Harvard Case - Smaart Home Furniture: Adding Value by Adding Services
"Smaart Home Furniture: Adding Value by Adding Services" Harvard business case study is written by Vidya Suresh, M. Selvalakshmi. It deals with the challenges in the field of Strategy. The case study is 8 page(s) long and it was first published on : Sep 6, 2019
At Fern Fort University, we recommend Smaart Home Furniture (SHF) pursue a strategic expansion into the value-added services market, leveraging their core competencies in design, manufacturing, and customer service to create a unique and differentiated customer experience. This recommendation is based on a thorough analysis of SHF's current market position, competitive landscape, and growth potential within the evolving home furniture industry.
2. Background
Smaart Home Furniture is a leading manufacturer and retailer of high-quality, customizable home furniture. The company faces increasing competition from both traditional and online retailers, driven by globalization and digital transformation. SHF recognizes the need to differentiate itself and create a sustainable competitive advantage to ensure long-term growth and profitability.
The case study focuses on SHF's exploration of expanding into value-added services, such as interior design consultation, installation, and post-sale maintenance. This strategy aims to address the evolving consumer needs for a holistic and personalized home furnishing experience.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces: The home furniture industry exhibits moderate competitive rivalry, with increasing online competition from global players. The threat of new entrants is moderate, while the threat of substitutes is high due to the availability of alternative home d'cor solutions. Supplier power is moderate, while buyer power is high due to the availability of numerous options.
- Industry Lifecycle: The home furniture industry is in a mature stage, with increasing demand for customization and personalization. This presents an opportunity for SHF to differentiate itself through value-added services.
- SWOT Analysis: SHF possesses strong brand recognition, manufacturing capabilities, and customer service expertise as key strengths. However, they face challenges from rising competition, evolving consumer preferences, and potential cost increases.
Internal Analysis:
- Value Chain: SHF's value chain consists of design, manufacturing, distribution, retail, and customer service. The company has a strong foundation in design and manufacturing, but needs to enhance its service offerings to create a more integrated customer experience.
- Core Competencies: SHF's core competencies lie in product design, manufacturing expertise, and customer service. These strengths can be leveraged to develop and deliver value-added services effectively.
- Resource-Based View: SHF possesses valuable resources, including its brand, customer base, and skilled workforce. These resources can be leveraged to create a sustainable competitive advantage through the development of unique service offerings.
External Analysis:
- PESTEL Analysis: The home furniture industry is influenced by political stability, economic growth, social trends, technological advancements, environmental concerns, and legal regulations. SHF needs to adapt its strategy to these external factors to ensure long-term success.
- Competitive Analysis: SHF faces competition from traditional retailers, online retailers, and niche players offering specialized services. The company needs to differentiate itself by offering a unique combination of products and services that meet evolving consumer needs.
- Market Segmentation: The home furniture market can be segmented based on demographics, lifestyle, and price sensitivity. SHF can target specific segments with tailored service offerings to maximize its reach and impact.
Strategic Options:
- Blue Ocean Strategy: SHF can create a new market space by offering a unique combination of products and services that are not currently available in the market. This could involve developing innovative service offerings, such as virtual design consultations, home staging services, or furniture rental options.
- Disruptive Innovation: SHF can disrupt the existing market by offering affordable and accessible value-added services to a broader customer base. This could involve partnering with online platforms or developing mobile applications to provide convenient access to services.
- Vertical Integration: SHF can expand its value chain by acquiring or developing complementary businesses that enhance its service offerings. This could involve acquiring interior design firms, installation companies, or furniture maintenance services.
- Strategic Alliances: SHF can partner with other businesses to offer complementary services and reach a wider customer base. This could involve collaborating with home d'cor retailers, technology companies, or financial institutions.
4. Recommendations
SHF should implement a phased approach to expanding into the value-added services market:
Phase 1: Pilot Program (6-12 months):
- Select a pilot market: Identify a specific geographic area or customer segment to test the new service offerings.
- Develop a limited range of services: Focus on a few core services, such as interior design consultation, installation, and basic maintenance.
