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Fine Furnishings Marketing

Victorian Fine Furnishings: B2B Marketing concepts

Executive Summary

This is a report about a company Victorian Fine Furnishings. The company is involved in the manufacturing of classic Victorian style furniture and is looking forward towards a new contract with Snoozarama, a new client which is a nationally franchised company. The Sales Manager has put in rigorous hard work and time in getting this order from Snoozarama. This is a very big and important order for Victorian and they can not afford to lose it. They know that if they deliver this order successfully by fulfilling the required conditions and within the stipulated time, they would get a chance to supply their furniture to Snoozarama in other cities also all over the nation.

Currently, Snoozarama has 41 retail stores in Australia. Victoria has to complete the order and deliver it within a time span of eight weeks because Snoozarama wants it in their "Spring Carnival" advertising and sales promotion. The deadline of doing the work in a limited period of eight weeks is the main problem. Though this is going to be tough but it can be done. Victoria will be depending on their supplier Ashley timbers for getting the raw material; i.e.; rosewood timber. But, this is a conditional order on guaranteed delivery in two weeks.

But, there was a problem; Ashley Timbers had a fire in their yard and now they would not be able to supply for nearly one month. There are different alternatives to this problem which have been discussed and analyzed in the report below. This report also includes the B2B marketing concepts and theory in bringing about a solution to the problem and includes recommendations that can be given to the managers with regards to the situation of the company.

About the company

Victorian Fine Furnishings is involved in the manufacturing of classic Victorian style furniture. It is a small company that is based in Australia. It has 34 employees and among them, the sales manager is the key person who is responsible for bringing in new clients and increasing the sales of the company. Ken Lambert is the Sales Manager and Gerry Watts is the General Manager. Both of them are the major figures in the case and are looking for a solution to the problem.

The situation

The company wishes to expand its sales all over the nation. For this, it has recently acquired a large contract of 120 of their exclusive "Derby" bedroom settings of bedhead, frame, two bedside tables and 5 drawer dressers. The key supplier of Victoria is Ashley Timbers and they generally buy their raw materials or timber from Ashley. They have an order to fulfill from Snoozarama, which is a national player. Victorian Fine Furnishing’s aspires of turning into a chief player and grabbing new clients.

Gerry has organized for the timber to be cut into the appropriate sizes to make sure there's no need for additional trimming or cutting of the rosewood by his staff which would slow down the production. Victorian is worried because the order has to be delivered within eight weeks; this will actually stretch their production capacity. But, the general manager has come up with a solution to this problem. He has figured out that if they receive the raw material within two weeks, they will have six weeks for the completing the order.

Besides, he is considering diverting activities of fifteen employees of the factory away from general manufacturing for a period of six weeks; this way, there should be enough stocks of other products to cover normal orders in the period. Though, this is going to be tough but it can be done. Thus, for completing the project with Snoozarama, the company has placed an order with their supplier, Ashley Timbers. Gerry placed the order for a total of 55 cubic meters (M³) at $2,550 per M³ of cut to size rosewood.

However, this order is conditional on guaranteed delivery in a period of two weeks. This will assure that Victoria has full six weeks for manufacturing. He has made arrangements with Ashley’s for the timber to be cut into the suitable sizes to ascertain that there's no need for further cutting or trimming of the rosewood by his staff; this would save the time of his staff and the production process will not be hampered.

SWOT analysis

SWOT analysis is the process of analyzing the company and the environment in which it is operating. This analysis helps in formulating effective strategies for the company to deal with competition. SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses are internal to the organization whereas opportunities and threats are external to the organization (Marketing Management, 2004).

Strength - A firm’s strength is its capability to achieve competitive advantage with the help if its resources. Victorian Fine Furnishings has the following strengths-

Good brand name- Victorian Fine Furnishing has a good brand name in manufacturing classic Victorian style furniture.
Good reputation among customer- It has a good image amid its customers and as a result, it has received this big and expensive order.
Skilled employees- Victorian Fine Furnishing has only 34 employees but they are expert and committed to their work.

Weakness- The absences of certain advantages or strengths is termed as weakness. There are following weaknesses in the Victorian Fine furnishing-

Lack of raw material- Victorian Fine Furnishing doesn’t have adequate raw material to meet the urgent needs of the client. Because of this, it is now loosing a chance to earn profit.
Lack of employees- There are only 34 employees in the company, which are not able to do work in the given time period though they are skilled. This order requires more employees to work but this will increase the overall cost of the project (Kotler, 2002).

