Furniture industry of UK

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1-INTRODUCTION/ EXECUTIVE SUMMERY

The purpose of this report is to present a detailed analysis of the purposed expansion of one of the leading UK based furniture company

Company and background:

Our company is one of well established company of the furniture industry of UK. It has achieved its success through competitive advantages in reputed quality products, customer services, price and strong supply chain which has established through intensive research and development over the time. Currently Our Company is producing desks and tables of metal legs and laminate tops which is sold in the UK market. Our company takes great pride in the fact that the furniture is designed and manufactured to the highest possible standards proving to be excellent value for money. The company is leading the furniture industry with commitment to provide excellent services with quality products. The company philosophy: quality, choice, value and service.

Expansion in Malaysia:

The project report include the detailed analysis of setting up production facility in Malaysia with focusing on key factors like production of mahogany dining tables, man power, quality, expertise, strategy & Implementation, supply chain management and customer issues.

The furniture industry has been identified by the Malaysian government as one of the industries which can drive the countries economy upwards. Therefore, the government is carrying out programs and formulates policies that could steer the further development of the industry. As per our research, our company can get the full advantage of the growing furniture industry of Malaysia and can target the European markets. Within a relatively short time, Malaysia has emerged as one of the major suppliers in the world furniture market.

2-PROJECT

From above definitions it is clear that project can only be done only once and for temporary time. Project should definitely have a perfect start and a perfect finishing. A project is always carried out to find out the solution for any problem and it must deal with both negative and positive aspects as discussed by Dr. J.M. Juran,

2.1 - 7-S OF PROJECT MODEL

This model was developed by the McKinsey and Co is a powerful management tool to effectively plan and manage a project. This model can describe all the required expertise and resources to successfully complete the project

Strategy: Refers to select a strategy to achieve the overall goals of the project and involves the decisions making processes at each stage of the project. The strategy applied in this project is to, determine all the requirements in sequence to the activities and, use the maximum resources from the local market.

Structure: The structure of the human resource will base on, again maximum involvement from local availability.

System: A system, based on the previous experiences and local requirements will be designed to effectively manage and control the process of the project.

Staff: Locals will be preferred to meet the staff requirements and will be trained. Experienced top management will be hired from the local and international market.

Skills: Other skilled staff including the operational management will also be attained from the head office in UK.

Style: The management style will follow the company's standards with a blend of local culture.

Stakeholders: The main stakeholders of the project include local community, local authorities, contractors, suppliers, and staff, and an effective stakeholders management will be developed to secure their interests.

2.2 -BRIEF INTRODUCTION OF THE PLAN

Being a project manager, I was approached by the Directors to prepare a project report to open a new production house for dining tables made from mahogany hard wood sourced from local wood supplier in Malaysia and sell them in European market.

This report is aimed to describe all the possible aspects relating to the project of opening new production house and capturing the European market.

2.3 - THE PROJECT AND ITS IMPACT ON THE OBJECTIVES OF THE COMPANY

Our company is well reputed in UK for producing quality furniture with excellent time and quality management and established supply chain. Apart from the obvious objective of earning profit the company's vision is to expand the business across the world with same quality according to health and safety rules, safer for the environment and public. The implementation of the current project of production house in Malaysia for supplying dinning tables in European market will achieve following objectives.

  • It will be great expansion of the company overseas.
  • Company will enter in a new market with unique mahogany hard wood made dinning tables to easily capture the market.
  • It will provide the basis to the company to offer the other products in the market to expand the business.

The cheap labour, availability of talented and experienced work force and cooperation from the local businesses, local authorities and government departments are also attractiveness as its bringing new investment in the country.

2.4 -DETAILS PROJECT PLAN

A project can be defined as "A unique set of co-ordinated activities, with definite starting and finishing point, undertaken by an individual or organization to meet specific performance objectives, within defined schedule, cost and performance parameters". (BS 6079: 2000).

The process of this project will start after getting a go-ahead from the executives. This project will be divided into different activities and will be completed within a specific time period to start producing the required goods to launch in the European market and is aimed to capture the market in next 10 years. The production house will be constructed according to the quality parameters established by company, local laws and building codes of the authorities.

Development of a project such as setting up a new production house in different country is always a complex procedure and involves many different steps to be completed. The process of developing this project can be divided into different steps described below:

3 - PLANNING

Planning is very important part of any project and desired results may not be possible to achieve from this project unless it is been properly planned. An overall planning of, how the project will be successfully completed within specified time period, meeting all the requirements, will be completed in this part.

