7/28/16

Group 2 will be presenting

International Executive Master of Management

MANAGEMENT CONTROL SYSTEM & ENTERPRISE RISK MANAGEMENT

“WESTERN CABINETS“
Building a Cabinet or Building a
Transformation?
Group 1
King Napoli
Gresisce Manegeng
Luo Gui Lin
Nancy Suwarnapa6
Igna6us Agus Pujantoro

PART 1. ASSESSING THE “AS IS” ENVIRONMENT

EXTERNAL ISSUES :
Competition tougher, economic downtrend eroding profit & margins

Big Box Retailers & Large

Micro Cabinet Companies
Cabinet Manufactures
+ Offer some degree of
+ Low prices
customization 20% + Improvement in customization
+ No over head cost 33% + Economies of scale
+ Current trend : ability to
produce more customized
-  Warranty issues lead to
product, alternative sourcing
47% customer un-satisfaction
through internet, technology tools

-  No access to raw material

sourcing
-  Limitation in production,
capacity, slow deliver, lack of
professionalism
-  Heavily influenced by the
economic cycle and demands
Medium Cabinet Companies
+ Competitive forces of cost and customization
+ Access of sourcing
+ Western Cabinet is the largest firms in this
segment, with 2 or 3 others competitive companies

1
 7/28/16

INTERNAL ISSUES

Strategic Operational Personnel Financial Control

•  Core value •  Centered on •  People lost •  Wrong •  Often
drivers : the founder passion and technology problem with
•  Customer •  Lack of wander investment & design not
service communicati •  Individual economic production
•  Lead time of on inter performance cycle put •  Budgeting
cabinets process varies widely pressure in process not
cash flow fit the key
•  Quality and
operational value drivers
•  Efficiency •  Tighten
control in
purchase

EXISTING BUSINESS MODEL & STRATEGIC POSITION

TRADITIONAL VALUE CHAIN

6. Customer
3. Order 4.
1. R&D new 2. Design 5. Delivery & service
entry for Manufacture
cabinets cabinets Installation follow up &
production cabinets
warranty

STRATEGIC POSITIONED BY : LOW COST – DIFFERENTIATION MODEL

2
 7/28/16

PART 2. DEVELOPING THE APPROPRIATE BUSINESS MODEL & STRATEGY

Smith’s Idea : creating value creation for the customers, not just building a wooden
cabinets instead providing a holistic kitchen solution (for example)

Focus more in the marketing research, R&D as the key element value chain

Positioning change : manufacture specialize (provide standardize until customize

product) to knowledgeable designer that solve the hidden needs from customers

According to our group Smith’s idea are :

•  Future oriented
•  Adjust to market evolution in demand and expectation
•  Preparing the right action before too late

NEW BUSINESS MODEL : PORTER’S MODEL

Reduce operational cost by outsource their standard product & only use their internal worker to
produce customized order

Reduce cost by outsource the worker on manufacture

 
Create differentiation on their products by produce new line products with technology
integrated function

3
 7/28/16

FUNDAMENTAL PROBLEMS & FUTURE STRATEGY

Previous success story might not be valid forever, since market condition (external)
change therefore adjustment in strategy is sometime needed

Cabinets function is evolving, from just functional wood display to creating value to
solve customer’s problem more holistic

As problem solver, Western cabinet need to involve more in the creation & design
process more than in production

Shifting of emphasis between each value chain and define the most importance key
value chain

The fundamental problem is the business model that no longer fit to their market/
external situation & management control need to be improved

ALTER BUSINESS MODEL & STRATEGY OR JUST EXECUTE BETTER?

BOTH

PART 3. EXECUTING USING THE APPROPRIATE

MANAGEMENT CONTROL SYSTEMS

Smith’s Goal : more controls in business process

The importance of execution and management control is to ensure the business

model and strategy in place

•  Financial : budget control in process & headcount

1. R&D new cabinets
2. Design cabinets
3. Order entry for production
•  Non Financial : quantified output
•  Non Financial : quality of innovation
•  Financial : budget control in process & headcount
•  Non Financial : sensible to be produced properly
•  Financial : budget control in headcount
•  Non Financial : accuracy

