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Executive Summary

Willamette Furniture has been riding a growth spurt, having


discovered the high-end direct mail channel that gave us a push to
new potential volumes through channels. Bolstered by appearances
in specialty catalogs, we were able to develop another additional
channel through distributors of office equipment that sell directly to
corporations.
We believe that by targeting the high-end market, we can
successfully occupy an emerging niche that other channels of
distribution have not been able to target. With the implementation
of the new marketing focus outlined in this plan, we will position our
product line as the high-quality, elegant alternative to mainstream
office furniture found in office supply stores. Our ability to integrate
emerging technologies in our design, provide complimentary pieces
for a complete set, and custom design ergonomic executive-level
office furniture will provide strengths and establish a reputation of
unmatched quality.

Situation Analysis
Willamette Furniture's product offerings focus on the executive level
customer who has an appreciation for quality craftsmanship and
materials, and wishes to integrate technology in to their office
environment. Our market segments within the office furniture
context include the corporate executive, small business owner, and
home office. We will target these markets through a variety of media
including the Internet, catalog distribution, and word of mouth
advertising. Because Willamette offers products at a high cost level,
we do not wish to mass market. Rather our strategy is to make our
product information readily available to those seeking quality office
furniture with specific technological needs. Therefore, we will add
internal catalog publishing to our existing catalog marketing
programs (currently through high level channels such as Sharper
Image). In addition, because our product assumes the use of
computer technology, the development of websites will increase our
company profile by promoting our product line in the media most
appropriate to our customers.

Willamette Furniture occupies a specific niche within the office


furniture market. Therefore, our competition does not provide
comparable products, as they lack the combination of technological
integration and quality in materials and craftsmanship. Our nearest
competition includes Ethan Allen, Acme Computer Furniture, and
ABC Manufacturing. These companies distribute their products
through channels such as chain office supply stores or their own
retail locations. In contrast, Willamette targets its potential
customers based on their search for our type of product.

Market Needs
Willamette gives the discriminating personal computer user, who
cares about design, quality furniture, and quality of working
environment, a combination of the highest quality furniture and an
integration of the latest technology, at a relatively high price.
Willamette provides this discriminating customer with more than a
piece of furniture. We provide a quality working environment that
includes the integration of technological components that generally
exist as part of the executive setting. The quality of manufacturing,
materials, and ergonomics found in our products serves to enhance
the appearance of an executive's office atmosphere, in turn adding
to their status and effectiveness as a decision maker, innovator, and
leader.
We understand that our target market needs more than just office
furniture. This need grew out of the special requirements of personal
computing, when combined with office furniture -- keyboards at
correct height, monitors at correct height, proper channels for
cables, and other amenities. Our target customer wants to have all
of that, plus fine furniture. There is a need for quality wood and
workmanship throughout. We don't just sell office furniture, we sell
design, workmanship, fine materials, and a total-quality office
environment.

The Market
Our product is positioned very carefully: this is high-quality office
furniture combining workmanship and ergonomics for the customer
who understands quality, is a user of high technology equipment,
and is willing to spend money on the best. Unlike the mainstream

products, we do not use laminates or cheap manufacturing


technology.
Our marketing strategy is based mainly on making the right
information available to the right target customer. We can't afford to
sell people on our expensive products, because most don't have the
budget. What we really do is make sure that those who have the
budget and appreciate the product know that it exists, and know
where to find it.
The marketing has to convey the sense of quality in every picture,
every promotion, and every publication. We can't afford to appear in
second-rate catalogs with poor illustrations that make the product
look less than it is. We also need to leverage our presence using
high-quality catalogs and specialty distributors.
Our target market is a person who wants to have very fine furniture
with the latest in technology, combined with an old fashioned sense
of fine woods and fine woodworking. This person can be in the
corporate towers, small or medium business, or in a home office.
The common bond is the appreciation of quality, and the lack of
price constraints.
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Market Analysis
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Market Analysis
2000
Potential Customers
Corporate
Executives
Small Business
Owners

2002

2003

2004

Growt

CAGR

h
2%
3%

Home Offices

5%

Other

5%

Total

2001

3.99

144,0

146,3

148,6

151,0

153,4

00

04

45

23

39

150,0

153,7

157,5

161,5

165,5

00

50

94

34

72

440,0

462,0

485,1

509,3

534,8

00

00

00

55

23

100,0

105,0

110,2

115,7

121,5

00

00

50

63

51

834,0

867,0

901,5

937,6

975,3

1.60%
2.50%
5.00%
5.00%
3.99%

00

54

89

75

85

Market Demographics
We focus our marketing on three types of target consumers:
1.

Corporate Executives: The Bureau of Labor Statistics


(http://stats.bls.gov) reports there are 14.4 million executive,
administrative, and managerial employees in the United States, and
that number is growing at 1.6% per year. We estimate the top 1% of
that number, 144,000, as our market, and we're suggesting the
number is growing at the same 1.6% annually.

2.

Small Business Owners and Executives: According to the


most recent data available from the Small Business Administration
(SBA), there are between 13 and 16 million small businesses (500
employees or fewer) in the United States. That includes about 5.5
million employers and 11 million self-employed people. We take the
top 1% of 15 million, to make our potential market of 150,000. We
estimate growth at 2.5%, a composite of different sources.

3.

Home Offices: According to a story in Home Office


Computing magazine, there are 36 million home offices in the
United States. That means a home office in 27% of the households
in the country. The U.S. census reports that in 1997 there were 16
million households in this country with incomes of more than
$100,000 per year. The 27% of those that have home offices are our
potential market. That's 4.4 million households (of 132 million total).
Our market is the top 10% of those, 440,000, which we estimate is
growing at 5% per year.

4.