The planning process will describe location of the proposed production house, its lay-out, staffing issues (concerning a range of functional and support staff), arrangements for the sourcing of raw materials, quality issues, arrangements for transportation of finished goods for subsequent distribution to an appropriate location in the European Union and all other activities required to complete the project. This process involves identifying all the activities, determining their logical sequence, preparing estimates of time and resources, and present in a readily intelligible format.

Every project consists of many activities that establish the whole project and identification of these activities is an important part for the success of the project

3.1 -WORK BREAK DOWN STRUCTURE

The key barrier in project planning is shaping how long tasks will take and what it will cost to do them. Inaccurate assessing is the foremost root of project collapse. The most useful tool to accomplish all of these tasks is the Work Breakdown Structure (WBS). You can subdivide a task into smaller activities. The structure will also identify the milestone of this project which includes different tasks and activities to achieve the main goal of the project.

3.2 COST ESTIMATIMATION AND FINANCIAL REQUIRMENTS

A business cannot be started without an adequate amount of required finance, and along with other finance providers, banks are the main source of finance. The good repute of the company and profitability of the project convinced banks and others to finance the project.

The successful completion of the project is highly dependent on the appropriate estimations of the cost and required resources. Most of the required resources including raw material and expertise are available, and can obtain locally. Some of these resources, such as technology and machinery, may be required to import from other countries.

The availability of cheap labour, material and other resources are also the plus point of this project.

So company needs to assure about the financial system to be excellent and up to the standards to meet international requirements and to manage the company financial aspects nicely and professionally while dealing with this project.

3.3 FEASABILITY REPORT WITH FINANCIAL ANALYSIS

The development of project planning changes in different companies and on different projects. To ensure that the project is feasible for the company and best use for its resources feasibility study needs to be done on the project. The company board can only invest in the project if the feasible report of the project is positive.

3.4 LOCATION OF THE NEW FACTORY

Malaysia is our targeted location for the new production factory for our new product. Malaysia is developing country and its capital city kualalampur is very famous city in the world. There are many development projects in process and country's growth is stabilising day by day.

The economy of Malaysia was the 29th largest economy in the world by purchasing power parity with gross domestic product and was estimated to be $357.9 billion with a growth rate of 5% to 7%. The Southeast Asian nation experienced an economic boom and underwent rapid development during the late 20th century and has a GDP per capita of $14,400, being considered a newly industrialized country.

Economic Strength

  • Natural resources - oil, gas, tin, timber, palm oil, rubber
  • GDP growth - 4.6%
  • Gross national savings - 37.9% of GNI
  • Unemployment rate - 3.7%
  • Inflation(CPI) - 5.4%
  • Export of manufactured goods 2008 - 70.0% of total exports
  • http://www.mida.gov.my/en_v2/index.php

    Supportive Government Policies

  • Pro-business policies
  • Responsive government
  • Liberal investment policies
  • Attractive tax and other incentives
  • Liberal exchange control regime
  • Intellectual property protection

http://www.mida.gov.my/en_v2/index.php

Developed Infrastructure

  • Network of well-maintained highways and railways
  • Well-equipped seaports and airports
  • High quality telecommunications networks and services
  • Fully developed industrial parks, including free industrial zones, technology parks and multimedia super corridor (MSC)

http://www.mida.gov.my/en_v2/index.php

As we had an overview of the Malaysian economy and development structures so it is not really hard to find some good place to build our new production house, which could be established in industrial estates of Malaysia. Location is perfectly suitable for cutting and assembling the wood according to environment.

http://www.trademal.com/global/index.php/id/14634/key//Malaysian_Industrial_Estates_Berhad_MIEL/index.html

3.5 LABOUR, FUNCTIONAL AND SUPPORT STAFF

Even if we have the best location, most advance technology, perfectly suitable weather and environmental conditions it is impossible for a project to complete successfully with out manpower, which made a good team. And a team is always perform best under a good team leader who actually knows what to do, when to do and where to do. For this project we need skilled and semiskilled plus professionals to perform the job to obtain the company's objective.

Malaysia offers the investor a diligent, disciplined, educated and trainable labor force. Malaysian youths who enter the labor market would have undergone at least 11 years of school education i.e. up to secondary school level, and are therefore easy to be trained in new skills.

"Malaysia is known as a country that has achieved industrialization at a faster pace than its counterparts in Asia. Although blessed with rich natural resources and primary products, its human resource development policy made a positive impact on Malaysia's economic growth. Its economic policies have a strong focus on human resource development, and it is firmly believed that workers are valuable human resources for social development.

http://www.mhlw.go.jp/english/topics/globalization/dl/38-08.pdf

Though we can find skilled and professional people but still we have to hire and some expertise from here in the UK so that they can train the work force in the Malaysia according to European health and safety and quality control and environmental laws, rules and regulations.

