external and internal environment of brothers furniture ltd
DESCRIPTION
PESTEL, SWOT, Porters 5TRANSCRIPT
Case Study Analysis: Brothers Furniture Ltd
Case Study Analysis: Brothers Furniture LtdCase Study Analysis: Brothers Furniture Ltd
Prepared for
Dr. A. K. M. Saiful Majid Professor
Institute of Business Administration (IBA)University of Dhaka
Prepared by
Shabib Raihan 13 48DSadman Prodhan 47 48DSalman Hossain Khan 56 48D
INSTITUE OF BUSINESS ADMINISTRATION (IBA)UNIVERSITY OF DHAKA
March 29, 2014
Letter of Transmittal
March 29, 2014
Dr. A. K. M. Saiful Majid ProfessorInstitute of Business AdministrationUniversity of Dhaka
Dear Sir:
Re: Submission of Assignment on “Case Study Analysis: Brothers Furniture”.
We would like to submit our Assignment as per your specifications. We would also like to mention the fact that we have tried our level best to gather and organize all the information required for this particular paper, and in doing so have tried our maximum to live up to your standards.
We hope that you would be kind enough to accept this paper and appreciate our efforts.
Thank you.
Yours Sincerely,
Shabib Raihan, MBA 48D, Roll 13Sadman Prodhan, MBA 48D, Roll 47 Salman Hossain khan MBA 48D, Roll 56
Contents1.0 Introduction...........................................................................................................................................6
1.1 Background:...........................................................................................................................................6
1.2 Objectives:.............................................................................................................................................6
1.2.1 Broad Objective..................................................................................................................................6
1.2.2 Specific Objective...............................................................................................................................6
1.3 Hypothesis:............................................................................................................................................7
1.4 Rationale:..............................................................................................................................................7
1.5 Scope:....................................................................................................................................................7
1.6 Limitation:.............................................................................................................................................8
2.0 Methodology.........................................................................................................................................9
2.1 Data Collection......................................................................................................................................9
2.2 Methods for Analysis.............................................................................................................................9
2.3 Sample Size............................................................................................................................................9
3.0 Literature Review................................................................................................................................10
4.0 Analysis of Data...................................................................................................................................11
4.1 PESTEL Analysis....................................................................................................................................11
4.1.1 Political Analysis...............................................................................................................................12
4.1.2 Economic Analysis............................................................................................................................12
4.1.3 Social Analysis...................................................................................................................................12
4.1.4 Technological Analysis......................................................................................................................13
4.1.5 Environmental Analysis....................................................................................................................13
4.1.6 Legal Analysis....................................................................................................................................13
4.2 Porter’s 5 Force Model........................................................................................................................14
4.2.1 Bargaining Power of consumer.........................................................................................................15
4.2.2 Bargaining power of Supplier...........................................................................................................15
4.2.3 Threat of New Entrants....................................................................................................................16
4.2.4 Threat of Substitute Products...........................................................................................................16
4.2.5 Intensity of Competition...................................................................................................................17
4.3 SWOT Analysis.....................................................................................................................................17
4.3.1 Strength............................................................................................................................................17
4.3.2 Weakness.........................................................................................................................................18
4.3.3 Opportunity......................................................................................................................................18
4.4.4 Threats..............................................................................................................................................19
5.0 Conclusion...........................................................................................................................................20
6.0 Recommendation................................................................................................................................21
Appendix A: References.............................................................................................................................22
Appendix B: Schema..................................................................................................................................23
Appendix C: Questionnaire........................................................................................................................24
Executive Summery
1.0 Introduction
1.1 Background:Furniture industry in Bangladesh has grown rapidly from traditional cottage based to mechanized mass production oriented industries. It is shifting its focuses from dependency on teak for raw materials to processed wood. Modern machineries, innovative designs and use of diverse materials made the products very attractive locally. Now the leading brands are contributing to the national economy by exporting to international markets.
This paper looks at Brothers Furniture. A name that is synonymous with fine quality Victorian and Modern productions. Their mission statement is: ‘Buying the Future today’. They guarantee very competitive price as well as complete customer satisfaction through quality and workmanship.
This paper will examine the environment in which Brothers Furniture operates using SWOT, PESTEL, Porter’s Five Forces to inspect the attractiveness and competitiveness of the industry. Our research will be conducted in order to indentify the various challenges and obstacles. Conclusions will also be made.
