Case 11

Dahlia Furniture Private Limited

On August 1984, Mr. Chua Boon Kang and Mr. Leong Sim Lam bought over Peter
Lim's forty-six percent stake at Dahlia Furniture Pte Ltd. Although co-owners at one
time, Mr. Chua and Mr. Leong have found Mr. Lim's management of the company to
be unsatisfactory. Some re-organization took place as most of the production
workers who were doing subcontracting orders solely for Dahlia had resigned due to
poor company performance in 1982. Dahlia also sold off seventy-five thousand
dollars worth of machinery used for mass producing furniture which was previously
purchased by a former Managing Director, who has since left the company. Now at
the helm, both are uncertain about the long-term direction of the company.
Meanwhile, they are both concerned over maintaining sales growth in a highly
competitive industry.
The furniture industry
Furniture making in Singapore began as a natural extension of one of its oldest
industries sawmilling. But what began as supporting industry eventually turned
into a leading local industry with a home market estimated at $300 million. Since
1979, domestic demand for furniture has risen by about twelve percent annually
and residents in HDB flats atone account for more than seventy percent of this local
furniture market. Using this as a base for forecast, some retailers expect a good
market for furniture at least until 1992 when HDB's expansion is expected to end.
This case was written by Mr. Ch'ng Hak Kee and Miss Jeannie Teah, School of
Management, National University of Singapore, as a basis for class discussion rather
than to illustrate effective handling ran administrative problem. Copyright 0 1985,
School of Management, National University of Singapore, Kent Ridge, Smgame
0511.
402 BUSINESS POLICY N AN ASIAN CONTEXT The zwwill of the local furniture
industry has been industry. The erinked.vto the growth of the country's construction
and building inda boon tothose in before. the success stones public housing
programs in the sixties was esPec the furniture trade and it was a matter of time of
furniture retailers drew many MOM others into the industry. There are now more
than '00 establishments manufacturing furniture and of these, fifty-nine are both
manufacturers and exporters of wooden knock-down (35), rattan (12), or steel
furniture (12). Exporters have mere itlan doubled within the last three years largely
due to the increase in the export of wooden knock-down furniture. Singapore
experts to the United States, Australia, Canada, Western Europe and the Middle
Although the American market is accounting for a large percentage of these
exports, exporters in Singapore face keen competition from domestic U.S.
manufacturers. Although furniture manufactured in Singapofe can be categorized
under wooden. metal, and carte, the trade is mainly wood-based. Under wooden
furniture WC have wooden knock-down and wooden assembled. The former is
mainly an export item which is enjoying a healthy growth rate while the latter is
primanly for domestic consumption. As far as the attitude towards the purchase of
furniture is concerned Urn has been a change. Before the last decade, would-be

buyers of furniture would want to blow how strong and how durable furniture was
but now aeghetic qualities are becoming an increasingly important consideration.
Fashions in furniture can be fickle. In 1977, imported chipboard furniture became
popular, especially those with polyester finishing. But the expansion of chipboard
upon contact with water made it impractical for item Iitchen cabinets. By 1992,
furniture with wood veneers had replaced these in popularity. Consumer taste was
again to change in 1984. The "in-thing" then was furniture with smooth and
sophisticated lacquer finish. Ten years ago, furniture makers used to turn out
standard products and consumers would buy these for their functional use. But
consumers today prefer designs and colors in furniture that will match their homes.
The younger generation especially go for a fashionable design and they may change
for a new set atier two to five years. It ap that furniture is maga- a once-in-alifetime" buy and with growing affluence, Singapore-ans have become more willing
to spend money to decorate their homes-Some retailers also feel that Singaporeans
prefer imported furnitucre to locally made furniture especially if the prices axe corn
bie.
DAHLIA FURNITURE PRIVATE LIMITED 403
Dahlia's move into retailing Dahlia Furniture made its entrance into the furniture
industry in 1972 as subcontractors to two large furniture concerns, Ching Lin and
Diethelm. It supplied mainly wall units and kitchen cabinets while bedrooms sets
and dining sets were subcontracted out or obtained from local suppliers. Business
went well and the company decided to branch into retailing. The first showroom was
set up in a housing estate but this location was later found to be unsuitable. While
Dahlia's furniture line was of a higher quality and price than those of other retailers
around that area, the people residing there were mainly from the lower income
group. In 1978, Dahlia moved the showroom to a department store in the Orchard
area. At $4 per square foot, the rent was more expensive than before but
management had no regrets. Orders began to come in very quickly through this
outlet and turnover soon reached $5 million per annum. Between 1979 and 1981,
Dahlia acquired two factories at Ang Mo Kio and Upper Thomson at a cost of
$400,000 and $300,000, respectively. The factory at Ang Mo Kio was rented out on a
monthly basis to furniture makers (mainly making dining sets and custom-made
kitchen cabinets) who were also subcontractors to Dahlia. The company also
acquired two more showrooms in the Bukit Timah and Upper Thomson area in 1978
and 1982, respectively.
Search for a general manager
All three owners had commitments to their own custom-made furniture business.
Mr. Chua and Mr. Leong,were involved in woodwork and metalwork, and Mr. Lim, in
upholstery. Hence, a Production Manager from another furniture company was
employed to run Dahlia. He was later made Managing Director and offered a chance
to have a thirty-five percent stake in the company. However, Dahlia failed to keep
him. After three years, he resigned and started his own furniture company. The
Marketing Manager was promoted to General Manager but he too left a year later.
Peter Lim, a co-owner and major shareholder then, took over the full-time
management of Dahlia in 1982. He left his upholstery concern, under the care of his