- Partner with external providers: Collaborate with existing service providers to gain expertise and minimize initial investment.
- Gather customer feedback: Collect data on customer satisfaction, service quality, and pricing to refine the service offerings.
Phase 2: Expansion and Integration (12-24 months):
- Expand service offerings: Introduce new services based on customer feedback and market demand.
- Develop internal expertise: Invest in training and development for employees to enhance their service capabilities.
- Integrate services into the existing business: Create a seamless customer experience by integrating service offerings into the sales process and online platforms.
- Monitor performance and adjust strategy: Continuously track key performance indicators (KPIs) and make necessary adjustments to optimize service delivery and profitability.
Phase 3: Growth and Innovation (24+ months):
- Expand into new markets: Target new geographic areas and customer segments with tailored service offerings.
- Develop innovative services: Explore new technologies and trends to create unique and differentiated service experiences.
- Build a strong brand reputation: Focus on delivering exceptional customer service and building a positive brand image.
- Invest in technology and analytics: Leverage data and analytics to optimize service delivery, personalize customer experiences, and improve operational efficiency.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The proposed expansion aligns with SHF's core competencies in design, manufacturing, and customer service. It also supports the company's mission to provide high-quality home furnishings and exceptional customer experiences.
- External customers and internal clients: The value-added services address the evolving needs of customers seeking a more holistic and personalized home furnishing experience. It also provides opportunities for employees to develop new skills and contribute to the company's growth.
- Competitors: The proposed strategy helps SHF differentiate itself from competitors by offering a unique combination of products and services. It also creates a barrier to entry for new competitors by leveraging SHF's existing resources and expertise.
- Attractiveness ' quantitative measures: The potential for increased revenue, improved customer loyalty, and enhanced brand value makes the proposed expansion attractive. The financial feasibility of the project can be assessed through detailed financial modeling and market research.
6. Conclusion
By expanding into the value-added services market, SHF can create a sustainable competitive advantage and achieve long-term growth and profitability. The company's core competencies, strong brand, and customer base provide a solid foundation for success. By implementing a phased approach, SHF can minimize risk and maximize the potential for success.
7. Discussion
Alternatives not selected:
- Mergers and Acquisitions: While acquisitions could provide immediate access to new services and expertise, they also carry significant risks and financial implications.
- Outsourcing: Outsourcing certain services could be cost-effective, but it may compromise quality and control over the customer experience.
Risks and key assumptions:
- Market demand: The success of the expansion depends on the demand for value-added services in the target market.
- Competition: The presence of existing competitors offering similar services could limit the market share and profitability of SHF's offerings.
- Cost of implementation: The initial investment in developing and launching new services could be significant.
- Employee training and development: Investing in employee training to enhance service capabilities is crucial for successful implementation.
8. Next Steps
- Conduct a feasibility study: Assess the market demand, competition, and financial viability of the proposed expansion.
- Develop a detailed business plan: Outline the specific services, target markets, marketing strategies, and financial projections for the expansion.
- Secure funding: Obtain the necessary financial resources to support the development and implementation of the new services.
- Recruit and train employees: Hire and train employees with the necessary skills and experience to deliver the value-added services.
- Launch the pilot program: Implement the pilot program in the selected market and gather customer feedback.
- Monitor performance and adjust strategy: Continuously track KPIs and make necessary adjustments to optimize service delivery and profitability.
By taking these steps, SHF can effectively implement its expansion into the value-added services market and achieve its strategic goals.
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Case Description
In 2016, the founder and managing director of Smaart Home Furniture, a furniture manufacturer in southern India, faced a dilemma. Although the business remained profitable, it was facing stiff competition from local players, branded and non-branded players, and online retail stores. The founder and managing director was considering extending his manufacturing business by also offering sofa servicing, which would require changes in the company's production, organization, and management. It would also require a rethinking of the firm's approach and interaction with its consumers. Should he start offering services? If so, should sofa servicing be launched as a separate entity or as part of the offerings of the existing manufacturing unit?
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