Analysis Of Leons Furniture Company

You have selected a company. Conduct research on the company and identify their current situation. The latest annual report for the company is provided for your use. You will be presenting your recommendations to the company. Your job is to provide a report addressing he following information:

1. Business Mission
   1. What business is your company in?
   2. What business should they be in the future?
   3. What are the business capabilities?

2. Performance Objectives

1. How is the business performing currently? Provide three examples that support your statement.
2. From data in the financial statements provided calculate a GMROI for the company.
3. Identify two (2) performance measures under each of the following three categories and explain why the measures would be appropriate for the company:

1. Input
2. Output

• Productivity

3. Merchandise Flow
   1. Describe the merchandise flow for the company.

1. Make one (1) recommendation about changing the merchandise flow.

4. Category Management
   1. For the purpose of this section (category management) identify one (1) category that the company sells.

1. What type of merchandise does this category represent?
2. Where is the category in its’ life cycle?
3. Develop an assortment plan for the category.  Justify the choices you are making.

5. Branding Strategies

1. Debate about the mix of national brands and private label brands sold by the company.
2. Determine if the company should expand or contract the number of private label brands available. Justify your decision.
3. Determine the private brand strategy the company is following. Make a recommendation on whether to continue with this strategy or to change to another private brand strategy. Provide an example and justify the recommendation.

6. Pricing Strategies
   1. When setting prices, describe how the company takes into account

1. Cost
2. Demand

• Competition

1. Legal considerations

1. Make two recommendations on how setting prices could change.
2. What price adjustments does the company engage in?

1. Make two recommendation on possible price adjustments.
2. What pricing strategy is the company following?

1. Make one recommendation on changing the pricing strategy used.
2. How does the company currently use pricing (apart from pricing adjustments) to stimulate sales?

1. Make two recommendation on how the company can stimulate sales.

7. Customer Loyalty

1. As part of its CRM process, how is the company getting customer loyalty?

1. Make three recommendations on how the company can increase customer loyalty.

8. Summary
   1. Provided a summary of the analysis and recommendations you have compiled.
   2. Express an opinion on the future success of the company.

About Leons Furniture Company

Leons Furniture is one of the retailers in the threshold of Canada. The first store was opened in Welland, Ontario. It is a public company, operating under the industry of home furnishing stores. According to the annual report of 2015, the annual revenue of the company was recorded as CAD 1.97 billion. The presence of 2864 employees helps the personnel in achieving efficiency within the execution of the business activities (Leons.ca, 2018). Leons is the subsidiary of The Brick. Leons deals in mid range furniture, appliances and electronics. The items in the store rooms are high priced. In the era of 2007, Leons introduced Urban Living Collection, which comprised of small sofas, bedrooms and dining sets.

The research and development team is efficient and possesses flexibility in the creating innovative designs for the furniture. Conducting market research assists Leon to gain an insight into the designs, which the contemporary brands have adopted. As a result of this, it can be said that adopting social media would be beneficial for the Leons in terms of expanding the scope and arena of the business operations (Leons.ca, 2018).

Current performance of Leon

As per the performance of 2017, the annual revenue of Leon was recorded as $2,212,216. The net income was $96593 and shareholder’s equity value was $10.60. This represents 3.2%, 15.6% and 15.2% growths respectively. Mention can be made of the sales growth, which was $2.64 billion (Leons.ca, 2018).

	Sales ($)	Gross margin	Average inventory cost	GMROI
Department A	315,000	50%	104,000	3.02%
Department B	200,000	40%	50,000	4%
Department C	210,400	48%	86,000	2.44%
Department D	180,000	44%	33,000	5.45%

Table 1: GMROI for Leons Furniture Company

(Source: Created by the author)

Input

Leons Furniture Company uses fair value hierarchy for categorizing the performance assets and liabilities. This segmentation is as follows:

 

This is done in three levels:

Level 1: Prices are quoted for the assets and liabilities, which are active within the markets.

Level 2: Inputs other than the quoted prices, which are included in Level 1 are directly or indirectly observed

Level 3: Inputs for the assets and liabilities, which are not based on observable data (Leons, s2018)

As per the terms and conditions of IFRS 11, Leons Furniture indulged in joint ventures. This is through the means of recognizing the share value of the assets and liabilities. Within this, focus is laid on revenue share from the outputs. As a matter of specification, the output from the joint operations including the shares are collaboratively incurred (Leons.ca, 2018).

Leons profitability is well placed within the core retailing business, which is carried out as per the industry norms. Initiatives like acquisitions, digital commerce and third party distribution enhances the sales revenue and the profit margin. Excess cash flows compels Leon to be selective in terms of choosing the alliances. Investment criterias includes research about the leading furniture brands within the Canadian market. The personnel are aware of the joint share holdings of 20% with The Brick. Adopting omni channels has enhanced the scope and arena of the retail marketing as well as supply chain network. State of art distribution modernizes the distribution channels (Leons.ca, 2018).