•  Financial : budget control in procurement & manufacture cost

4. Manufacture cabinets •  Non Financial : quality & quantity control of output
•  Non Financial : timeline

•  Financial : budget control in process & headcount

5. Delivery & Installation •  Non Financial : fit & proper process
•  Non Financial : timeline

•  Financial : budget control in headcount

6. Customer service follow up & warranty
•  Non Financial : customer satisfaction

4
 7/28/16

PART 3. EXECUTING USING THE APPROPRIATE

MANAGEMENT CONTROL SYSTEMS

Technology will be used on the scope of :

-  Providing 3D virtual technology which enable customer to review their design to
get the “real” feeling, at the same Hme make easier for our designer to deliver the
idea more precise

-  Technology will bridge and transcribe accurately, with digitalize design that will
correlate all value chain to have the same understanding and avoid miss-
interpretaHon that will lead to mistake in producHon

-  Embedding holisHc soluHon to solve the customer hidden needs, related to
technology, to the product that western build

THE END

5
 7/28/16

Group
1 Western Cabinets – Building a Cabinet or Building a Transformation?
2
A case study
Ahmad Feiral Rizky Batubara
Felix Nurdin
Mahfud Syah
Roswida Sidauruk
Samuel Purwanto
Wendry Pasorong

2 1.1. EXTERNAL ASSESSMENT

Business Environment
Increase in number of import
of China products with lower
price
Macro Economics
Business is easily affected by
economic condition:
downturn and upsizing
(economic cycle)
Financial Technology
Each type of competitor has More automated machine
appears to have cost could be used to increase
advantage (economies of productivity
scale in the big box stores
versus low overheads in the
‘Micro cabinets’ businesses)

Micro cabinets companies Western does not fit into any Possible technology
have more access to better of the two labels (Big Box integration into cabinet
tools and technology, and and Micro cabinets) business: differentiation
also material through online

Low barrier of entry that

make this even more
fragmented market

1
 7/28/16

3 1.2. INTERNAL ASSESSMENT

Strategic Operations Personnel Financial Control Product &

Marketing
Positioning of Western Lack of Mix of experience and Budget allocation does Too many personnel R&D focus too much on
Cabinet in the market communication inexperience not reflect the budget has the power to product improvement
is not clear, whether between the designer, employee dedicated to key value purchase rather than new
they want to compete the plant, and installer drivers (customer product innovation
in low cost market or in service, lead time of
product differentiation cabinet, quality,
operational efficiency)

Potential uncertainty Centralized control New budgetary control Overlapping Company producing
about the mission/ which evolves around system to increase responsibility standard base
purpose/values of the the late CEO/ Owner accountability (existing products
organization system does not
provide useful
information)

4 1.3. Western Cabinets’ business model

and strategic position
´  Western Cabinet currently applied two business models:
ü  Producing standard basic products (low cost cabinets)
ü  Customer centric (customization) business model
§  Western Cabinet’s designers often gives customers interior design recommendation (untapped value added as
interior decorator for the end customer or project manager for contractors to have multiple trades)
´  Company’s strategic positioning in middle between large manufacturers and micro cabinet companies, in terms of
flexibility, professionalism, capacity-automation and delivery speed also source of raw materials
ü  No unique selling proposition; not clear as to which element of the value chain is the source of value to the
customer
ü  Focus on standardization while offering customization as an add-on and mass customization
ü  Both cost and customization are important –leading to potential ambiguity regarding the company’s strategic
position
ü  Company seems follows the industrial value logic
ü  Lack of understanding of the target market niche or target customer group
ü  Cannot really say whether the company is following a differentiation strategy or a cost leadership strategy (“stuck in
the middle”)

2
 7/28/16

5 2.1. What do we think of Mr. Smith’s idea to

create a new business model? Why?

´ It is a great idea:

´ In a highly fragmented market, Western cabinet need to have
differentiation
´ More importantly, Western Cabinet need to find their identity, which is not
only wood making, but more than that: for example, the reason behind
why they do this business. The bigger picture.

2.2. Western Cabinets should do

6
strategically - From a business model
perspective? Why?
Business Model: Customer intimacy
´ They have better flexibility compared to the big box
competitor yet better resources and perhaps quality
compared to the micro player.
´ Focus on customer needs, and leave out he mass-
product cost competitive product range
´ Redefine their short term and long term goal

3
 7/28/16

7
2.3 Do you think the fundamental issue is
strategic, business model, or execution?