son. As time passed, the other co-owners began to privately feel that Mr. Lim was
using his contacts in Dahlia to benefit his upholstery business possibly at the
expense of Dahlia. These misgivings and other personal
404 BUSINESS POLICY IN AN ASIAN CON"l'EXT differences culminated in the take
over of the control of the company by Mr. Chua and Mr. Leong in 1984. A relative,
Chua Soo Lee, was brought in to handle general admini-stration work while Robert
Lam who was attached to the design unit also assisted in production and general
management of the place. Major decisions Other staff included were still being
made by Mr. Chua and Mr. Leong. eleven salespeople, four clerical workers, and six
production workers at the Thomson factory.
Sales
Furniture makers at the Ang Mo Kio factory did- both standard and custom-made
furniture and operated on a piece-rate basis. Dahlia was its only client and when it
failed to generate regular and sizeable orders, many of the workers resigned. Faced
with the dilemma of filling their showrooms with saleable furniture without relying
too much on local suppliers, Dahlia turned towards imported furniture. Initially,
furniture was gradually imported from France, Japan, and Belgium but their
popularity has prompted it to look upon imports as playing an important role in
achieving higher profits. Currently, it is working towards importing furniture from
Italy. In addition to its own production, imports, and furniture from subcon-tractors,
Dahlia also has local suppliers. Some of them are mainly furniture manufacturers
while there are a few who have retail outlets and can be considered to be Dahlia's
competitors except that their retail outlets may be in a different locality such as
East Coast Parkway. These competitors-cum-suppliers provide furniture to Dahlia at
a cheaper rate. Settees are the top money earners accounting for fifty percent of
sales. But in the last few months of 1984, wall units have proved to be very popular
and within that period, accounted for 47% of dollar sales. Mr. Chua and Mr. Leong,
with the help of Robert Lam, are trying to revamp operations to improve the
company's position. They perceived Dahlia's clientele to be middle and upper
income families who are generally westernized in taste. The majority of them are in
private housing or five-7001I1 HDB flats. With this in mind, it has only advertised in
the Straits Times but, even then, on very few occasions. The owners expressed
satisfaction over the highquality and fairly expensive image of Dahlia's furniture.
They felt there wood market or them judging by the growing demand for im as a
gported furniture and the
DAHLIA FURNITURE PRIVATE LIMITED 405
growing number of families who could afford and were willing to pay for such
furniture. At this juncture, both owners are considering whether they should
increase the role of imports. With imported furniture, one does not have to worry
about overhead costs. But it could turn out costly if these took two months or more
to sell. Alternatively, the company could expand its production unit. This may
involve hiring more labor whic'h could prove to be expensive and difficult in view of
the government's policy .to dis-courage such use of foreign labor.
Competition

Recent furniture advertisements, fairs, and price slashes show that the industry is
very competitive. This has given rise to some erratic pricing. A case in point was
when a coffee set was sold for $800 and within a week, another retailer was able to
sell a similar set for $600. Some retailers have even been reported to sell below
cost. There are those who have imported more furniture than they can sell and
hence have clearing sales. Local furniture firms not only have to contend with locals
but with branches of foreign manufacturers and retailers like Ikea, Fly, and Homestead. As one retailer puts it: Another Scandinavian company is coming, the Italians
are coming, the Japanese are coming, the Americans are coming..., all in a big way.
Dahlia does not see itself as being in direct competition with these large foreign
furniture retailers. It claims that while such companies cater to the mass market, its
furniture line is more for those who want exclusivity. Retail outlets are now carrying
a wider range of furniture and some have accessories like curtains and bedspreads.
One retailer in Singapore is also selling household appliances.