Financial Performance and Analysis

Mention can be made of the extended warranties, which Leons produces on certain merchandise. The management exposes judgmental decision making for specifying the time period for recognizing the warranty revenue. Merchandise imported from US and Southeast Asia receive payment in dollars. This value is equal to Canadian dollar, which is translated at the year-end through the exchange rates. The return policy is beneficial in terms of respecting the purchasing power of the clients and the customers. If the customers are not satisfied with the product, they can return within 7 days. When the customer picks the order, the merchandise value is recognized (Leons.ca, 2018). While selling the gift cards, the personnel can track the use of the cards. This would be beneficial in terms of averting the illegal instances of thefts, robberies among others.

One of the category, which Leons Furniture sells can be small sized sofas. Merchandise for these sofas come from the spare parts, which are assembled from the neighboring countries like United States. In case the customers find any defect within the purchased sofa, they can exchange it within 7 days. However, this needs to be done according to the terms and conditions of the exchange policy. In terms of this policy, this category can be placed in the maturation stage of the product life cycle (Leons.ca, 2018). This is because the managers are in contact with the higher authorities in terms of revising the terms and conditions of the policy.

Branding strategy: To sustain profitability Business model: Value chain analysis Current market trends: Low costs for the furniture Sales and margin history: $2,212, 216 in 2017 (3.2% growth) Channels or distribution requirements: Social media Financial plans: review of the current trends and statistics for enhancing the understanding about long-term effects

Review of the current position would be effective in terms of upgrading the standards and quality of the business operations. Social media would be beneficial in enhancing the scope and arena of the distribution channels.

The national brand, under which Leon sells the furniture is Leon. Some of the furniture are sold under the subsidiary brand, The Brick. The private label brands are Crystoceans, Transglobal, The Brick Outlet, TGW and TGI. Expansion through contracts with the private label brands would be effective for Leon in terms of enhancing the scope and arena of the business (Leons.ca, 2018). Along with this, the contracts would widen the distribution channels, indicating the enhancement of productivity.

The private label brand strategy undertaken by Leon is sustainability in the upcoming financial years. Strategic planning for indulging in alliance would be crucial in terms of securing the market position. Consistency in the strategic planning would reflect conscious approach towards preserving traditionalism. On the other hand, focusing on one particular strategy for long time would compel the employees to feel bored in the process of executing the business activities. For this, revisions need to be done at frequent intervals for luring the clients and the customers towards the brand image (Leons.ca, 2018).

Cost

Branding Strategy for Sustainability

When dealing with the costs of the furniture, Leon personnel consider the expenses regarding the labour charges, salary, and commission among others. Along with this, assistance of the Commerce department is needed in terms of assessing the effectiveness, appropriateness and feasibility of the adopted pricing methods.

Mention can be made of the current condition of the supply of raw materials, which are reviewed for calculating the demands for the furnitures. Within this, graphs are prepared for gaining an insight into the relationship between the demand and supply. This is assistance in terms of measuring the position within the competitive ambience of the market (Leons.ca, 2018). Alliance with the statutory bodies of law is beneficial in terms of averting the illegal marketing activities.

Currently, the company is following competitive pricing strategy for measuring the position in the competitive ambience of the market. On the contrary, Leon can adopt penetration pricing method, which would be beneficial in terms of penetrating into the foreign markets. Within this, adjustments needs to be done according to the needs, demands and requirements of the clients and the customers. For this, the means of survey and feedback can be considered. Modification of the business operations, according to the opinions of the clients and the customers would help Leon to stimulate the sales revenue and productivity as a whole (Leons.ca, 2018).

Leon believes in catering to the special needs, demands and requirements of the customers. For achieving loyalty, trust and dependence from the customers, various loyalty programs are conducted. These programs are consistently monitored for tracking the response of the customers towards the business methods. Within the marketing strategies, focus is placed on the ways through which the purchasing power and affordability of the customers is protected. Social media marketing can be adopted for increasing the trafficking of the audience towards the brand image. Installation of privacy cookies and policies would be effective in terms of gaining trust, loyalty and dependence from the clients and the customers (Leons.ca, 2018). Special discounts, schemes and offers can be introduced within the urchased furniture. This would act as a caring approach towards the passion of the middle class customers to buy branded furniture.

Leons Furniture has attained a greater share in the competitive market of Canada. Alliance with the subsidiary brand, The Brick has been assistance in terms of enhancing the sales revenue and profit margin. Adopting penetrating pricing method would seem fruitful in terms of assessing the possible sources from where the company can enhance the sales revenue and profit margin.

References

Leons.ca (2018). About us. Retrieved 30^th Nov 2018 from https://www.leons.ca/

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