Other: We will also sell to some buyers outside the United


States and outside of these targeted market segments. We estimate

100,000 other potential customers, a number that we estimate will


be growing at 5% per year.
Market Demographics
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Market Demographics

Comput
Market Segments

er

Age

Income

Issues Decision Maker

Usage
$200,00
Corporate Executives

Medium

40-65

0 and

Prestige

Staff

Comfort

User

Space

User

up
Small Business Owners

Medium

30-65

$50,000
and up
$100,00

Home Offices

High

25-65

0 and
upo

Other

Market Trends
Our market has finally grown to recognize the disparity between
most of the standard office furniture sold through channels and our
own products.
The development of the high-end office worker, office owners, and
the baby-boomer executive is an important trend for us. We now
have people who are using computers and also appreciate the oldfashioned workmanship of good furniture.
Today's high integration of technology in the work place, especially
in the multi-task oriented, executive environment, sets the stage for
growth in the area of high quality, technologically integrated office
environments. Similarly, home offices and small business owners

continue to demand more advanced technologies and their


integration into the office atmosphere. A sense of craftsmanship and
quality of materials, such as oak and cherry, is timeless. The
synergy of this desire for the classic cabinet-maker look, and use of
technology is inherent in Willamette's offerings.
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Market Growth
According to [source omitted], the market for office furniture is
growing at XX percent per year, and is projected to increase. The
market for PC-related office furniture is growing even faster, at YY
percent per year, and is projected to top $XX billion by the year
2005.
Most important is the growth in home offices with personal
computer equipment. As the cost of the computer goes down,
steadily, the number of home offices goes up. According to [source
omitted], this is about 33 million right now, growing at 15 percent

per year. Households spent $XX billion last year to equip home
offices, and 15 percent of that was spent on furniture.
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Macroenvironment
At a large scale, market research demonstrates that the high-end
market that we are catering to is growing and changing to our
benefit. Generally, there is a trend toward executive turnover in
large companies today. That is, corporate restructuring, increased
small business development, and the growth of the home office
sector is providing for a younger market in the executive, small
business owner, and home office positions.
Research indicates that this new generation of executives
implements technology to a much higher degree than past trends
have indicated. Therefore, with the emergence this new generation
of executives, the appreciation of quality craftsmanship and
materials in office furniture that provides for an effective office
environment, combined with the utilization of emerging

technologies for greater efficiency, dictates that our product line will
increase in popularity.

The Company
Willamette Furniture Mfr. is a privately-owned
specialty manufacturer of high-end office furniture for computer
users who care about elegant office space. Our customers are in all
levels of business that can afford very high quality office furniture,
plus a growing portion of high-end home offices.
Willamette Furniture Mfr. is an Oregon corporation, subchapter S,
owned entirely by Jim and Susan Graham. It was created in 1992. At
that time the product line and industrial property rights (including
trademarks) were purchased from the heirs to the Willamette
Association, which was a 1970s commune in rural Oregon.
Willamette Furniture Mfr. had actually existed since the 1970s as a
"hippy commune," but its present existence began in 1992 when the
furniture line was purchased by Jim and Susan Graham. The
Grahams moved to Oregon from California and purchased the
business as part of the move.
Sales took a big jump in 1997, when we reached more effective
channels of distribution. The key was winning a place in the Premier
Executive office furniture catalog, which led to winning the interest
of the Needham furniture distributors, and display space in several
hundred stores.
Profitability and working capital were problems during our recent
growth, but we believe we now have costs and cash flow under
control.

Mission
Willamette helps create pleasant, productive office environments
with well-designed furniture that incorporates new technology into
the classic office model, in which real people can work happily. We
are sensitive to the look and feel of good wood and fine furniture, as
well as to high-powered personal computing. We always provide the
best possible value to our customers who care about quality office

environments, and we want every dollar spent with us to be well


spent.
We also create and nurture a healthy, creative, respectful, and fun
office and workshop environment, in which our employees are fairly
compensated and encouraged to respect the customer and the
quality of the product we produce. We seek fair and responsible
profit, enough to keep the company financially healthy for the long
term and to fairly compensate owners and investors for their money
and risk.

Product Offering
Willamette offers very high quality office furniture designed to
effectively incorporate computer machinery into the executive office
or home office. The key to the line is an ergonomically effective desk
that still looks like an executive desk and looks very good in a highend office, but is intended to accommodate the personal computer.
Each piece is available in either oak or cherry.
1.

Our main line is the Willamette computer desk in several


versions. This is an elegant piece of office furniture designed to look
good in executive office or home office, and at the same time, be
ideal for real use of the computer. The two critical elements of
ergonomics -- keyboard height and angle, and monitor height and
angle -- are completely adjustable. Cable runs and shelving add to
the utility of the executive desk, without sacrificing elegance.

2.

We also make complementary pieces to fill out the office suite,


including file cabinets, printer stands, and bookcases.

3.

In addition, we make custom designs to fit exact


measurements.
Further supporting our competitive edge is our assembly strategy,
which is based on interlocking wood pieces of such high quality that
assembly is not only a pleasure for our customers, it is actually a
feature that enhances the sense of quality.

In 2001 we will introduce the new custom option to our executive


desk line based on the laptop computer, with a docking station to
connect to a network. The new furniture has a different
configuration to assume easy access to the docking station, and
better use of the space that doesn't have to be dedicated the the
CPU case.
We are also going to accommodate larger monitors, the 17," 19,"
and 21" sizes that are becoming much more common, particularly in
our high-end market. We will also be watching for technological
developments, allowing us to be the first to provide custom furniture
for wall-mounted flat screens, liquid crystal displays, and similar
technologies.

Positioning
Our competitive edge is our dominance of high-technology
ergonomics and traditional high-quality furniture workmanship.
Although there are many computer furniture manufacturers, and
many computer lovers, few have brought the two crafts together as
we have.
We focus on a special kind of customer, the person who wants very
high quality office furniture customized to work beautifully with
modern technology including personal computers, scanners,
Internet connections, and other high-tech items. Our customer
might be in larger corporations, small or medium business, or in a
home office with or without a home-office business. What is
important to the customer is elegance, fine workmanship, ease of
use, ergonomics, and practicality.
The product strategy is also based on quality, in this case the
intersection of technical understanding with very high quality
woodworking and professional materials, and workmanship.
An important competitive edge is our assembly strategy, which is
based on interlocking wood pieces of such high quality that
assembly is not only a pleasure for our customers, it is actually a
feature that enhances the sense of quality.