It is STRATEGIC issue
ü A clear definition on the strategy will impacted to
the sustainable planning of Western Cabinets

8 3.1 How to change management

control system to improve execution?
´  Decentralize between division: Budget allocation to key value process
´  Clear responsibility on project structure: To increase customer satisfaction
´  Define clear strategic direction and make everybody align with common goal:
every KPI is cascaded from top to bottom

4
 7/28/16

9
3.2 How to use technology in support the
chosen business model or support
execution?

´ Management information system (transparency)

´ Automation in internal process
´ Technology Integration to leverage product
differentiation as a integrated customer approach

5
 7/28/16

Western Cabinets
Building a Cabinet or Building a Transformation?

IEMM Batch 4 - Group 3

Adhi Sugiharto
Eddy Prajitno
Jonny Wijaya
1

Part 1 – “As Is” Environment – Market Analysis

Assess the external environment of Western Cabinets
•  Big Box Stores & Large Manufacturers: Cabinet Industry is fragmented :
- provide value through increased customiza;on at lower prices. 1.  Big Box Store Retailers.
- able to form Strategic Alliances with key suppliers (low costs). 2.  Large Cabinet Manufacturers.
- rela;vely stable, no new entrants. 3.  Medium Cabinet Companies (Western Cabinet).
- warranty and customer sa;sfac;on issues. 4.  Micro Cabinet Companies.

•  Micro Cabinet Companies:
[CATEGO
- consist of independent carpenters with virtually no overhead. RY [CATEGO
- providing value through customiza;on using “hands-on” craIsmanship. NAME] RY
- oIen do not have access to all the raw materials. [PER
[CATEGO
NAME]
- limited ability to produce (capacity constraints), slow delivery and lack of professionalism. CEN
RY [PER
NAME]
TAGE CEN
•  Medium Cabinet Companies: [PER
- generally has customers and value chains similar to Western’s. ] TAGE
- compe;;ve forces of cost and customiza;on appear to be dominant.
CEN ]
- maintain a decent reputa;on (customer service, lead ;me of cabinets, servicing for TAGE
warranty, quality & opera;onal efficiency. ]
Western Cabinet, and
•  Current Trend: 2-3 compeQtors
- increase in imports coming from China.
- economy recently turned recessionary, but there are signs now in a recovery mode.

1
 7/28/16

Part 1 – “As Is” Environment - Five Forces Framework Analysis

Threat of New Entrants - LOW
Increase compe;;on, number of
players, and economic crisis make the
industry less a]rac;ve for new
entrants.

Supplier Power - MEDIUM Buyer Power - HIGH

•  Fragmented industry provide Industry Rivalry - HIGH •  Increased compe;;on from exis;ng
opportunity for supplier to •  Fragmented Industry. players and import from china has
switch their consumer. •  Increase compe;;on with offered wide choice of alterna;ves.
•  Strategic alliance between reduced profit margin. •  The economic recession has reduced
large manufacture and stores the purchasing power of the
reduce nego;a;on room. consumer (more price sensi;ve).

Threat of SubsQtuQon - MEDIUM

•  Increase customiza;on offer with low
price.
•  Low switching cost.

Part 1 – “As Is” Environment – SWOT Analysis

Assess the internal issues at Western Cabinets

Strength Weakness
-  Long experience in the cabinetry industry (27 years). -  Cash Flow pressures due to technology investment and economic
-  Good reputa1on with respect to customer service, lead ;me cycle.
of cabinet, service warranty, quality. -  Lack of standardized process due to low governance.
-  Good distribu1on network through contractors and -  Lack of customer and sales data due to inexistence of ERP system.
showroom in each major city in Canada. -  Lack of opera1onal efficiency due to mix of experience and
inexperience worker.
-  Lack of communica1on between the designers, the manufacturers,
and the installers.
-  Lack of accountability and controls due to inefficient budge;ng
process and purchasing authority.

Opportunity Threat
-  Lack of quality product from big box retailer, large -  ShiB in Consumer Trends might affect consumer demand.
manufacturer and micro cabinet companies. -  Tight labor market force the company to use inexperience workers.
-  Value crea1on product will provide differen;a;on on the -  Economic recession which lead to reduced consumer purchasing
company product offering. power.
-  Increase low price product offering from big box stores, large
manufacturers and import from China.