Opportunity- Opportunities come from the external environment of the business. Analysis of the external environment creates some new opportunities for profit and growth. Following are the opportunities for the Victorian Fine Furnishing-

Unfulfilled need of the customer- It received an order from Snoozarama, which has 41 specialized retail bedding stores around Australia. Snoozarama wants this order within 8 weeks. So there is an opportunity for Victorian to earn a large amount of profit.
New clients- If Ken and Gerry complete this project within the time, they will be able to attract new clients. They will also be able to supply this client nationally.
Brand building- Because Snoozarama has 41 branches around Australia; it will help Victorian Fine Furnishing to build an image.

Threat – Changes in the external environment also bring some threats for the organization. The organization should constantly keep a watchful eye on the market, so that it can analyze the opportunities and threats it is facing (Kotler, 2002). Following are the threats for Victorian-

New competitors- Order can go in the hand of other manufacturers because Victorian is facing the problem of raw material. This will create new competitors for Victorian.
Increase in cost- If Victorian wants to fulfill this order within time limit; it will have to face an increase in cost (Kotler, 2002).

The four alternatives

The four alternatives present before VICTORIAN FINE FURNISHINGS” are discussed below

The first option is to go with Ashley Timbers. They have to wait for four weeks for the raw materials, as suppliers won’t be able to supply before this time period. It will require the production of 120 unit’s within the remaining four weeks. This calls for approximately 1000 - 1200 additional hours at overtime rates. This will add approximately $35,000 - $40,000 to the cost of production. Ashley Timbers will make provision for cutting and trimming of the rosewood.
The second option presented before company is to take help of four suppliers in Melbourne as there is no other single supplier who can fulfill their total demand of raw material. Victoria Fine Furnishing will be getting 40% of the total required raw material from these suppliers. Their price will vary from $3,300 per M3 to $3,600 per M3.This price is 30% to 40% higher than Ashley’s price.
Third option in front of them is to take help of the two timber merchants of Sydney. These merchants can supply the product within 3 weeks, but they are asking for a price which is 20 – 25% higher than Ashley’s price. They are asking for a share in the contract.
Fourth option which they have is of North Coast Timber Co. This company is the main supplier of Ashley Timber and is located in northern NSW. They are ready to provide uncut and untrimmed amount of rosewood. Half of the material would be supplied within a week’s time and rest would be supplied in 10 days. Road freight has to be paid by the Victorian fine furnishings. The order has to be increased from 55 M3 to 60-62 M3 as they are not providing the facility of cutting and trimming. They are asking for cash in advance. Their rate is 20% lower than Ashley’s price (Ramaswamy & Namakumari, 2007).

Analyzing the four alternatives

There are four alternatives given for the Victorian Fine Furnishings. The selection of best alternative will help the company to complete the project for its client on time. So there is a need to evaluate all the four alternatives. The analysis of the four options is given below:

If Victoria Fine Furnishing goes with the first alternative, it can face the state of uncertainty whether it will be proficient to complete its production after four weeks or not. Therefore, the company should not waste its four weeks just for the sake of saving some extra costs in the production. The company wants to establish itself at the national level to acquire new clients. They will also get an opportunity to work with Snoozarama, a nationally franchised company. Going by this alternative, the company would require over time rates for 1000-1200 hours. This implies that they have to add approximately $35,000 - $40,000 to the cost of production. This would prove to be a costly and highly uncertain choice for Victoria Fine Furnishing.
If the company goes with the four suppliers in Melbourne, following would be the consequences. Victoria Fine Furnishing would be provided with only 40% of the total raw material required. They still have to find suppliers for remaining 60%. They are charging a price which is 30% to 40% higher than Ashley's price. With these prices, there will be little or no margin for profit in the settings for Victorian Fine Furnishings. In such a scenario, this deal would prove to be highly disadvantageous for the company.
The third option, which is taking help of two Sydney merchants who will supply the product within 3 weeks. This alternative seems to be working. Victorian Fine furnishings can choose this alternative. Although the cost of supply will be 20 – 25% higher than Ashley’s price, yet they will get the complete product within 3 weeks. At the time of crisis, 20 – 25% increase in the supply cost has to be managed. Although, the Victorian Fine furnishings will pay a little extra, but will not lose their client Snoozarama (Kazmi, 2002).
Looking at the fourth possibility, the expenses seem to be more than profits. North Coast Timber Co., major supplier of Ashley Timber is providing uncut and untrimmed solid rosewood timber. This implies that there has to be a provision made for wastage. Only half of the material would be available within a week, but for the rest, the company has to wait for ten days. In this option, the road expenses have to be paid by the company. The prices at which they are supplying are 20% lower than Ashley’s price, but they are providing uncut and untrimmed material. This means that they have to find a company to cut and trim the product, which is an add-on to the expenses.