1.2 Objectives:
1.2.1 Broad ObjectiveTo analyze Brothers Furniture in accordance to PESTEL analysis, Porter’s 5 force model and SWOT analysis
1.2.2 Specific Objective To analyze the company politically To analyze the company economically To analyze the company socially To analyze the company technologically To analyze the company environmentally To analyze the company legally To find out the company’s buyer bargaining power
To find out the company’s supplier bargaining power To find out the threat of new entrants To find out the substitutes of their product To find out the competition in furniture industry To find out the strength of the company To find out the weakness of the company To identify the opportunities of the company To identify the threats to the company
1.3 Hypothesis:H1: Furniture industry has got very few big players in the market
H2: Brothers Furniture is not at a very high end position in the market
H3: Brothers Furniture is the market leader of its category (mid level)
H4: Brothers Furniture is at Shakeout position at Industry Life Cycle
1.4 Rationale:Understanding the extension of furniture industry and its benefits would give a broader and clearer perspective to potential investors and existing vendors as well as the customers
New entrants to the furniture industry in Bangladesh will get insight into profitable products and services. They will get an idea of what kind of products has maximum coverage, which products attract maximum customers, what are the factors that motivates customer to purchase, etc.
Brothers Furniture can perceive the extension opportunities in the market. Also, they can assess the customer satisfaction level and needs that exist.
The collected data has scopes for further market research on relevant topics.
1.5 Scope:The scope of the report revolves around the practical and theoretical aspect. Practical
experience and data collection from different sources will be considered in this process and
analysing this data the report will be furnished. The report will also cover information from
some books, magazines, articles and various websites of different furniture companies of the
country and incorporation of this ideas/knowledge in the report will be introduced as well. The
report will cover following broad areas:
Current Scenario of furniture industry in Bangladesh
Market position of Brothers Furniture
Macro-environment Analysis (PESTEL)
Micro-environment Analysis (SWOT, Porter’s Five Forces model)
Future prospects of Brothers furniture
1.6 Limitation:Following could be considered as the limitations of the study:
Focus of the analysis could be considered a bit narrow; as we are considering
Brothers furniture only and the exploratory measures will be taken based only on
availability.
No scope for cross-cultural & cross-border comparison
Number of analytic articles available on respective topic is very low in number
Duration of the study, if a bit longer, could have covered more on the topic
2.0 Methodology
2.1 Data CollectionIn order to attain the aim of this assignment, the research work will be based on qualitative
interpretation based on quantitative analysis. For this purpose, data will be collected from both
Primary & Secondary sources.
Primary Sources: Talking directly to Brothers Furniture & Other affiliates’ company personnel;
Undertake questionnaire based survey from both consumers & traders (based on necessity).
From the points taken from Brothers Furniture Ltd personnel we developed a survey
questionnaire and took the response of 25 users. For the questionnaire the option in the
answers are provided by company personnel.
Secondary Sources: Accumulating information from online publications, research articles,
business almanacs (if available) etc.
2.2 Methods for AnalysisMicro-environment analysis (internal environment) will be performed through SWOT and
Porter’s Five Forces model analysis. This will give insight into the internal mechanism and stakes
of the respective company.
Macro analysis (external environment) will be performed through PESTEL analysis method. This
will shed light on the position of the firm in comparison to the industry scenario. It will depict
the stability of the firm with comparison to market competitions.
2.3 Sample SizeWe randomly took 25 users who used products of Brothers Furniture Ltd at least once in his
lifetime.
3.0 Literature Review
Various kinds of researches have been conducted over the years on furniture industry. Many of
those reports covered issues such as brief description of the furniture industry, prospects and
challenges of that particular business in both global and local perspective. Leading international
furniture retailers brand IKEA’s SWOT, PESTEL and Porter’s Five Forces model analysis gives us a
global perspective that will aide in analyzing Brothers Furniture Ltd.
A big prospect for Brothers Furniture Ltd. is e-shopping. Their website has ecommerce
functionalities with shopping cart facilities. Local and global e-shopping models will be assessed
and compared in our analysis.
4.0 Analysis of Data
4.1 PESTEL AnalysisA PESTEL analysis is a framework or tool used by marketers to analyze and monitor the macro-environmental (external marketing environment) factors that have an impact on an organization.
PESTEL stands for:
P – Political E – Economic S – Social T – Technological E – Environmental L – Legal
Figure 1
PESTEL Analysis for Brothers Furniture Ltd is given below.