2
 7/28/16

Part 1 – “As Is” Environment – Value Chain Analysis

q  Manufacturing oriented company
q  Not clear which stage crea;ng value to customer

R&D Design Order Entry Manufacture Delivery & Follow Up &

•  5 FTEs •  35 Designers •  9 FTEs •  120 FTEs InstallaQon Warranty
•  Spend majority ;me •  Time:2hrs-24hrs •  Time:2hrs-36hrs •  Wood & Paint: 60%; •  25 Installers •  3 FTEs
to make adjustments •  Focused only on •  Func;on is very Labor & overhead:40% •  Installa;on on •  This step exist to resolve
to exis;ng product design the cabinets, administra;ve- of manufacturing cost. customer premises customer complaints
not maintain cust. oriented and •  Company doesn’t have by Installer (reac;ve) rather than
rela;onship some;mes the buying power with an;cipate problems
•  The installers
•  Design does not incur duplica;ve in nature suppliers (proac;ve)
usually working
add. charge •  Inefficient Support independently
func;ons.

AdministraQve FuncQon
§  15 FTEs
§  The composi;on of administra;ve func;on is adequate.

Part 1 – “As Is” Environment – Strategic PosiQon

What is Western Cabinets’ business model and strategic posi;on?

Business Strategy Growth Strategy

The compe;;ve forces of cost and customiza;on R&D Team spends the majority of its ;me
appear to be dominant no ma]er what geographic making adjustments to the exis;ng product
region or product line Western expands into. line.

Target Product
New

Low Cost Market

Scope Uniqueness DiversificaQon
Markets

Development
Broad
Cost Leadership Differen;a;on
Exis;ng

(Industry
Strategy Strategy Market Product
Wide)
PenetraQon Development
Narrow
Focus Strategy Focus Strategy
(Market Exis;ng New
(low cost) (differen;a;on)
Segment) Products and Services

3
 7/28/16

Part 1 – “As Is” Environment – Business Model

KEY KEY VALUE CUSTOMER CUSTOMER
PARTNERS ACTIVITIES PROPOSITIONS RELATIONSHIPS SEGMENTS Findings :

§  Numerous §  R&D §  Low Price §  Designer that capture §  Homeowner •  does not have clear value
Suppliers §  Design §  Customiza;on customer needs §  Contractors who are
§  Contractors §  Order Entry §  Design §  Installer for installing either renova;ng or
proposi;on
§  Manufacturing cabinetry building new homes à (Value Proposi;ons)
§  Installa;on §  Account manager for
§  Customer Support contractor
•  does not have specific
target customer
KEY CHANNELS à (Customer Segments)
RESOURCES
§  Showrooms •  does not have strategic
§  Physical asset alliances with suppliers
(Building, Warehouse,
Factories, Showroom)
à (Key Partners)
§  Human Resources
(Designer and Installer) •  tradi;onal manufacturing
companies – does not have
a working ERP systems
COST STRUCTURE REVENUE STREAMS à (Key Resources)
Cost Driven §  Product Sales Price
Value Driven – based on customiza;on design §  No Design fee - already part of the asset price

Part 2 – Developing The Appropriate Business Model & Strategy

What do you think of Mr. Smith’s idea to create a new business model? Why?
q  The idea to create a new business model is good.
q  Western currently used manufacturing company business model; however its business model
has several deficiency and its value chain processes does not show specific process which
provide value to the customers.
q  The current business model and its value chain process does not support Western to face the
increase compe;;on in the market.

Do you think the fundamental issue is strategic, business model, or execu;on?

q  Business strategy decision is the fundamental issue because the current business strategy,
value chain strategy and business model could not support the execu;on of this strategy in the
current market condi;on.

4
 7/28/16

Part 2 – Developing The Appropriate Business Model & Strategy

What do you think Western Cabinets should do strategically? From a business
model perspec;ve? Why?
q  From strategy point of view, Western can choose to implement either low cost strategy,
differen;a;on strategy or both. Based on the current condi;on, Western should choose to
implement both:
§  For low cost strategy, con;nue to produce current basic products with minimum
customiza;on op;on and simple technology integra;on (R&D process), while trying to
increase economies of scale and improve its value chain processes (Manufacture process).
§  For differen;a;on strategy, create one product line that will provide customiza;on with
complex design and complex technology integra;on to the customers (Design and
Installa;on process).
q  From business model perspec;ve, Western should realign its value proposi;on to the above
strategy, redefine its product offering and growth strategy, and choose its specific target of
customers.

