CARPENTER TAN HANDICRAFT

CASE ANALYSIS
SUBMITTED BY:
GROUP 9
CASE SUMMARY
• Qi Zhang majored in petroleum engineering at a famous university in
China and graduated in 2010. She then joined CNPC, a large state-owned
enterprise in Panjin city.
• Albeit, the income was stable, and the job was comfortable, the
monotony had made it extremely unappealing for Zhang.
• As a result, she quit her job in 2011 with ambitions to build her own
business, which not only would help her gain independence, but also
greatly increase her income if it was a success
• Due to the extant high demand and multi-segment market of woodworks,
Zhang decided to become a franchisee for the woodworks manufacturing
behemoth, Carpenter Tan.
• Despite being a novice in business management, Zhang was confident that
her rigorous training and practical experience would aid her greatly along
the way.
• The company’s favorable policies and the promising market allowed Zhang
to recover her entire investment in the first store in 6 months.
• Not long after, she opened a second franchise store to offset the profit
growth decline that the first store was experiencing and increase her
income and was able to recover her investment in 10 months.
• By 2015, both of Zhang’s stores were experiencing a consistent decline in
the profit growth and this had Zhang worried. Furthermore, Zhang felt
that the restrictions imposed by Carpenter Tan’s franchise model on
promotional discounts, advertising and product portfolio were imprudent
and was a significant hinderance to her business growth.
• After Carpenter Tan gave Zhang an ultimatum by suggesting that they
would allow other franchisees to open stores in the same area, she was
faced with a tough choice.
• She could acquiesce to the company’s demands and open a third store,
risking cannibalization of market share from the first two stores
• Another option is that she could quit as a franchisee and move to a more
profitable industry which interests her and build her business utilizing the
training and practical experience, she had gathered working for Carpenter
Tan.
 • Zhan did not have enough funds and was wary
Why did Zhang about failure of her business
choose to join
Carpenter Tan as a • She had a petroleum background and had no
franchisee instead experience of handling a business, franchise
of starting her own would help her in day to day operations and
business after provide standard procedures that can be
followed
resigning from her
first job? What kind • She was newly married and did not wanted to
of restrictions did jeopardize her family life and thus found the
this franchise model franchise model to suit her interest and
impose on the situation
franchisee?
 Restrictions imposed by Fanchise model
Why did Zhang
choose to join • Carpenter Tan did not allow any discounts or
Carpenter Tan as a promotional strategies other than those set by
franchisee instead Carpenter Tan
of starting her own • Word of mouth was the only strategy that
business after Carpenter Tan allowed and refused to fund
resigning from her other modes of advertisement
first job? What kind
• Zhan was not able to reduce operating costs
of restrictions did as Carpenter Tan did not allow
this franchise model
impose on the • Developing/adding Product portfolio other
franchisee? than set by the franchisor was not allowed
Was Zhang satisfied Zhang was not very happy at this point
because her store was not growing as
with Carpenter expected. Even after spending a lot on
Tan’s franchise the local newspaper and television
model in 2013 when during the Spring festival- the most
important festival in China but the
she earned her first revenue did not grow and because of
franchised store’s this she decided to start one more
investment back? store.
Why?
 • Zhang was profitable in 2015 with her
earnings more than that in the state job
that she was previously in.
• Even though her primary goal was to
Was Zhang satisfied increase her earnings, she was not
with Carpenter satisfied as the profits had been
Tan’s franchise decreasing since 2015.
model in 2015 when • In the age of digitalization, the model did
both her franchised not allow her to promote the products
stores were well; increase their portfolio to have a
experiencing growth better and larger assortment of products
or give promotional discounts.
bottlenecks? Why?
• She was worried that her profits would
drop further.
 • If the franchisee is dissatisfied, it would
lead to a friction and basic
understanding between the company
and the client further decreasing
channel efficiency.
What kind of impact
might the decrease • It spreads negativity among other
in franchisee franchisees and the turnover rate of the
company would increase as more
satisfaction have on franchisee would drop out making the
the development of company less reliable in terms of
the franchise investment.
model? How could • To prevent this, the company must be
Zhang’s satisfaction willing to change the policies according
be improved? to the business world outside; invest in
advertising or increase their portfolio to
keep the customers happy with new
products flooding the market.
 • I would negotiate on the advertising front
with the company as this is the easiest policy
to change.
• This is needed to sustain my profits as the
world had moved into the age of
digitalization where it is crucial to have better
advertising strategies.
As Zhang, would
you set up a third • In case of nonconformity; I would take the
franchised store? profits made till date and exit the contract
with the company as the motive was to work
Why? on something that I had an interest in as well
as it made a good profit.
• With increased knowledge about the system
as well as the knowledge gained through the
rigorous training and experience, I would
start another business with policies that
suited my way of working.