Business Level Strategies of Ashley Furniture

Introduction of Ashley Furniture

Ashley Furniture industries, Inc., founded by Carlyle Weinberger in Chicago in 1945 just as a sales operation, is a furniture manufacturing and distributing company, which headquartered in Arcadia, Wisconsin. Now the father and son team Ron and Todd Wanek own the company.

Like many other furniture companies, Ashley Furniture Industries sells its products, such as home furnishing, accessories through two main distributions: one is independent channels; another is more than 400 Ashley Furniture Homestore retail furniture stores. All the stores are either owned by the company or licensed to other businessmen in North America countries, such as USA, Canada, Mexico, Central America and Japan.

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The mission to become the BEST Furniture Company reflects its proud past and shows the desire about future. And with over 60 years of innovation, creation and experience in the furniture industry, the company already became the leader in the industry which focuses on the quality of its furniture products. At present, the company has manufacture plants across the United States and Pacific Rim Countries, mainly in China.

Business Level Strategies of Ashley Furniture

One model can be used to give a full explanation of what happens in the real world at the level of the Strategic Business Unit and it can help identify those strategies which can be utilized to prevent the failure of business. The successful strategies can be illustrated as following levels: Low price/ low added value, Low price, Hybrid, differentiation without price premium and Focused differentiation.

• Low price/ low added value: providing lower price than it can be found elsewhere.
• Low price: based on a high volume with low margin product to bring cost leadership as its competitive advantage.
• Hybrid: Compete on price and seek to keep the margin by controlling the cost of products.
• Differentiation without price premium: Competition is principally on perceived benefits but not on price.
• Focused differentiation: Using unique qualities without substitution to get premium.

The Strategic Business Unit chose for this research is the living room division of Ashley Furniture. According to what one of the Ashley Furniture Industries sales managers called Al Lopriore said, the business model of Ashley Furniture is different from other competitors, by establishing for over 65 years, the main business model of Ashley Furniture is the company design, build and deliver its own furniture, and the company is in control of all aspects to make sure the good quality.

From the website of Ashley Furniture Industries, it can be seen from the homepage that the four cornerstones of its business models are quality, style, selection, service. They are all the foundations for Ashley Furniture making every decision and the guidelines and principles to help the company achieve the mission statement of being the best furniture company.

Therefore, the main business model of Ashley living room furniture used to get competitive advantage is using Hybrid, which means by the methods such as outsourcing a series of its products from Pacific Rim countries to cut the cost of furniture and adding value to the products by quality, style, selection and service.

Strengths and Weaknesses of Business Strategies

The main strategy of Ashley living room furniture is Hybrid, which means that the division wants to compete other competitors on price and as well to control the cost of furniture to maintain the gross margin of the company. There are a series of advantages and strengths as follows:

Strengths:

Good price to attract customers: After the recession of economy crisis in 2008, the price of goods, especially furniture, become the main competitive advantage to attract customers to consume products on company. As the main reason that led to the economy crisis is the subprime lending which is related to the housing industry; and makes a drop in the sales of houses in North America, mainly in US. Although the recession had a negative impact on Ashley living room furniture, good price of its products keeps attracting the customers to purchase Ashley living room furniture.

Variety of products: this means that based on variety of products, Ashley living room furniture is able to survive during the crisis. Even one product fails in the market, there are still other products succeed in the market to make up the loss that cost by the failure of that product. Besides, different kinds of products make those brand loyalty customers to purchase more and also increase the image of the brand. This helps the company achieve the mission of becoming the best furniture company in North America and even all over the world.

Maintain the gross margin: Obviously, this technique assist the company to maintain the gross margin by controlling the cost of furniture. By using Hybrid strategy, the division still possesses the ability to control the cost of products. On the other hand, by adding more value through design, build and deliver the furniture to the customers, the products of Ashley living room furniture are still attractive.

Weaknesses:

Inevitably, there are some negative impacts by using this kind of business level of strategy, which can be identified as weaknesses. And the weaknesses of using Hybrid strategy are presented as follows:

More funds spent on implementing the strategy: In order to supply and offer more furniture products to the customers, more funds will be spent on Research and Development, Design to find more solutions offered to the customers. Besides, the division possesses its own stores which cost much of its capital on investing in purchasing fixed assets, which may become a potential problem to the cash flow of the company.

Competition of the similar products in the company: It can be seen from its website that the division provides more than 100 furniture products to customers to find out the most suitable furniture for their living rooms. Therefore, this results in the competition among the products within the same category. Although from some perspective, this attracts customers to purchase in Ashley living room furniture, it increases the competition in the products of the company, which can not be ignored.

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Lack of quality: It can be known that the products of Ashley living room furniture rely on quality and the mission of becoming the best furniture company in North America and even all over the world rely on quality; meanwhile, the business model of Ashley living room furniture depends on the quality of products. If the company concentrates on controlling the cost, such as the outsourcing price offered to those manufacturing companies in Pacific Rim countries, which may affect the quality of products of Ashley living room furniture. Then it will affect the paradigm of the division in the industry and then reduce customer brand loyalty.

Report to the Board of Directors

Dear Board of Directors:

This report is a summary of the findings of the current research on the business level strategies based on the living room division of your company. And it will highlight the key information and findings; at the end, a couple of recommendations will be provided to help the division enhance the strengths and polish up the weaknesses.

After analyzing the strategies used by your company, it can be viewed as Hybrid strategy. It do bring strengths to the division such as offering good price to the customers which helped the division survive during the recession of economy recession in 2008, offering different kinds of products which enhances the choice of customers, and the methods of controlling on the cost of furniture increase the competitiveness of the division. However, it brings a few negative impacts to the Ashley living room furniture. For example, it disperses the funds of the company to many different products; it also increases the competition among the furniture of the company, which is always ignored by many companies. The high intensity of cost control may affect the quality of products which will lead to a significant impact to the division.

Therefore, Ashley living room furniture should pay more attention to this kind of issue and as well to enhance the strengths and polish up the weaknesses. The following will give a couple of recommendations.

Enhance the strengths:

Corporate with those plants in Pacific Rim countries. This means the Ashley living room furniture division collaborates with those plants in Pacific Rim countries. By using this technique, it is helpful for the division to control the quality of furniture. Besides, through collaborating with these plants, the division can share the information, knowledge and resources to achieve more competitive advantage to compete other competitors and make the mission of the company come true.

Pay attention to the shipping cost. This is a significant part of the cost of the furniture, by outsourcing some products and manufacture at another side of Pacific Ocean, the division was charged a huge amount of capital on shipping cost. So it is necessary to use the strategy like preparing in South-east Asia, and assembling in US to cut down the shipping cost and then make the Ashley living room furniture more competitive.

Polish up the weaknesses:

Further design the products to differentiate them. The furniture needs to be design further and add more value functions to make it more attractive and valuable. By doing this, furniture can be classified to fit different size of living rooms, different kinds of decoration styles.

Add TQM in Asia plants. Total Quality Management helps Ashley living room furniture to control the furniture quality and based on this, the division can have a vision of how the shipping furniture looks like; and based on this, the division can have an insight of the furniture quality to meet the customers’ requirements.

Funds spent on those more value-added actions. Don’t spend the money and capital on those non-value added processes, even those it is important to the division. In this case, it is better to outsource these processes rather than make it by the division itself.

It is essential that the division pay attention to polish up the situation and make the products of the division more competitive and attractive. It is predictable that by enhancing the strengths and polishing up the weaknesses, it will accelerate the process of becoming the best furniture company in North America and even all over the world.