SWOT Summary
We are on the brink of major opportunity. We have the strength of a
combined expertise in high-tech ergonomics and furniture
manufacturing, and the opportunity of a growing market and new
channels of distribution. We have the weakness of a small company
without a lot of experience, and the threat of new competition
taking aim at our niche.

Strengths

Strategic market segmentation and implementation


strategies.

Combination of skills in ownership. As co-owners, Jim and


Susan jointly develop business strategy and long-term plans. Jim is
strong on product know-how and technology, and Susan is strong on
management and business know-how.

Diversified market segments: Corporate executives, small


business owners, home offices.

Increased capital from successful historical growths in sales.

Weaknesses

High-end, high priced product line limits sales volume.

Addition of in-house catalog design and publishing will add an


aspect to Willamette's functions that has not been previously
experienced.

Direct marketing through the development of the above


catalog creates the need for further research, data gathering, and
analysis.

Establishment on the Internet will produce technological


challenges.

Opportunities

New channels of distribution.

Internet marketing and sales.

Specific niche: High-end appreciation for quality materials


(cherry and oak), ergonomics, and technology (and integration
therein).

Employee turnover and corporate restructuring is causing an


increased employee turnover at the highest levels. The new
generation of corporate executives, small business owners, and
home offices has a far greater appreciation of technology and the
needs driven by its implementation, such as office environment
quality and integration.

Threats

Growth in the high-end office furniture market invites


competition. This competition could emerge from a variety of given
sources including:

1.

Established mass-market companies' development of


new lines.

2.

New start up companies generated by healthy economic


growth nation-wide.

3.

New marketing strategies for established products and


companies.

Existing competition.

Historical Results
The following historical results table is based on research and some
simplifying assumptions:
1.

We used the Imarket Inc. website at www.imarketinc.com to


find an estimate for wood office desks. The total market in the U.S.
was estimated at $140 million in 1996.

2.

We estimated growth at 2.5% per year, using the average


growth of the entire office furniture industry as reported by the U.S.

Census in Cendata (http://tier2.census.gov/cgiwin/asm/ASMDATA.EXE).


3.

We estimated an average of $500 per desk to calculate unit


numbers from market numbers.

4.

We simplified our own financial history somewhat, because


this makes the analysis more useful for decision making. We
rounded some numbers and consolidated, so that our numbers are
an accurate reflection.
Looking at the table, we can see that we may soon begin to have
measurable market share, as our new channels allow us to
contemplate future growth. Our present market share is a function
of dividing our numbers, since we don't show up in any industry
surveys -- yet.
Historical Data
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Historical Data

Variable
Industry Revenue
Company Market Share
Company Revenue
Industry Variable Costs
Company Variable Costs
Industry Gross
Contribution Margin

1997

1998

$143,820, $146,696,4
000

00

12%

13%

$17,258,4 $19,070,53
00

$84,600,0 $86,400,00
00
$8,413,47
0

0
$9,535,266

$59,220,0 $60,296,40
00

1999
$149,630,328
14%
$20,948,246
$87,900,000
$10,100,047
$61,730,328

Company Gross

$8,844,93

Contribution Margin

Marketing Expenses

$23,600

Company Net

$8,821,33

Contribution Margin

$9,535,266

$10,848,199

$27,600

$43,000

$9,507,666 $10,805,199

Competition
Within our niche we have three significant competitors, Ethan Allen,
Acme Computer Furniture, and ABC Manufacturing. Acme is a bigger
company, operating mainly in our same niche, whose marketing is
better than its product quality. ABC is a subsidiary of Haines
Furniture, a major furniture manufacturer, which has recently
targeted our niche. Ethan Allen is a furniture manufacturer which
produces some office furniture products and markets to the high
level consumer.
In general, however, our competition is not in our niche. We
compete against generalized furniture manufacturers, cheaper
computer-related furniture, and the mainstream merchandise in the
major furniture channels and office supply stores. It is not that
people choose our competitors instead of our product, it is that they
choose lesser quality, mainstream materials instead of the higher
quality furniture we offer.
In the mainstream business, channels are critical to volume. The
manufacturers with impact in the national sales are going to win
display space in the store, and most buyers seem content to pick
their product off the store floor. Price is critical, because the
channels take significant margins. Buyers are willing to settle for
laminated quality and serviceable design.
In direct sales to corporations, price and volume is critical. The
corporate buyer wants trouble-free buying in volume, at a great
price. Reliable delivery is as important as reliable quality.
In the high-end specialty market, particularly in our niche, features
are very important. Our target customer is not making selections
based on price. The ergonomics, design, accommodation of the
computer features within the high-quality feel of good wood, is

much more important than mere price. We are also seeing that
assembly is critical to shipping and packing, but our customer
doesn't accept any assembly problems. We need to make sure that
the piece comes together almost like magic, and as it does, it
presents a greater feel of quality than if it hadn't required assembly
at all.

