The best alternative
Rajeev Singh faced three different options: store network expansion, indirect and direct global outsourcing or vertical integration. Each of the options had its advantages and disadvantages, but based on the past history, it is possible to forecast the most efficient decision.
His choice of vertical integration that involved shifting to the manufacture of domestic furniture for its own retail sale was certainly his immediate best alternative. The other two options may not have worked out right for varied reasons.
For instance, had he opted for store network expansion, he would only have been trying to re-do a similar venture while leaving his successful chance to fate. He initially founded four branches in different locations; among which, only the Toronto branch seemed to make sufficient amounts of returns to meet the day-to-day costs.
This meant that expansion in an area outside Toronto would prove to be just as futile. Since he did not identify any particular location that would have been fully tested on sales performance, the probability of failure was more than half.
Secondly, the expansion space that results from store network expansion may allow greater inventory capacity but cannot guarantee sales. Formation of CFM resulted from a similar initiative, which is buying in the very large quantities, which appeared to be only disappointing. Though expansion opens into a different form of advertising, none of the competing firms tried the method, thus its success is based on sheer lack.
In addition, the present market presents problems of securing the best sales personnel. Such a market demands products that are self selling and with little competition. However, the furniture market occupied by CFM has many competitors with similar products, some even cheaper. Therefore, increasing inventory of the same product without unique salesmanship may not serve as the best alternative for Singh.
Increasing direct and indirect global sourcing also offers a temporary solution to the product quality and uniqueness issue in the store expansion alternative. This choice will increase the profit margin in the long run while ensuring the customers receive exactly those products which they choose.
Moreover, the reduced costs would allow the company to sell the products better than their competitors would do at cheap and affordable prices. This would help beat the competition.
However, the alternative also has its negative perspectives. It requires significant financial commitment which is not presently available due to the previous business failures. The estimated cash required is $150,000 will result in the monthly warehousing expenses which will be $10000.
Moreover, wrong product-selection may result in a similar case as that with the Chinese customer. This can cause huge losses that the company may not be in a position to recuperate. This coupled with the huge cash demands and a looming sales problem that can also arise makes the alternative rather risky.
Finally, there is the Vertical integration option. This entailed manufacturing various domestic purchase commodities for its sale. Unlike the other two alternatives, Singh has not tried this option before. However, since all the other alternatives had been partially tested and failed in a result, the best choice is to try a new one. Vertical integration had numerous advantages.
First, he would depend on his father’s wealth of experience in the manufacture of similar products to make the appropriate choices. Secondly, the method would give customers the option of specifying product designs thus differentiating their product from that of the competitors.
The alternative would also cut down on costs and delivery time taken. However, the alternative has its disadvantages. The sales are not guaranteed though the company has the option of selling to other retailers. Staffing may also present a challenge in the future. Despite this, the option is still the best alternative, among the three alternatives (Tiffany & Peterson, 2011).
Singh’s future
Despite the turn in the events’ flow, the manufacturing opportunity is still a viable option. Only the occurrences in the few past months presented a challenge. Presently, Singh’s problems are the inability to satisfy the market with the correct design of products, and the lack of sufficient capital to sustain the inventory as well as the lawsuit over one of his branches.
By closing the Pickering location, Singh can secure the inventory required to supply the retail company for a particular period (Jennings, 2010). The funds used in the lawsuit could be transferred to the manufacturing business as salary for a knowledgeable and experienced employee who can aid in the development of the complex designs of the domestic products (Gambles, 2009).
In the short run, the company can hire employees based on a basic salary and commission basic on the work production. Though in the initial stages, the company can incur losses, the proceeds form the manufactured products will cover these expenses in the long-run. Hiring an employee with the expertise is a benefit for the company as it ensures that it will succeed in competition since it can supply its retail branch.
The remuneration method adopted ensures the company does not lose its best staff in case of low sales. Any additional proceeds should then be used in opening up other retail joints in potential business locations. Moreover, the two earlier alternatives can then be brought on board for profit maximization (Zeff, 2007).
References
Gambles, I. (2009).Making the Business Case: Proposals That Succeed For Projects That Work: New York,NY: Ashgate.
Jennings, M. M. (2010). Business: Its Legal, Ethical, and Global Environment: Chicago: Cengage Learning.
Tiffany, P., & Peterson, S. D. (2011). Business Plans For Dummies. New York,NY: John Wiley & Sons.
Zeff, J. (2007). Make the Right Choice: Creating a Positive, Innovative and Productive Work Life. New York,NY : John Wiley & Sons.