Part 3 – ExecuQng Using The Appropriate Mgt Control Systems

Give advice to Mr. Smith on how you would change the management control
systems to improve execu;on.
Western should implement four lever of control framework to address the execuQon issue in the company
and provide conQnuous feedback to its business strategy and business models.

Belief System Boundary System
Communicate core values of the organiza;on, such as vision Define the limits of freedom (what not to do), such as codes
statement and mission statement. of conduct and ethics statements.

à Strengthen Awareness of Vision and Mission statement à Introduce code of ethics and Standard OperaQng
Procedure

InteracQve Control System DiagnosQc Control System

Provide strategic feedback and facilitate upda;ng and Monitor opera;onal performance based on quan;ta;ve
redirec;ng of strategy such as balance scorecard, data and preset limit, and measure progress towards targets.
compe;;ve analysis and market feedback reports.
à Implement ERP system and balance scorecard with key
à Use Balance Scorecard for conQnuous feedback performance indicator

10

5
 7/28/16

Part 3 – ExecuQng Using The Appropriate Mgt Control Systems

How would you use technology to support your chosen business model/strategy or
support strategic execu;on?

q  The technology can be used to support differen;a;on strategy by incorpora;ng technology as

part of value crea;on product.
q  The technology can also be used to implement four levers of control framework:
§  Diagnos;c Control System : ERP for monitoring the process, collec;ng the data and providing
data feed to BSC Dashboard.
§  Interac;ve Control System : BSC Dashboard that monitor and measure performance against
target and provide input/feedback for strategy analysis and review.
q  The technology can be used to provide value crea;on in the products.

11

6
 7/28/16

GROUP 4:
1.  Marlina Chandra

GROUP CASE: 2. 

3. 
H e r m a s Irawan
Michael Very U.
4.  Keni
Western Cabinets – Building a Cabinet or Building a Transformation? 5.  Gunawan Ali
6.  Andy R e v i a n t o
Jakarta, 28 July 2016 7.  Silvester S J

INDUSTRY OVERVIEW

$ 3 bio in Revenues

$ 1,795
Revenues*

2.7%
Annual Growth
2011 - 2016
Industry Scale

$ 825.5 19,786
Revenues***

Employment

2,158
$ 60
Revenues
Businesses

www.ibisworld.com – Estimated
Cabinet Manufacturing Industry
Data in the Canada Market (2016)
Total Revenues (in US$ mio) 2

1
 7/28/16

PART 1
Q1: Assess the external environment of Western Cabinets

Industry Revenues Focused Deliver Costs Economic recession

20%
33.3% Large
Large:
$$$$
Economies of Scale
$
Dominant market forces of increased
customization at lower cost

Similar structural issues within medium-

sized companies

$$$$$
46.7%
Medium
Improving ability from large-sized
Medium: companies to customize product outputs
Big Box & Large Medium Micro
Competitive Forces of Cost

Increasing use of technologies

$$$$$
Micro

Trend of direct import from China with

Micro: Low Quality and Customization Product
Standard Cabinet Relatively Low Cost
No Overhead
Customized Cabinet 3

PART 1
Q2: Assess the internal issues at Western Cabinets
Inefficient Cost Structure

Largely fixed-cost. Hard

to reduce the costs
X
40%

60%

No buying power to
negotiate costs with The lack of communication
suppliers between designers, the
plant, and the installers
Wood & Paint Labor & Overhead

The organization is being too reactive and the

The lack of maximizing the FTEs’ role to add
R&D is not focusing enough on the upcoming
more customers’ value
cabinet trends in anticipation of market demands

The need of the company to reconsider its focus

Western Cabinets has yet to exploit the benefits
in terms of customer segments in order to
of using the most recent technologies
maximize revenues 4

2
 7/28/16

PART 1

Q3: What is Western Cabinets’ business model and strategic position?

Western Cabinets Business Model
Partner Customer Customer
Key Ac0vi0es Offer
Network Rela0onship Segments
Low-Cost
R&D
Suppliers
Manufacturing Cabinets Enhance & Homeowners
maintain
Design relationship with
Cabinet for
Delivery &
Installation Customer

Customization
Customer High-end Contractors
Customized
Cabinets
Customer Service

Key Resources Distribu0on
Channels
Wood & Paint
Supplier Retail Stores

Talented
Designers
Direct
Distribution
Price

Cost Structure Revenue Streams STRATEGIC POSITION

Raw
High volume of
Materials Overhead mass-production High-end
Manpower products customized
products
5

PART 2

Q1: What do you think of Mr. Smith’s idea to create a new business model?