B2B marketing concept and theory

Business-to-Business (B2B) theory of marketing includes those management activities that enable a supplier firm to understand, create, and deliver value to other businesses and institutional customers. Generally, it is described as electronic commerce transaction between two or more businesses (Business Marketing Plan, 2006). Business-to-Business marketing concept helps the buyers in finding new suppliers and vice versa, reduces the time and cost of interaction and increases the trade geographically.

The competition has been increasing on the global level and the product commoditization is showing a rapid movement. One of the most important success factors of the B2B business and marketing is the strategic marketing management. One of the keys for the success of the business is the professional approach to the market. This approach can help Victorian Fine Furnishings by selecting the third alternative. In this age, negotiation and bargaining are the most important tools for the buyer. Although, the two Sidney merchant are offering 20 – 25% higher prices for the raw material but purchasing executives of Victorian Fine Furnishings can negotiate with them and can reduce the cost of the raw material. The Business to Business concept can help Victorian Fine Furnishings to arrange the raw material for the production of the finished furniture. Victorian Fine Furnishings is an institutional buyer. It purchases all the raw material for its business point of view.

The B2B decision process is a process by which the need for purchased services and products is established by the formal organizations and the organizations also identify, evaluate and choose among alternative brands and suppliers. This is important to comprehend, so that the firm can deliver the best suitable and effective marketing communication mix (Marketing Management, 2004).

Viewing the importance of the task, a number of people make a purchase. The task is considered to be important, as it is concerned not only to their career but also to the whole firm. Further explanation says that the purchase decision process is concerned with many representatives rather than a few one. This group of people is named as the decision making unit (DMU). The DMU differs in size depending on the complexity of the problem being solved. In accordance with individual consumers, every member of the DMU is an active problem solver. All the active problem solvers process information, so that the personal and organizational goals are accomplished. This is an indication that purchases on impulse are rare in the business market context. This also indicates that the buying process is more time consuming than what is acknowledged in the B2C market (Ida, Maria & Camilla, 2006).

Conclusion

The problem before Victorian Fine Furnishings is the unavailability of the raw material that is timber. Ashley Timbers, which is one of the old suppliers of Victorian Fine Furnishings, is not able to provide timber before two months. There are four alternatives for the company to purchase the timber. The problem is that all the suppliers are charging comparatively higher price than Ashley Timbers. The best alternative is the third one under which the company receives raw material from two timber merchants of Sidney, who are charging 20-25% higher prices than Ashley Timbers. Victorian Fine Furnishings can bargain with the supplier on the prices of the raw material. The implementation of the business to business concept in a best appropriative manner is more valuable for the company. It would help Victorian Fine Furnishings to sort out the problem of lacking with the raw material.

References

Marketing Management. 2004. Hyderabad: ICFAI Center for Management Research
Kazmi, A. 2002. Business Policy and Strategic Management. New Delhi: Tata McGraw Hill
Ramaswamy, V. S. & Namakumari, S. 2007. Strategic Planning Formulation of Corporate Strategy. New Delhi: McMillan India Ltd.
Kotler, P. 2002. Marketing Management. 11^th Edition. New Delhi: Prentice Hall of India Private Ltd.
Business Marketing Plan. 2006. [online]. [Accessed 2^nd July 2008]. Available from World Wide Web: <http://www.pycco.com/business-marketing-plan.html>
Ida, H., Maria, J. & Camilla, L. 2006. Marketing Communication in a B2B Market. [online]. [Accessed 2^nd July 2008]. Available from World Wide Web: <http://www.diva-portal.org/diva/getDocument?urn_nbn_se_hj_diva-639-1__fulltext.pdf>

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