3.6 SOURCING OF RAW MATERIAL

The cost of raw materials and components can have a major bearing on a firm's profitability. The bargaining power of suppliers will be higher in the following circumstances:

  • Supply is dominated by few companies and they are more concentrated than the industry they sell to.
  • Their products are unique or differentiated, or they have built up switching costs.
  • They are not obliged to contend with other products for sale to the industry.
  • The market is not an important customer to the supplier group.

3.6 PRODUCTION

Our company already have the manufacturing experience in UK and we have best expertise and professionals who know about manufacturing. In this case production might be slightly different as we have to take extra care for the raw wood. Company also have to be extra careful about quality of the product, for company needs to train the staff and labour in Malaysia. For that purpose, company needs to send expertise and quality control managers from UK to ensure that company is maintain the same quality in Malaysia as it is in UK. Plus company needs to focus on special design to prominent our product in the European market.

Simply production process will include few simple steps

  • Designing
  • Cutting
  • Assembling
  • Polishing
  • Packing

PRODUCTION PROCESS CHART

3.7 SUPPLY CHAIN ISSUES

"A project is only as good as the weakest part of the process".

We can commit considerable resources to ensuring that the processes within our organisation are the best that they can be, but the outcome will be poor if this excellence does not also exist in our supply chains.

Supply chains permeate the entire organization. It is hard to envision a process in a firm that is not in some way affected by the design of the supply chain. Supply chain must be managed to coordinate the inputs with the outputs in a firm to achieve the appropriate competitive priorities of the firm's enterprise process.

A fundamental purpose of supply chain design for manufacturers is to control inventory by managing the flow of materials. The typical manufacturer spends more than 60 percent of its total income from sales on purchased services and materials, whereas the typical service provider spends only 30 to 40 percent. Because materials comprise such a large component of the sales, manufactures can reap large profits with a small reduction in the cost of materials, which makes supply chain management a key competitive weapon.

The supply chain for a manufacturing firm can be complicated if the manufacturer supply and buying materials and goods from different countries.

ompany must have a good supply chain to accomplish the project and successful business. Our company already have contacts with suppliers and dealers and logistic companies so there shouldn't be much problem with our company. But as we are going to Malaysia for production and then we will transfer the finished goods to European market then company must consider this issue as serious.

The transportation system in Malaysia is advanced and up to mark for supplying or travelling along the country and outside of the country.

"Malaysia is served by an excellent transport system. Once you are in the country there is always transport available to you to even remote areas. Travelling by road in peninsula Malaysia is popular as it has well- developed network of roads".

http://www.2malaysia.com/transport.htm

There are local suppliers who will provide us the raw material as we discuss above. But for shifting the finished goods we need big logistic company.

Out target for the selling the product is European market which is a very big market. Initially we will target few big counties of Europe such as Italy, France, Spain and Germany. These all countries have well established economy with potentially big customers with high purchasing power. It is easy to find outlet locations in these countries in establish markets. And these countries are advance in technology according to staffing and transportation issues.

For advertisement and marketing there are various modes in these countries such as

Electronic media

  • Television
  • Radio
  • Internet
  • Paper media
  • Newspapers
  • Magazines
  • News letters

4.1- QUICK VIEW OF THE ECONOMIC CONDITIONS OF THE TARGETED COUNTRIES

For the quick launch we have selected France, Italy, Germany are well established countries of European Union. All three countries are economically strong and have population with great purchasing power.

A brief overview of the countries is listed below.

FRANCE

France is the largest country in the EU, stretching from the North Sea to the Mediterranean. The landscape is diverse, with mountains in the east and south, including the Alpine peak of Mont Blanc (4 810 m) which is Western Europe's highest point.

http://europa.eu/abc/european_countries/eu_members/france/index_en.htm

French real GDP grew in the third quarter. GDP raised 0.3% q/q. In annual terms, the economy shrank 2.4%. Rising exports and strong government spending were once again the key drivers. This follows a 0.3% q/q increase and 2.9% y/y contraction in the second quarter.

https://www.economy.com/home/login/ds_proLogin_4.asp?script_name=/dismal/pro/release.asp&rk=8AA889FC-477D-41E2-900C-5F566DB61EFF