Direct Competition
Acme Computer Furniture
Acme has been operating since the middle 1980s, and grew up with
computer-related furniture. It was one of the first, certainly the first
we are aware of, to develop personal computer desks and market
through advertising in computer magazines. Today they are about
twice our size. They have a very nicely done catalog and good
relationships with two distributors.
Strengths: good marketing, strong advertising budget, relationships
with distributors, strong direct sales.
Weaknesses: the product is more standardized, and of lesser quality,
with less sense of design and materials and workmanship.
ABC Manufacturing
ABC Manufacturing is a division of Haines Furniture, the second
largest manufacturers of mainstream home furnishings. Haines
bought ABC three years ago and is focusing on our niche. We see
very good quality product, and an excellent sense of design, but
little movement in channels or catalogs.
Strengths: financial backing, product quality.
Weaknesses: ABC has not seemed to understand our niche, where to
find the buyers, how to market as a specialty niche instead of the
more traditional furniture channels.
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Growth and Share Analysis


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Growth and Share

Competitor

Price

Growth Rate

Market Share

Acme Computer Furniture

$800

8%

3%

ABC Manufacturing

$1,500

1%

10%

Ethan Allen

$2,500

3%

15%

Office Depot

$400

12%

32%

Staples

$400

4%

10%

Office Max

$400

15%

30%

$1,000.00

7.17%

16.67%

Average
Total

$6,000.00

43.00%

100.00%

Marketing Strategy
Willamette furniture is moving toward internal marketing control by
establishing programs such as an in-house catalog publishing and
distribution department, detailed customer service vehicles that will
allow us to track the success of our marketing and sales, and further
integration with established quality catalog vendors, such as Shaper
Image.
Our target markets present great opportunities for company growth,
as our niche is not at all saturated at this point. We will dominate
the high-end office furniture market by stressing the quality in
workmanship and materials of our product lines, keeping up with
and integrating technological advances in the personal computing
environment, and by increasing our market research and customer
service in order to constantly satisfy our markets' needs.
The home office, small business owner, and corporate executive will
greatly benefit from our quality products in terms of , comfort, and
appreciation of the office environment. The key to reaching this
market is to make them aware that our products are available. We
do not need to convince them of anything but the assurance of
quality in manufacturing and ergonomic design.

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Value Proposition
Willamette Furniture Mfr. gives the discriminating personal computer
user, who cares aboutdesign and quality furniture and quality of
working environment, a combination of highestquality furniture and
latest technology, at a relatively high price.

Critical Issues
The critical issues emerge from the SWOT analysis and review of the
market:

The underlying paradox: How can we sell our high-end


customers a packaged kit that requires assembly? Or do we need to
find channels to offer delivery of assembled product?

Channels vs. Internet: Can we do both? Is there a channel


conflict? Are we going to be able to manage our channels well
enough to make money with them?

Financial Objectives
1.

To grow our sales more than three times over during a fiveyear period, from $450,000 in 2000 to $1.6 million in 2004.

2.

To significantly decrease our sales and marketing expenses as


a percent of sales: from 34.5% this year to 26% by 2004.

3.

To increase contribution margin from 40% to 48% over five


years.

Marketing Objectives
Our marketing strategy assumes that we need to go into specialty
channels to address our target customer's needs. The tie-in with
high-end quality catalogs like Sharper Image is perfect, because
these catalogs cater to our kind of customers. We position as the
highest quality, offering status and prestige levels of purchase.
Our presence on the World Wide Web will increase the availability of
our products to the specific market segments that we wish to target.
Because Willamette's product offerings concentrate on the
integration of PC technologies, Web presence is a natural objective
in reaching appropriate potential customers.
Finally, our movement into internal catalog publishing will provide
Willamette's marketing managers with additional control over the
content and recipients of our direct marketing. With experience

gained through our inclusion in other high-end catalog merchants,


and our managers' publishing experience, our internal catalogs will
undoubtedly prove to generate great sales increases for Willamette
Furniture.

Target Market Strategy


Our segment definition is of itself strategic. We are not intending to
satisfy all users of office furniture intended for use with personal
computers, but, rather, only those who are most demanding. We are
definitely out to address the needs of the high-end buyer, who is
willing to pay more for quality.
In our particular market, we also seek the buyer who appreciates
two attributes: the quality of furniture workmanship and the
excellence of design, with an understanding of technology and
ergonomics built in.

Corporate executives: our market research indicates about 2.5


million potential customers who are managers in corporations of
more than 100 employees. The target customer is going to be at a
high executive level, in most cases, because the purchase price is
relatively steep compared to standard office furniture.

Small business owners: our customer surveys indicate a


strong market among the owners of businesses with fewer than 100
employees. There are 11 million such businesses in this country,
most of them with concentrated ownership that makes the owners
potential customers.

Home offices: the home office business has proliferated during


the 1990s, and we also have home offices for people employed
outside the home. This is a big market, some 36 million home
offices, growing faster than other markets.

Strategy Pyramids
Our main strategy at Willamette Furniture is to position ourselves at
the top of the quality scale, featuring our combination of superb
technology and fine old-fashioned woodworking, for the buyer who
wants the best quality regardless of price.
Tactics underneath that strategy include research and development
related to new designs and new technology, choosing the right
channels of distribution, and communicating our quality position to
the market.
Programs are mainly those listed in the milestones table, including
new design programs, new equipment to keep up with design,
channel development, channel marketing programs, our direct
sales, and our continued presence in high-end catalog channels and
new presence in the web.

Marketing Mix
Our marketing mix depends mainly on the product and product marketing, but we
are also leveraging a lot more in our presence in channels than on our direct
national branding. The channels are the key to our recent growth and our
prospects for additional growth.

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Product Marketing
Our product marketing has to emphasize the benefits of our unique combination
of technological expertise, ergonomics, and fine furniture craftsmanship. We need
to sell pride of ownership and workmanship, and prestige. That has to come out in
our packaging, finishing, shipping, and collaterals.
Product marketing's most important challenge is the problem of assembly and
packaging. We know we have the best product when we deliver it locally. That

isn't necessarily so when we send it in boxes to be assembled. We have to make


sure that the assembly is truly easy.

Promotion
Our promotion strategy is based mainly on making the right information available
to the right target customer. We can't afford to sell people on our expensive
products, because most don't have the budget. What we really do is make sure
that those who have the budget and appreciate the product know that it exists,
and know where to find it.
The marketing has to convey the sense of quality in every picture, every
promotion, and every publication. We can't afford to appear in second-rate
catalogs with poor illustrations that make the product look less than it is. We also
need to leverage our presence using high-quality catalogs and specialty
distributors.

