towards purchasing furniture has radically changed over the
years. In the past, potential customers are more concerned with durability
and functionality of their furniture. Now, they are more concerned of
aesthetics and fashion. The trend in furniture designs also changed
accordingly. In 1977, imported chipboard with polyester finish was in
fashion. In 1984, furniture fad shifted to a more polished and chic finish.
Furthermore, potential buyers are now more willing to expend their money
on sprucing up their homes as often as every two (2) to five (5) years. In
addition, it was noted that imported furniture are more preferred over the
locally made ones given that prices are comparable.

2. Government Regulations
A. Foreign labor discouraged
Furniture production requires manpower, which, in turn, entails additional
costs to the company. Dahlia Furniture needs to consider the size of labor
force needed to keep its production afloat, and whether such labor will be
sourced locally or from foreign services. The use of foreign labor may have
material cost impact in the operations of the company as well as potential
government intervention pursuant to its policy of deterring the utilization of
foreign labor.
B. Tax implication on importation
In addition to the restriction on the use of foreign labor, the government of
Singapore also levies five percent (5%) import duties on imported goods. This
means that if Dahlia decides to boost its importation, additional expenses on
import will be included in its operating expenses.

VI.

Alternative Courses of Action

1. Increase importation activities by investing more on imported furniture
A. Advantages
i. The popularity of imported furniture during this time is a plus factor in
selling such product line. The company no longer needs to advertise or
exert effort in marketing such products to increase sales, and, in effect,
ii.

increase profits.
The middle and upper income earners who generally have westernized
preferences in furniture, and are the existing clientele of Dahlia
Furniture, will have more diverse products and styles to choose from.

iii.

There is a growing number of families who can afford, and are willing to
spend for high quality and fairly expensive product lines of Dahlia

iv.

Furniture.
Singaporeans prefer imported furniture over locally made ones

v.

especially when the prices are comparable.

There is no need to hire additional workforce or incur overhead costs for
production.

B. Disadvantages
i. The company will incur additional storage costs when imported furniture
ii.
iii.
iv.

are not sold within two (2) months.

Imported goods are levied with a five percent (5%) import duty.
Dahlia will incur additional shipment fees for importing furniture.
Not all imported furniture are durable, and have good quality. Some may
be overpriced but do not meet the quality standards, and some may be

v.

counterfeit versions of the genuine brand.

Dahlia Furniture may be exposed to the risk of delayed delivery of
imported furniture due to various reasons such as bad weather conditions

vi.

and government regulations.

Dahlia Furniture customers will be deterred to customize their desired

vii.

furniture due to possible lead time and added cost implications.

The company may also be exposed to legal obstacles arising from red
tape transactions especially when importing trades are involved.

2. Expand investment on locally made furniture (both from own production and
local suppliers)
A. Advantages
i. It was noted that locally made wooden knock-down furniture, mainly an
export item, has a healthy sales growth rate. This can be one product that
Dahlia Furniture can maximize profit from if it opts to expand on local
production.

ii.

This option will pose a greater impact in improving income as locally

made products (own production and from local suppliers) contribute a

iii.

total of seventy percent (70%) of the over-all income of the company.

Customization of furniture would be easier for customers as they can

iv.

personally communicate with production, and even negotiate on prices.

In this option, customers serve as a built-in focus group where the
showroom becomes a perfect venue for customers to give feedback on

v.

current trends and general preferences.

Storage costs for furniture will be minimized, if not eliminated, since

vi.

products can be supplied to customers on order basis.

The company will have an opportunity for expansion by exporting local
products once the local market becomes saturated.

B. Disadvantages
i. Competition for exporting furniture has become intense. In fact,
exporting competitors have more than doubled within the last three (3)
years largely due to the increase in the export of wooden knock-down
ii.

furniture.
There is a significant capital requirement for this alternative. Aside from
the added overhead costs for production, the company will now need to
invest in buying or renting a factory for production, expanding its supply
of raw materials, and hiring additional labor force for production and

iii.

managing production.
This option will contribute to the depletion of local natural resources
(e.g. wood) especially when demand increases.

3. Develop the right mix of inventory for imported and locally made products
A. Advantages

i.

This will address the increasing demand for imported products to cater
the middle and upper income families, and at the same time attend to

ii.

locally made products which is growing in sales in terms of exports.

Concern on higher storage costs for imported products will be decreased,
if not eradicated, because only enough number of these items will be

iii.

purchased.
Overhead costs will be minimized because products to be sold will not

iv.

be solely dependent on locally made ones.

Dahlia Furniture would be able to cater to the mass market because of its
diversified product line, which include selection of both local and
foreign product styles and designs.

B. Disadvantages
i. Officers and managers of Dahlia Furniture have to be competent enough
to focus on both imports and local production strategies to maximize
profits. The company can either invest in further education and trainings
ii.

on this field or hire a proficient person for this particular position.

Considering that the company already has problems of retaining its
employees, Dahlia Furniture will need to create an attractive
compensation package to assure retention of all its competent employees
particularly if it plans to hire skilled managers to oversee business
operations.

4. Develop and invest in marketing strategies to promote and improve sales

A. Advantages
i. Dahlia Furniture can strengthen its current market share, even increase
it, by reaching out to a wide array of customers through engaging in
marketing strategies such as creating advertisements and participating in
trade expositions.

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ii.

This will also aid in rebuilding the company by getting back and even
increasing its sales, which suffered its lowest in 1983 when Mr. Lim
mismanaged the operations of the company.

B. Disadvantages
i. Coming up with marketing strategies will definitely entail the company
ii.

additional costs.
This will also require the company to invest man hours to conceptualize
and create various marketing styles and approaches to further reach its
desired market.

VII.

Recommendation
The group recommends Alternative Course of Action No. Three (3). With this option,
the company will be able to capture both its targeted foreign and local markets, and at
the same time reduce unnecessary costs, if managed properly. The advantages of this
decision outweigh the additional manpower required and its corresponding costs, in
effect, steering the company to realize its short-term goal of profit maximization. In
the long run, this course of action will contribute to the achievement of the long-term
objective of being the number one furniture manufacturer and exporter in Singapore.