Harvard Case - Scranton Furniture Co.
"Scranton Furniture Co." Harvard business case study is written by David F. Hawkins, Norman J. Bartczak. It deals with the challenges in the field of Accounting. The case study is 5 page(s) long and it was first published on : Jul 25, 1995
At Fern Fort University, we recommend that Scranton Furniture Co. implement a comprehensive strategic plan focused on improving operational efficiency, enhancing customer experience, and diversifying its revenue streams. This plan should encompass a combination of internal process improvements, targeted investments, and strategic partnerships, ultimately positioning Scranton Furniture Co. for sustainable growth and profitability in the increasingly competitive furniture market.
2. Background
Scranton Furniture Co. is a family-owned business facing significant challenges in the face of growing competition from national retailers and changing consumer preferences. The company's traditional cost accounting system, lack of robust financial reporting, and limited investment in technology are hindering its ability to effectively manage costs, improve efficiency, and adapt to market trends.
The case study highlights the struggles of the company's current management, led by the founder's son, John Scranton, who is facing pressure to improve the company's financial performance and address the concerns of the board of directors.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks, including:
- Porter's Five Forces: Analysis reveals a highly competitive market with strong bargaining power of buyers due to readily available alternatives. The threat of new entrants is moderate, while the threat of substitutes is high due to the availability of cheaper and more readily available furniture options. The bargaining power of suppliers is moderate, with Scranton Furniture Co. having some leverage due to its established relationships with suppliers.
- Value Chain Analysis: Examining the value chain reveals inefficiencies in Scranton Furniture Co.'s operations, particularly in production, inventory management, and marketing. The company's reliance on traditional cost accounting methods hinders its ability to accurately track costs and identify areas for improvement.
- Financial Statement Analysis: The case study provides limited financial data, but it reveals that Scranton Furniture Co. is facing profitability challenges, with declining margins and increasing costs. The company's financial statements lack detailed information on key performance indicators (KPIs), making it difficult to assess its financial health and identify areas for improvement.
- Strategic Analysis: Scranton Furniture Co. lacks a clear and comprehensive strategic plan to address the challenges it faces. The company's focus on its traditional customer base and reluctance to embrace new technologies are hindering its ability to compete effectively in the evolving furniture market.
4. Recommendations
To address the challenges faced by Scranton Furniture Co., we recommend the following:
- Implement Activity-Based Costing (ABC): Transitioning from traditional cost accounting to ABC will provide a more accurate understanding of cost drivers and allow for more efficient resource allocation. This will enable Scranton Furniture Co. to identify areas for cost reduction and improve profitability.
- Enhance Financial Reporting and Analysis: Implement a robust financial reporting system that provides detailed information on key performance indicators (KPIs) such as profitability, customer acquisition cost, inventory turnover, and return on assets. This will enable management to make informed decisions and track progress towards strategic goals.
- Invest in Technology: Upgrade IT systems to improve efficiency in areas such as inventory management, order processing, and customer relationship management. This will streamline operations, reduce costs, and improve customer satisfaction.
- Develop a Comprehensive Strategic Plan: Craft a clear and actionable strategic plan that outlines the company's vision, mission, and objectives. The plan should address market trends, competitive landscape, and customer needs.
- Diversify Revenue Streams: Explore new revenue opportunities through product diversification, expansion into new markets, or strategic partnerships. This will reduce reliance on the traditional customer base and mitigate risks associated with market fluctuations.
- Improve Customer Experience: Implement initiatives to enhance customer experience, such as personalized service, online ordering options, and convenient delivery services. This will attract new customers and foster loyalty among existing ones.
- Focus on Employee Performance Management: Develop a robust employee performance management system that aligns with the company's strategic goals. This will ensure that employees are motivated and equipped to contribute effectively to the company's success.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with Scranton Furniture Co.'s core competencies in furniture manufacturing and its mission to provide quality furniture at competitive prices.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who desire convenient and personalized service, and internal clients, who require accurate information and efficient tools to perform their jobs effectively.
- Competitors: The recommendations consider the competitive landscape and aim to position Scranton Furniture Co. to compete effectively with national retailers and other furniture manufacturers.
- Attractiveness ' Quantitative Measures: The recommendations are expected to improve profitability by reducing costs, enhancing efficiency, and increasing revenue. The implementation of ABC will provide a more accurate assessment of profitability and return on investment (ROI).
- Assumptions: These recommendations are based on the assumption that Scranton Furniture Co. is committed to implementing the necessary changes and investing in the resources required to achieve its strategic goals.
6. Conclusion
By implementing these recommendations, Scranton Furniture Co. can improve its operational efficiency, enhance customer experience, and diversify its revenue streams. This will position the company for sustainable growth and profitability in the competitive furniture market.
7. Discussion
Alternative solutions not selected include:
- Merging with a larger furniture company: This could provide access to resources and economies of scale, but it could also lead to loss of control and identity.
- Liquidating the business: This would be a drastic measure and would result in significant job losses.
Key assumptions include:
- Commitment to change: Management and employees must be committed to implementing the recommended changes.
- Availability of resources: The company must have the financial and human resources to implement the recommendations.
- Market acceptance: The company's new products and services must be accepted by the market.
8. Next Steps
The following steps should be taken to implement the recommendations:
- Develop a detailed implementation plan: This should outline the specific actions, timelines, and resources required for each recommendation.
- Secure board approval: The board of directors must approve the implementation plan and provide the necessary resources.
- Communicate the changes to employees: Employees must be informed about the changes and their role in implementing them.
- Monitor progress and make adjustments: The company must monitor the progress of the implementation and make adjustments as needed.
By taking these steps, Scranton Furniture Co. can successfully navigate the challenges it faces and achieve its strategic goals.
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A supplier questions the credit extended to two customers during a weak sales period.
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