Service
The service aspect of Willamette's marketing mix is limited in traditional terms.
That is, due to our high degree of quality in manufacturing and assembly, our
product lines do not require continued maintenance or service. However, we do
consider our customer service to be key to the retention of customers.
Willamette manufactures many accessories in addition to our main, executive
desk lines. As a result, we offer a fully integrated office environment, including
peripherals such as lamps, cabinets, tables, and chairs. Therefore, a Willamette
Furniture customer is not considered to be a one time buyer. The establishment of
a quality office environment can be an on-going process. Willamette will continue
to offer additional pieces to our customers, targeting them based on their
previous purchases.

Sales Plan
Our strategy focuses first on maintaining the identity with the high-end buyer who
appreciates the best available quality, but is also very demanding regarding
computer systems and technology. We've been able to find these customers using
a combination of direct mail catalogs and direct sales to distributors.
For the next year we continue to focus on growing presence in the high-end direct
mail catalog that finds our specialty customer. We will work with Sharper Image
and Broadview more than ever, and we expect to gain position in the major airline

catalogs as well. Specialty retail is a new channel that could become important for
us.
Our work with distributors has been promising. We hope to continue the
relationship with distributors selling directly to larger corporations, even though
this takes working capital to support receivables.

Channels
Our past marketing strategy assumes that we need to go into specialty channels
to address our target customer's needs. The tie-in with the high-end quality
catalogs like Sharper Image is perfect, because these catalogs cater to our kind of
customers. We position our products as the highest quality, highest price offering
in any channel mix.
By including our products in these high-end catalogs, we were able to successfully
target the specific niche that was our marketing milestone. This has provided the
foundation for a move to internal catalog production. With a higher degree of
information control internally, these catalogs will target the same audience, but
will include more extensive information in terms of quality, examples,
testimonials, and information tailored to past sales experiences.

Channels of Distribution
The four main manufacturers are selling direct to the office superstores and
buying discount clubs. This accounts for the main volume of distribution. The
office furniture customer seems to be growing steadily more comfortable with the
retail buy in the chain store.
The major corporate purchases are still made directly with manufacturers.
Although this is a major channel for some of the more traditional manufacturers, it
is essentially closed to new competition. The direct channel is dominated by two
manufacturers and two distributors. The distributors will occasionally take on a
new line -- happily, this has helped Willamette -- but the main growth is in retail.
Published research indicates that 51% of the total sales volume in the market
goes through the retail channel, most of that major national chains. Another 23%
goes through the direct sales channel, although in this case direct sales includes
sales by distributors who are buying from multiple manufacturers. Most of the
remainder, 18%, is sold directly to buyers by catalogs.

In the mainstream business, channels are critical to volume. The manufacturers


with impact in the national sales are going to win display space in the store, and
most buyers seem content to pick their product off the store floor. Price is critical,
because the channels take significant margins. Buyers are willing to settle for
laminated quality and serviceable design.
In direct sales to corporations, price and volume is critical. The corporate buyer
wants trouble-free buying in volume, at a great price. Reliable delivery is as
important as reliable quality.
In the high-end specialty market, particularly in our niche, features are very
important. Our target customer is not making selections based on price. The
ergonomics, design, accommodation of the computer features within the highquality feel of good wood, is much more important than mere price. We are also
seeing that assembly is critical to shipping and packing, but our customer doesn't
accept any assembly problems. We need to make sure that the piece comes
together almost like magic, and as it does, it presents a greater feel of quality
than if it hadn't required assembly at all.
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Channel Analysis

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Channel Analysis

Channel

Reach

Comarketi Paymen
ng

ts

Cost

Risk

Outside Catalogs

10

Internal Catalogs

Websites

Other

Channel Forecast

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Channel Forecast

Channel

Growt
h

2000

2001

2002

2003

2004

CAGR

Outside Catalogs

20%

120

144

173

208

250

20.14%

Internal Catalogs

40%

200

280

392

549

769

40.03%

Websites

40%

100

140

196

274

384

39.99%

0%

0.00%

Other

-------- -------- -------- -------- -------- -------Total

35.19
%

420

564

761

1,031 1,403 35.19%

Implementation Schedule
Willamette Furniture will begin the year 2000 by continuing to strengthen our
alliances with established partners in distribution. We will prepare our catalog

placements internally, submitting them by the middle of January 2000.


Simultaneously, the internal catalog plan will be polished and submitted by the
end of January 2000. This will be possible with the expertise of Rebecca King and
James Black, who have brought their industry knowledge to the marketing
department of Willamette Furniture.
With the completion of this plan, design stages will occur from February 2000
through to the middle of March 2000. This time frame is accurate because we
have experience in the design stage, as we have historically submitted our own
designs to outside catalog vendors.
As in past years, Spring and Fall Trade Shows will occur at their normal times.
These shows will provide test cases for our internal catalog design. , our last
milestone category to be implemented will be the expansion of our product
distribution through the addition of three new distributors to our current line-up.
These distributors will increase our customer base nationwide.
Milestones

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Milestones

Advertising
First Catalog Placement
Second Catalog
Third Catalog
Other

Start

End

Date

Date

1/1/200

1/11/20

00

1/10/20

1/31/20

00

00

1/15/20

2/5/200

00

1/1/200

1/15/20

00

Manage
r

Department

$50,000

Jack

Ads

$40,000

Jack

Ads

$30,000

Jack

Ads

$0

ABC

Department

Manage

Department

$120,00

Total Advertising Budget


PR

Budget

0
Start

End

Budget

Spring Trade Show preparation


Spring Trade Show
Fall Trade Show preparation
Fall Trade Show
Other

Date

Date

1/5/200

3/5/200

3/10/20

3/15/20

00

00

7/1/200

8/30/20

00

9/1/200

9/10/20

00

1/1/200

1/15/20

00

Total PR Budget
Direct Marketing
New Distributor
In-House Catalog Plan
In-House Catalog Design
In-House Catalog Mailing
Other