4.1.1 Political AnalysisSection A: Question 1 of the survey represents the political issue for Brothers Furniture Ltd. The question was open ended and from the question the issues came up like-
Political stability Export-Import policy Tax and Tariff policy Trade restriction Labor laws and labor unrest
4.1.2 Economic AnalysisSection A: Question 2 of the survey represents the political issue for Brothers Furniture Ltd. Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The question was open ended and from the question the issues came up like-
Economic growth Interest rates Exchange rates Rate of inflation Per capita income Labor cost Market/Industry trends
4.1.3 Social AnalysisSocial factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Section A: Question 3 of the survey represents the social issue for Brothers Furniture Ltd. The question was open ended and from the question the issues came up like-
Income level Social status
occupation Age Family size Cultural factors Fashion trends
4.1.4 Technological AnalysisTechnological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Section A: Question 4 of the survey represents the technical issue for Brothers Furniture Ltd. The question was open ended and from the question the issues came up like-
Automation Social Media (Facebook, Twitter etc) Technology incentives Website Supply chain management Ease of accessibility, information and communication
4.1.5 Environmental AnalysisSection A: Question 5 of the survey represents the environmental issue for Brothers Furniture Ltd. The question was open ended and from the question the issues came up like-
Protection of nature Business Ethics Corporate Social Responsibility Ethical business operation
4.1.6 Legal AnalysisSection A: Question 6 of the survey represents the legal issue for Brothers Furniture Ltd. The question was open ended and from the question the issues came up like-
Consumer rights and laws
Employee protection Health and safety of labor Consumer rights and laws Advertising standards
4.2 Porter’s 5 Force ModelPorter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability.
The 5 forces of the model are-
Bargaining Power of consumer Bargaining power of supplier Threat of New Entrants Threat of substitute product Intensity of competition
Figure 2
4.2.1 Bargaining Power of consumer
This force is strengthening by factors such as intense competition, and wide choice of substitute
products. For Brothers Furniture Ltd this force is quite strong as there are companies like
Akhter Furniture, Hatil Furniture with whom Brothers is at intense competition. Also there are
substitute products like Partex, Stainless steel products, Cast Iron products, Rot iron products
etc.
Section B: Question 1 represents the Buyers bargaining power. The result of the survey is
illustrated by graphical representation.
Very High (3 of 25)
High (11 of 25)
Neutral (7 of 25)
Low (3 of 25)
Very Low (1 of 25)
4.2.2 Bargaining power of Supplier
The supply of Brothers Furniture Ltd usually comes from local suppliers and imported from
china mainly. The raw materials used in production are vinyl boards, frames, Oak wood, gums,
screws, nails etc. The basic material is wood which comes from nature, is limited. As a result it is
very important to maintain a good relation with wood supplier to maximize profit. Brothers
Furniture Ltd values to create the strategic relationships with suppliers, to empower its
suppliers in certain extent so they don’t switch to their other competitors. On the other hand
imported supplies do not require extra care as there is enough number of suppliers in china.
So it can be said that Suppliers bargain power is quite moderate or at the higher end slightly.
Section B: Question 2 represents the Suppliers bargaining power.
Very High (1 of 25)
High (6 of 25)
Neutral (12 of 25)
Low (6 of 25)
Very Low (0 of 25)
4.2.3 Threat of New Entrants
Section B: Question 3 represents the Threat of New Entrants. This force is considered weak and
the probability of development of new competition for the furniture retailer is insubstantial,
due to market saturation, high amount of capital investment, and skilled labor are required to
become a powerful Brand in furniture manufacturing sector. Other factors such as suffering of
pricy-labeled household items and furniture considered as a low spending priority due to
recessed economies, recent unstable political situation.
Very High (1 of 25)
High (3 of 25)
Neutral (10 of 25)
Low (7 of 25)
Very Low (4 of 25)
4.2.4 Threat of Substitute Products
As mentioned above, threat of substitutes is quite high force here. Brothers Furniture Ltd
specializes in manufacturing functional, moderate-cost, good-quality furniture. But there is
some substitution for wooden products are emerging as wood has a limited source and
deforestation has negative impact on nature. Partex group works with particle boards which are
made from industrial waste, sawdust and other particles. Local furniture manufacturer are using
Stainless steel, Rot iron, Cast iron etc. So it appears that this force is quite high for Brothers
Furniture Ltd. Section B: Question 4 represents the Threat of Substitute product.
Very High (4 of 25)
High (7 of 25)
Neutral (9 of 25)
Low (4 of 25)
Very Low (1 of 25)
4.2.5 Intensity of Competition
Brothers Furniture Ltd operates in an extremely competitive industry, defined by many other
good quality furniture manufacturers namely Hatil Furniture, Akhter Furniture, Navana
Furniture, Otobi, Hi-fashion Gallery etc. Some of them are for higher end customer with
premium pricing and others are at fierce competition with each other. Brothers Furniture Ltd
faces intense competition from Akhter, Hatil, Otobi etc. But the competition is quite stable
because every manufacturer have been successful in retaining their market share for a long
period of time and it is observed that furniture buyers are loyal to the brands. Section B:
Question 4 represents the Intensity of competition
Very High (2 of 25)
High (6 of 25)
Neutral (12 of 25)
Low (4 of 25)
Very Low (1 of 25)
4.3 SWOT Analysis
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate
the strengths, weaknesses, opportunities, and threats involved in a project or in a business
venture. A SWOT analysis can be carried out for a product, place, industry or person. It
involves specifying the objective of the business venture or project and identifying the internal
and external factors that are favorable and unfavorable to achieving that objective.