ITALY

There are two small independent states within peninsular Italy: the Vatican City in Rome, and the Republic of San Marino

http://europa.eu/abc/european_countries/eu_members/italy/index_en.htm

  • GDP (purchasing power parity, 2009 est.): $1.8 trillion.
  • GDP per capita (purchasing power parity, 2009 est.): $31,000.
  • GDP growth: -1.0% (2008); 1.5% (2007); 1.8% (2006); 0.5% (2005); 1.5% (2004), 0.0% (2003 est.); 0.5% (2002); 1.8% (2001).
  • Natural resources: Fish and natural gas.

http://www.state.gov/r/pa/ei/bgn/4033.htm

GERMANY

Germany has the largest population of any EU country. Germany is a federal republic. The lawmakers at the national level are the Bundestag, whose members are elected every four years by popular vote and the Bundesrat, which consists of 69 representatives of the 16 states (Bundesländer).

http://europa.eu/abc/european_countries/eu_members/germany/index_en.htm

Germany's economy expanded in the second quarter of 2009. GDP rose by 0.3% on a seasonally adjusted basis from the pervious quarter, when it fell by 3.5%, the steepest fall on record. Economic activity was boosted by net exports and public spending. https://www.economy.com/home/login/ds_proLogin_5.asp?script_name=/dismal/pro/release.asp&r=deu_gdp

5 - SWOT ANALYSIS

STRENGTHS

  • Political Relations
  • Favourable access to distribution channels
  • Strong market demand
  • New and modern product

WEAKNESSESS

  • High cost structure
  • New entry in the new market for us
  • Quality control issues
  • Different laws and rules in different countries

OPPORTUNITIES

  • No trade barriers
  • Market segment Growth
  • Developed market
  • Supporting government tax policies

THREATS

  • Competitors
  • Competitors have superior access to channels of distribution
  • Shift in designs
  • New market / Uncertainty

6- CONCLUSION

The aim and objective of this project report was to evaluate the expansion of company's business into Malaysia and capture global markets by setting up production facility to get competitive advantage in terms of lower material cost and labour. Today's organizations engaging in businesses have to contend with the dynamics of a changing competitive environment and for that it is necessary to analyse the global opportunities and grasp them timely.

Sector Prospects:

As from our detailed analysis, it can be seen that moving internationally for expanding our brand name is vital for the company. Malaysia has been one of the largest producers and exporters of high quality tropical timber to the world market. It has achieved this position through adherence to a strict quality control system and an effective marketing strategy for sawn timber. Furniture industry witnessed positive growth and globally Malaysia is providing healthy opportunities with good infrastructure, resources, manpower and raw materials.

Frequently furniture trade shows and related events are held in Kuala Lampur and it captured well the attention of international investors. Malaysian furniture industry continues to angle for a bigger slice of the European and U.S. market and our company can get the most benefit out it by taking the timely initiative.

Company Prospects:

Currently our company is the market leader in UK in terms of quality, expertise, technology and wide variety of products through which we have developed strong and well deserved reputation. The company has developed well reputed brands in UK and is capable of moving to international markets for gaining competitive advantages. The research shows that Malaysian furniture industry is largely developed and exploring industry opportunities; company can achieve its objective of becoming the leader of the dining table industry. Our company has an exceptional depth of knowledge and expertise with commitment to provide customers, the best impartial advice and sharing our passion for our products.

7 -REFERENCES

  • Maylor, H. (2003) Project Management, 3rd edition, Pearson Educational Limited, England
  • BS. 6079, Part 3: 2000, Guide to the Management of Business Related Risk Management
  • Svend Hollensen , Global Marketing 4th edition,
  • http://www.mida.gov.my/en_v2/index.php
  • http://images.google.co.uk/imgres?imgurl=http://www.batam-island-info.com/images/Batam-Industrial-Estate-Muka-Kuning.jpg
  • http://www.trademal.com/global/index.php/id/14634/key//Malaysian_Industrial_Estates_Berhad_MIEL/index.html
  • http://www.globalwood.org/market1/aaw20061002.htm
  • http://www.alibaba.com/member/berkatperdana2.html
  • http://www.alibaba.com/countrysearch/MY-suppliers/Mahogany/--1311------------------------.html?noddp=Y
  • http://europa.eu/abc/european_countries/index_en.htm
  • http://europa.eu/abc/european_countries/eu_members/italy/index_en.htm
  • http://europa.eu/abc/european_countries/eu_members/france/index_en.htm
  • https://www.economy.com/home/login/ds_proLogin_4.asp?script_name=/dismal/pro/release.asp&rk=8AA889FC-477D-41E2-900C-5F566DB61EFF
  • http://www.state.gov/r/pa/ei/bgn/4033.htm
  • https://www.economy.com/home/login/ds_proLogin_5.asp?script_name=/dismal/pro/release.asp&r=deu_gdp

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