Start

End

Date

Date

3/15/20

3/25/20

00

00

1/5/200

2/19/20

00

2/21/20

3/22/20

00

00

3/25/20

3/30/20

00

00

1/1/200

1/15/20

00

Name me
Name me

Terry

PR

$15,000

Terry

PR

$5,000

Terry

PR

$15,000

Terry

PR

$0

ABC

Department

Budget

Manage
r

Department

$5,000

Cassidy

Tavel

$3,000

Cassidy

Sales

$0

Bertha

Other

$2,000

Bertha

Other

$0

ABC

Department

$10,000

Budget

Websites

$5,000

$40,000

Total Direct Marketing

Web Development

Start

End

Date

Date

2/1/200

5/31/20

00

1/1/200

1/15/20

00

1/1/200

1/15/20

Budget

Manage
r

Department

$20,000

Jack

IT

$0

ABC

Department

$0

ABC

Department

Other

00

1/1/200

1/15/20

00

Total Web Development

Laptop Product Test


Laptop Product Release
Name me
Other
Total Other Budget
Totals

ABC

Department

$20,000

Budget
Other

$0

Start

End

Date

Date

2/1/200

4/1/200

4/1/200

4/16/20

00

1/1/200

1/15/20

00

1/1/200

1/15/20

00

Budget
$5,000
$1,000

Manage
r
Terry
Sampso
n

Department
Other
Other

$0

ABC

Department

$0

ABC

Department

$6,000
$196,000

Financials
The financial picture is quite encouraging. We have been slow to
take on debt, but with our increase in sales we do expect to apply
for a credit line with the bank, to a limit of $150,000. The credit line
is easily supported by assets.
We do expect to be able to take some money out as dividends. The
owners don't take overly generous salaries, so some draw is
appropriate.

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Break-even Analysis
Our break-even analysis is based on running costs, the "burn-rate"
costs we incur to keep the business running, not on theoretical fixed
costs that would be relevant only if we were closing. Between
payroll, rent, utilities, and basic marketing costs, we think $30,000 is
a good estimate of fixed costs.
Our assumptions on average unit sales and average per-unit costs
depend on averaging. We don't really need to calculate an exact
average, this is close enough to help us understand what a real
break-even point might be.
The essential insight here is that our sales level seems to be running
comfortably above break-even.
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Break-even Analysis
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Break-even Analysis

Monthly Units Break-even

26

Monthly Revenue Break-even

$40,144

Assumptions:
Average Per-Unit Revenue

$1,518.86

Average Per-Unit Variable Cost


Estimated Monthly Fixed Cost

$383.80
$30,000

Sales Forecast
Our sales forecast assumes no change in costs or prices, which is a
reasonable assumption for the last few years.

We are expecting to increase sales grow from $350 thousand last


year to $450 thousand this year. The growth forecast is in line with
our last year, and is relatively high for our industry because we are
developing new channels. In 2001 and 2002 we expect growth
closer to 60% per year, to a projected total of more than $1 million
in 2002.
For 2000 we plan to internally develop a company catalog, which
will include some other products for the same target customers. The
focus will be an executive level office catalog, with furniture, lamps,
and other accessories.
Our Oregon location is a distinct advantage for local wood. We can
buy higher quality oak and cherry than either of our competitors
(one in California, one in New York). Since our sales increased over
the last two years, we have been able to buy at better prices,
because of higher volumes.
We work with three wood suppliers, all local. Bambridge supplies
most of our oak, and a bit of cherry and some other specialty woods.
Bambridge has been in business for as long as we have, and has
given us good service and good prices. This is a good, stable
supplier. Duffin Wood Products is a good second source, particularly
for cherry and specialty woods. We've used Merlin supplies as well,
frequently, for filling in when either of our main two suppliers were
short.
We also work with a number of specialty manufacturers for furniture
fittings, drawer accessories, glass, shelving accessories, and related
purchases.
Although we aren't a major player compared to the largest furniture
manufacturers, we are one of the biggest buyers of the custom
materials we need. Most of our suppliers are selling through
channels to hobbyists and carpenters, so they treat us as a major
account.
We depend on our dominance of the latest in technology of
ergonomics, combined with classic design elements of fine furniture.
We must remain on top of new technologies in display, input and
output, and communications. For example, our latest models are

already assuming the desktop digital scanner as a frequent


accessory, and audio for use in creating presentations, email
attachments, etc.
Our assembly patents are an important competitive edge. No
competitor can match the way we turn a drawback -- having to
assemble the product -- into a feature. Our customer surveys
confirm that customers take the interlocking assembly system as an
enhancement to the sense of quality.
In 2000 we will introduce the new line based on the executive laptop
computer, with docking station to connect to a network. The new
variation on the executive desk line has a different configuration to
assume easy access to the docking station, and better use of the
space that doesn't have to be dedicated the the CPU case.
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Sales Forecast
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Sales Forecast
2000