4.3.1 Strength
A firm’s strengths are its resources and capabilities that can be used as a basis for developing a
competitive advantage. Brothers Furniture Ltd’s Strengths were searched in Section 3:
Question 1 of the survey through open ended question. The strengths are-
Strong brand name
Unique Design
Good reputation among customer
Automation in production
Software based central inventory
Imported raw materials from China
Customer database maintenance
Wide customer base
4.3.2 Weakness
The absence of certain strengths may be viewed as a weakness. Section 3: Question 2 of the
survey represents the weakness of Brother Furniture Ltd. They are-
Lack of patent protection: anyone can copy the product
Absence of high end product
Not advertised at larger scale
Poor website quality
4.3.3 Opportunity
The external environmental analysis may reveal certain new opportunities for profit and
growth. Opportunities also arise from factors influencing consumer purchase decisions such as
desire of quality, special discounts and offers, and excellent and competitive customer service.
Section 3: Question 3 describes the opportunities.
Demand for Eco friendly product
Zero wastage target for cost minimization
Integrated marketing communication
Niche for higher end products
Opportunity to go global (Export)
4.4.4 Threats
Social trends showing lowered entrance of first-time buyers into the housing market
affect furniture sale. Increasing competition and lowered disposable income are
factors that motivate buyers to purchase low price furniture, even at the cost of
compromising quality. Threats such as these, demands the furniture manufacturer to
reform its value chain, and optimize innovative technology in order to provide good
quality at lowered prices. Section 3: Question 4 provides a good insight on the threats
for Brothers Furniture Ltd.
Shifts in consumer tastes away from the firm’s products Emergence of substitute products New regulations Increased trade barriers
5.0 Conclusion
6.0 Recommendation
Appendix A: References
Appendix B: Schema
Parameter
Complex Variable
Simple Variable Value
PESTEL political Analyze the company position politicallyAnalysis Economic Analyze the company position economically Social Analyze the social position of the company
Technological Analyze the company position technologically Environmental Analyze the environmental position of the
companyMarket Legal Analyze the legal position of the companyAnalysis Porter’s 5 Buyer Bargain
powerBargaining power of customers
Force model Supplier Bargain power
Bargaining power of the suppliers
Threat of new entrants
Threats of new company entering the market
Substitute product Availability of substitute product for customers Competition Competition between different companies SWOT Strength Strength of the company Analysis Weakness Weakness of the company Opportunity Opportunities for the company Threats Threats to the company
Appendix C: Questionnaire
Case Study Analysis: Brothers Furniture LtdCase Study Analysis: Brothers Furniture Ltd
Questionnaire
Respondent’s Name:Address:Contact no.: e-mail: Date: ___/___/____ Time:
dd mmyyyy
Request for Cooperation
We, the MBA students of IBA, are conducting a Case Study Analysis: Brothers Furniture Ltd. Please, spend a little time to fill out this questionnaire. Your feedback is valuable for our research work. We would like to assure you of confidentiality since the data collected is strictly and exclusively for academic use. Thank you in advance for your precious time.We really appreciate your cooperation.
A. Please answer the following questions (open ended)
1. What are the political issues faced by Brothers Furniture Ltd?[______________________]
2. What are the economic issues faced by Brothers Furniture Ltd?[______________________]
3. What are the social issues faced by Brothers Furniture Ltd?[______________________]
4. What are the Technical issues faced by Brothers Furniture Ltd?[______________________]
5. What are the environmental issues faced by Brothers Furniture Ltd?[______________________]
6. What are the legal issues faced by Brothers Furniture Ltd?[______________________]
B. Please tick the right choice for your overall view on Brothers Furniture Ltd
Questions Ver
y H
igh
Hig
h
Neu
tral
Low
Ver
y L
ow
1. Bargaining power of customers is
2. Bargaining power of the suppliers is
3. Threats of new company entering the market is
4. Availability of substitute product for customers is
5. Competition between different companies is
C. Please answer the following questions (open ended)
1. Strengths of Brothers Furniture Ltd?[______________________]
2. Weakness of Brothers Furniture Ltd?[______________________]
3. Opportunities for Brothers Furniture Ltd?[______________________]
4. Threats faced by Brothers Furniture Ltd?[______________________]
D. Please tick the following questions
1. Your Ageo 18-28 yearso 29-38 yearso 39-48 yearso 49-58 yearso 59 years or more
2. Your locationo Gulshano Bananio Uttarao Dhanmondio Farmgateo Baridharao Khilgaono Jatrabario Mohammadpuro Mogbazaro Other [__________________]
3. Your occupationo Private Serviceo Businesso Government Officialo Not on a job right now
4. Your monthly incomeo Below 20000 BDTo 20000-30000 BDTo 30000- 40000 BDTo 40000-50000 BDTo More than 50000 BDT
Thank You!