Meubles Canadal: Looking Towards the Future Essay

Introduction Meubles Canadel is Canada’s leading manufacturing firm in producing high quality furniture for dining purposes and was established in 1982 by three brothers in Louisville, a small town in the province of Quebec in Canada. It is a privately own company and established itself from a small to a large international operating company with still increasing sales around $125 million in 2000. Between 1987 and 1991 Canadel grew rapidly. This was due to the fact that the firm focused on demographic changes. The families’ size decreased in this time and shifted the demand from the â€Å"lunch-corner† and formal dining room segment to dining room furniture to everyday use. Canadel took advantage of this change and started to produce high quality dining furniture. With continued increasing sales, the firm expanded to the U.S market and additionally serves now the eastern part of the U.S with its products. Looking at Canadel in 2000, the firm owns 50% of the dining room market although prices are generally higher than competitor’s prices. At this point in time, the company’s sales were mostly coming from the U.S (75%), 20% from the Canadian market and five percent from Europe and Japan. Further, Canadel’s staff represented 1,550 people of which 800 are directly employed. In the following a case analysis of Canadel will be conducted. The first part represents the external environmental analysis whereas the second part focuses on the internal factors influencing the firm. Ultimately a conclusion will be drawn. External environmental analysis An external environmental analysis contains a macroeconomic and a microeconomic view on firm’s influencing factors. On the macroeconomic level one could ask a general question for example which environmental factors do affect the firm and its strategic management. It is necessary for Canadel to maintain a coherent strategy that fit in its environment in order to reinforce its distinctive competencies and establish sustainability in creating value to its stakeholders. In order to answer this question a PESTEL analysis will be conducted, where the macroeconomic view is studied. PESTEL stands for political, economic, sociocultural, technical, environmental and legal factors, which affect the firm and its strategy. Regarding political factors, the Canadian furniture industry was massively influenced after the introduction of the Free Trade Agreement (FTA) between the United States and Canada in 1989. Trades between both countries have become easier due to the elimination of tariff s and in addition competition increased. However, Canadel was not operating internationally in this time therefore, only the increase in competition could have influenced the firm. The next factor, which influences Canadel, is the economic impact. Exchange rate fluctuations between the U.S. and the Canadian dollar can affect the export to the United States, which can cause both losses and profits for Canadel. At the moment the firm has an advantage because the Canadian dollar has a strong position compared to the U.S. dollar. However, this used to be different and therefore it is important for the three Deveault brothers to take this factor into consideration in order to avoid losses. Another point is the huge unemployment rate that is mentioned. The Deveault brothers feel that they have an obligation to stay in Quebec in order to support their hometown and province, which would not be ensured if they would look for other suppliers in different regions. This decision influences the firm’s management strategy. On the one hand it could mean that Canadel does not take the opportunity to look for other suppliers in different regions who might be cheaper and therefore would enable the firm to benefit in costs savings. On the other hand it improves the relationship to its suppliers and increases loyalty on both sides, which can be more valuable than any cost saving strategy. The next external factor is the sociocultural development over time. As already mention, Canadel is a local company carrying about its employees and suppliers. This clearly influences its strategic operational decision as above discussed. Moreover, the company took advantage of the demographic changes in lifestyle and family size. It began to produce smaller exclusive tables and profited from the decrease in family size. Further, Canadel has a very unique attitude towards work, hiring policy and leisure. It is mentioned that the Deveaults try to maintain a small power distance between their employees and the management level. The company does not have a hierarchal structure and stands for an open-door policy where employees any time have the possibility to see the mangers and talk to them. Meetings held within the management level or with suppliers are classified as very informal without a secretary taking notes. These characteristics affect Canadel’s business decision like staying in the region of Quebec to conduct its business in favour of the local population. Another economic factor is the technological change in the last couple of years. It is obvious that machinery improved and facilitated the manufacturing process of wood. However, one has to remember that the company emphasises the production of unique hand made dining tables. This could lead to the