2001

2002

209

350

600

Executive Desk Cherry

32

35

40

Other Furniture Oak

43

50

50

Other Furniture Cherry

10

10

Custom Designed Furniture

10

20

297

455

720

2000

2001

2002

Executive Desk Oak

$1,600.00

$1,600.00

$1,600.00

Executive Desk Cherry

$1,750.00

$1,750.00

$1,750.00

$900.00

$900.00

$900.00

Other Furniture Cherry

$1,000.00

$1,000.00

$1,000.00

Custom Designed Furniture

$2,500.00

$2,500.00

$2,500.00

$334,400

$560,000

$960,000

Executive Desk Cherry

$56,000

$61,250

$70,000

Other Furniture Oak

$38,700

$45,000

$45,000

$7,000

$10,000

$10,000

$15,000

$25,000

$50,000

$451,100

$701,250

$1,135,000

2000

2001

2002

Executive Desk Oak

$400.00

$400.00

$400.00

Executive Desk Cherry

$525.00

$525.00

$525.00

Other Furniture Oak

$180.00

$180.00

$180.00

Other Furniture Cherry

$300.00

$300.00

$300.00

Custom Designed Furniture

$625.00

$625.00

$625.00

Unit Sales
Executive Desk Oak

Total Unit Sales


Unit Prices

Other Furniture Oak

Sales
Executive Desk Oak

Other Furniture Cherry


Custom Designed Furniture
Total Sales
Direct Unit Costs

Direct Cost of Sales


Executive Desk Oak

$83,600

$140,000

$240,000

Executive Desk Cherry

$16,800

$18,375

$21,000

Other Furniture Oak

$7,740

$9,000

$9,000

Other Furniture Cherry

$2,100

$3,000

$3,000

Custom Designed Furniture

$3,750

$6,250

$12,500

Subtotal Direct Cost of


Sales

$113,990

$176,625

$285,500

Sales by Manager
Willamette's sales in terms of our management structure are
represented in the following table. Jack and Cassidy are our
strongest generators of sales because of their established
relationships with past customers and channels.
We will bring on two new managers due to our progress on the
Internet and through internal catalog publishing. Although the first
year sales projections for Sampson and Bertha are not extremely
high, their positions and customer interactions will increase
exponentially with the completion of our websites and internal
catalogs.
Willamette has decided to bring them on early because Peggy will
be taking a leave of absence during the summer months of 2000.
The overlap will also allow Sampson and Bertha to become quite
familiar with our product offerings before their respective
departments are online.
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Sales Breakdown by Manager


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Sales by: Manager
2000

2001

2002

Jack

78

126

223

Peggy

30

71

152

Sampson

57

80

109

Cassidy

78

86

103

Bertha

48

92

133

297

455

720

Sales

Other
Total
Average

50

76

120

Sales by Segment
Willamette's sales by program forecasts are a direct result of past
performance stemming from outside catalog marketing and market
research. Our expanding markets are, by default, heavy users of the
World Wide Web. With our technological integration that is key to
Willamette's product offerings, it can be assumed that our target
customers will find our products via the Internet (with a relatively
aggressive Internet marketing scheme).
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Sales Breakdown by Segment


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Sales by: Segment
2000

2001

2002

109

215

362

Sales
Corporate Executives

Small Business Owners

94

136

203

Home Offices

90

104

155

297

455

720

Other
Total
Average

74

114

180

Sales by Program
Our sales by segment show how strategically we have targeted our
market segments in the past and project to continue to do so
successfully. With historical experience in targeting these market
segments, Willamette will only increase in its market share due to
expansions in marketing programs tailored to our past success.
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Sales Breakdown by Program


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Sales by: Program


2000

2001

2002

Outside Catalogs

122

134

176

Internal Catalogs

82

152

232

Websites

77

144

207

Customer Service

13

25

105

297

455

720

Sales

Other
Total
Average

59

91

144

Expense Forecast
Our expenses occur as the result of both historically successful
marketing endeavors and projected marketing programs designed
to take advantage of expanding markets and improved product
lines. We will be moving into the realm of Internet marketing and
sales in the year 2000. The initial costs are high relative to the
maintenance costs involved after the websites' creation.
Similarly, the development of an in-house catalog design and
publishing department will incur higher start-up expenses than
maintenance costs after the initial publication. We have chosen
these two new marketing programs as areas where expenses can
initially build up because research indicates that they will cause our
market share to increase exponentially over time.
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Marketing Expense Budget


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Marketing Expense Budget
2000

2001

2002

Outside Catalogs

$24,000

$50,000

$100,000

Internal Catalogs

$72,000

$104,000

$125,000

Customer Service

$30,000

$40,000

$50,000

Websites

$30,000

$30,000

$40,000

$0

$0

$0

------------

------------

------------

$156,000

$224,000

$315,000

Other
Total Sales and Marketing
Expenses
Percent of Sales

34.58%

31.94%

27.75%

Expense by Manager
Willamette Furniture's expenses in terms of manager are directly
proportionate to the managed program's potential. As our market
share increases and capital is generated, we will support further
marketing programs and the expansion of current programs, thus
increasing our managment budgets for these specific departments
and projects.
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Expense Breakdown by Manager


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Expenses by Manager
2000

2001

2002

$36,000

$46,000

$61,000

Expenses
Jack

Peggy

$31,200

$41,200

$56,200

Sampson

$31,200

$41,200

$56,200

Cassidy

$24,000

$34,000

$49,000

Bertha

$33,600

$43,600

$58,600

$0

$18,000

$34,000

$156,000

$224,000

$315,000

Other
Total
Average

$26,000

$37,333

$52,500

Expense by Segment
Willamette Furniture's expenses in terms of marketing programs are
directly proportionate to the proposed and historical success of
these programs. As our market share increases and capital is
generated, we will support further marketing programs and the
expansion of current programs.
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Expense Breakdown by Segment


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Expenses by Segment
2000

2001

2002

Corporate Executives

$84,000

$94,000

$109,000

Small Business Owners

$48,000

$58,000

$73,000

Home Offices

$24,000

$34,000

$49,000

$0

$38,000

$84,000

$156,000

$224,000

$315,000

Expenses

Other
Total
Average

$39,000

$56,000

$78,750

Expense by Program
Willamette Furniture's expenses in terms of market segment are
directly proportionate to the segment's potential. As our market
share increases and capital is generated, we will support further
marketing programs and the expansion of current programs.
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Expense Breakdown by Program