conclusion that the technological improvement did simplify the manufacturing process however, not in the major way. This is solely due to the fact that the production of exclusive dining table is very labour intensive. The last two macro-economic influences environmental and legal impacts are not sufficiently addressed in the case and will be left out in this analysis. On the microeconomic level the model of Porter’s five forces will be used to detect competitive forces that affect the firm’s business decisions. First, the entry barriers are described as very low, which increases the risk of potential new competitors for Canadel. This might give reason to establish the firm as a market leader in the industry in order to threaten potential new competitors. This could be important due to some potential competition from the Asian markets. However, this does not necessarily mean loosing all of the firm’s customers if competition increases because Canadel produces a very specialised product, which cannot be easily copied. Nevertheless, it can complicate Canadel’s business strategy and force them to decrease costs in order to possibly decrease its very high prices for dining furniture. Another fact is that Canadel has a very good relationship to its suppliers and staff, which enables the firm to profit from this loyalty if competition increases. Summarising, it can be said that overall competition is low in this industry. The threat of substitutes can be described as relatively low because people who can afford to pay around $7,000 for a dining table would probably not purchase furniture at firms like IKEA. Moreover, Canadel’s products seem to be very unique and therefore hard to find anywhere else. Analysing the bargaining power of suppliers it can be said that the firm operates with many smaller suppliers in the region of Quebec. Thus, a low bargaining power is identified. Compared to that the bargaining power of customers is characterised as significantly stronger because Canadel produces very unique products, which addresses a specified branch of customers. This could lead to problems if sales decreases and might cause the company into trouble and force them to adjust for this changes. Internal environmental analysis The next part describes the internal factors which influences the firm’s operating strategy. This can be established by a SWOT analysis to detect the firm’s strengths, weaknesses, opportunities and threats. One of the most important strengths Canadel can present is the large subcontractor network, which it can rely on. Long-time relationships are important for the firm, as it knows most of its stakeholders from the very beginning. Therefore, controversies and conflicts are probably less frequent and decrease the fear of shortages in resources used for the production process. Further, Canadel has a well developed retail network, which shortens its delivery time compared to its competition. A next strength is the uniqueness of its products and its high quality, which is very much appreciated by the consumers. The high price of Canadel’s products can be identified as a weakness and might decrease its potential number of customers. Maybe it might be valuable to think about an additional production line that is cheaper and hence affordable to more people. A further weakness is the just-in-time (JIT) inventory system that could easily cause shortages although the firm accounted some time lack due to human errors. That JIT inventory system can be of course also identified as a firm’s strength. Canadel’s opportunities are already recognised by the expansion in the U.S. market, which could also be extended to the western part of the U.S. The already mentioned cheaper product line could be an opportunity to attract more consumers and to increase sales or to broaden the firm’s product segment. Major threats of the company are the Asian manufactures, which are likely to produce cheaper products and therefore might capture some of Canadel’s sales. Moreover, it can be said that Canadel has a major competitive advantage in producing high quality and unique dining furniture. It has the capabilities and resources, which is supported by the geographical location. A strong value chain can be identified with a good stakeholder network and a good infrastructure. These factors facilitate the firm’s operating position by focusing on the resources, capabilities and resources of Canadel. Conclusion In conclusion it can be said that Canadel managed to establish itself with a strong position in the fast growing dining room market. It has many opportunities to improve this position and expand its business by increasing its product line and thus attract more consumers. Further, it needs to pay attention to possible new competitors entering the market. Therefore, the philosophy to â€Å"grow when its time to grow† should not be taken too seriously because this might cause trouble to Canadel. It has to adjust to demographic and environmental changes. However, it should maintain its unique business culture and operation strategy. References Johnson G., Whittington R., Scholes K. (2008). Exploring Corporate Strategy (9th edition). Harlow UK: Pearson Education. Mark K., Hebert L., Crossan M,. (2001). Meubles Canadel: Looking towards the future. Richard Ivey School of Business, University of Western Ontario.