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Expenses by Program
2000

2001

2002

Outside Catalogs

$24,000

$34,000

$49,000

Internal Catalogs

$72,000

$82,000

$97,000

Customer Service

$30,000

$40,000

$55,000

Websites

$30,000

$40,000

$55,000

$0

$28,000

$59,000

$156,000

$224,000

$315,000

Expenses

Other
Total
Average

$31,200

$44,800

$63,000

Linking Expenses to Strategy and Tactics


Willamette's growth in sales revenue will happen as a result of the
implementation of new marketing programs in accordance with

market growth. The expenses generated by these new marketing


strategies will be greater in the initial design and implementation
stages than in later maintenance stages. For example, it is proven
that an Internet presence will increase our sales anywhere from 310%.
Therefore, it is worth an initial expenditure of $30,000 for design
and staffing in order to maintain the websites. Website expenses
increase as website importance increases. We will use our increased
capital to make wise infrastructure purchases such as internal
catalog publishing capabilities and additional design and
manufacturing tools.
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Contribution Margin
Willamette's sales will increase as a result of market growth, market
share increase, and Internet presence. Our gross margin will remain
steady at approximately 75%. The contribution margin will steadily
increase as a result of the initial expenses involved with starting

marketing programs such as internal catalog publication and


website development. These second year expense decreases will
offset the increases in retained customer expenses, custom product
line development, and outside catalog expansion.
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Contribution Margin
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Contribution Margin
2000

2001

2002

Sales

$451,100

$701,250

$1,135,000

Direct Costs of Goods

$113,990

$176,625

$285,500

$0

$0

$0

------------

------------

------------

$113,990

$176,625

$285,500

Other Variable Costs of


Sales
Cost of Goods Sold

Gross Margin

$337,110

$524,625

$849,500

74.73%

74.81%

74.85%

2000

2001

2002

Outside Catalogs

$24,000

$50,000

$100,000

Internal Catalogs

$72,000

$104,000

$125,000

Customer Service

$30,000

$40,000

$50,000

Websites

$30,000

$30,000

$40,000

$0

$0

$0

------------

------------

------------

$156,000

$224,000

$315,000

34.58%

31.94%

27.75%

$181,110

$300,625

$534,500

Gross Margin %
Marketing Expense Budget

Other
Total Sales and Marketing
Expenses
Percent of Sales
Contribution Margin
Contribution Margin / Sales

40.15%

42.87%

47.09%

Controls
The executive furniture market is steadily increasing at an average
calculated annual growth rate of 7.75 percent. With this in mind, our
marketing programs will expand accordingly. The addition of an
internally created catalog will allow Willamette to market to this
expanding number of potential customers. Sales will increase
accordingly, providing working capital for internal product
development, marketing department growth, and Internet
development. A presence on the Internet will be a key milestone to
expanding sales and marketing potentials through the utilization of
new channels.

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Keys to Success
The keys to Willamette's success have historically been effective
market segmentation and implementation strategies. Along these
lines of proven success, Willamette will implement direct marketing
strategies based on our success in distribution through high-end
channels such as the Sharper Image. Our catalog marketing will turn
to in-house production for more specific, extensive product
descriptions.

Uncompromising commitment to the quality of the product:


quality wood, quality workmanship, quality design, quality of end
result.

Successful niche marketing: we need to find the qualityconscious customer in the right channels, and we need to make sure
that customer can find us.

Almost-automatic assembly: we can't afford to ship fullyassembled desks, but assembly must be so easy and automatic that
it makes the customer feel better about the quality, not worse.

Market Research
Due to the market segmentation that Willamette Furniture has
established, we will require constant updates in terms of the
potential sizes, distributions, and purchasing patterns of the quality
conscious, technology utilizing executive markets. We will use our
historical performance to establish a customer database containing

this information. This will allow Willamette to target customers more


efficiently as a result of actual experience. Furthermore, as our
customer service and follow-up are key to establishing retained
customers, the marketing database will allow us to divide the
potential buying patterns of customers into categories based on
future needs.

Contingency Planning
Willamette Furniture is unique in its discovery and utilization of the
high quality, executive level computer integrated office furniture
niche. Therefore, it is possible that with our success and superior
design, other, well-established furniture manufacturers may release
a competitive product line. However, Willamette focuses specifically
on the high-end, technologically integrated aspect of office
furniture. With this exclusive concentration, Willamette can continue
to focus its resources on producing the best executive level office
furniture available. Another possible challenge would be the
emergence of a new company in our niche. This however, would not
be quite as threatening, as their initial market share would be
minuscule, allowing for us to strategize further for continued
success. Finally, an established furniture company my choose to
begin marketing to our target market. This would not be overly
threatening because our products are inherently the best available
due to the true craftsmanship involved in their design and
manufacture.

Marketing Organization
Susan Graham, President, is responsible for overall business
management. Our managers of finance, marketing, and sales report
directly to Susan. Susan had a successful career in retail before
becoming half owner of Willamette. She was an area manager of
Ross Stores, a buyer for Macy's, and merchandising assistant for
Sears and Roebuck. She has a degree in Literature from the
University of Notre Dame.
Jim Graham, designer, is responsible for product design and
development, assembly, and manufacturing. Our workshop manager
reports directly to him. Jim designed furniture for Haines
Manufacturing before becoming half owner of Willamette. He was

responsible for one of the first executive desks designed to include


customized fittings for personal computers, and was one of the first
to design the monitor inside the desk under glass. He has an B.S.
and M.S. in industrial design, from Stanford University and the
University of Oregon, respectively.
As co-owners, Jim and Susan jointly develop business strategy and
long-term plans. Jim is strong on product know-how and technology,
and Susan is strong on management and business know-how.
Terry Hatcher, 34, is marketing manager. Terry joined Willamette
from the marketing department of the Thomasville Furniture chain,
having been in charge of national catalog production and catalog
advertising. Terry also managed direct sales at one of the furniture
distributors that has since died to industry consolidation. Terry has a
B.A. degree in literature from the University of Washington.
Our sales and marketing managers are in the process of
revolutionizing the way in which Willamette Furniture reaches its
customers. Both of these departments have been integrated with
our Information Technology area in order to sell and market
Willamette's product through our own, internal website. In addition,
we have started the publication of our own catalog. Due to the
success in marketing with high-end retailers and catalog merchants,
such as Sharper Image, we have decided to implement this new,
internal strategy for future growth and increased market share. If
the executive level employees nationwide are aware of our product
offerings, Willamette furniture will soon become a part of every
quality office environment.