We think it is a good idea to innovate current business model from just

creating Cabinet into solving the customer problem. There are several
opportunities and weakness in current business :

Rooms for improvement are still widely available (e.g. alteration of basic
materials, insertion of technologies, distribution channels, etc.)

The need for innovation and continuous improvement as the competition is

getting fiercer by the day

The need to re-strategize the project management planning in

accordance with the economic cycle

Unefficient and miss comunication in current business process

affect to quality products and time to deliver

3
 7/28/16

PART 2
Q2: What do you think Western Cabinet should do strategically from a
business model perspective? Why?

Focusing R&D on Upcoming Furniture Trends

Like any other businesses, R&D plays a critical role in the innovation process. It’s essentially an investment in both technologies and future
capabilities which is transformed into new products, processes, and services, that satisfy the needs of the customers

Invest in Good Talents & Improve Manpower Planning

Employees define the competitive advantage of the company. No matter how good the product is, the company still need a stellar team to
design it, build it, improve it, sell it and service it. No matter how solid the business model, the company need great people to back it up and
deliver on the company’s promise to its stakeholders.

Utilize Up-to-date Technologies & tap-in Into Wider Range of Distribution Channels
With the help of technology, information travel fast. One way of optimizing the opportunities is by tapping into online and e-commerce
markets. This can help boost sales volume, widening distribution channels, and reduce overhead costs

PART 2
Q3: Do you think the fundamental issue is strategic, business model,
or execution?

Poor communication
throughout the production
supply chain up to the end-
Execution consumers

The lack of vision to capture

available opportunities and
commercialize the market trends
Business Model

The fundamental issue in Western

Cabinet is Strategic. Prior to Mr.
Smith’s era, the business was
pretty much run like a family
Strategic business (conventional). It was too
CEO-centric, micro-managed, and
lack of professionalism. 8

4
 7/28/16

PART 3

Q3: Give advice to Mr. Smith on how you would change the management
control systems to improve execution

Administrative Controls
Management could emphasize the dominant organizational system and yet, create a protocol which is the basis for everyone. A protocol
would enable new employees for easy access to understand how everything works. And on the other, a protocol would enable a
preconception for the clients how the work is done in the company.

Reward and Compensation Controls

Currently, the reward and compensation controls are not there yet. Therefore, Mr. Smith needs to pay attention to this particular aspect
which may drive the outcome of employees’ behavior. With standardized policy, each and every employee will have the same understanding
of what needs to be done to achieve his/her goals in terms of reward and compensation. Satisfied and happy employees will most likely
result in better performance across the organization

Strategy
Because we think the fundamental issue is strategy, we suggest Mr. Smith to create a solid strategy map to enable the company to deliver
value to the customer, which is to be a "problem solver". Mr. Smith does not foresee a business-as-usual situation. Therefore, he should
consider the potential business model innovation, moving from manufacturing cabinets to providing solutions to homeowners. He should
communicate the strategy to his employees and align their behavior towards the company's goal by using Balanced Scorecard.

PART 3

Q3: How would you use technology to support your chosen business
model/strategy or support strategic execution?

With high-pressure on cash flow due to past

technology investments and economic cycle, need
t o b e v e r y c a r e f u l i n d e t e r m i n i n g t h e
technology(ies) that will be used
1. 
1 Provide new sales channel via e-commerce to
sell Western Cabinets products. Customers can
communicate directly with designers about the
cabinet’s concept.
2. 
2 Integrated informa0on system to manage
current processes from the start of design un0l
the installa0on of the cabinet. Use technology
to meet customers’ needs using 3D design
applica0on so that the designer can get the
exact picture, deliver to the plant and improve
installa0on process.
3. 
3 Simplify reports to aid top management make
0mely decision
10

5
 7/28/16

WESTERN CABINETS
Innovate or better execution?

IEMM 4 - Group 5

Western Cabinets
2

¨  Started as micro companies, now a medium size

company building cabinets in Canada for
residential homes and condominiums.
¨  Revenue growth, to $60 m with 300 employees

¨  Organic growth by expansion in each major city in

western Canada

1
 7/28/16

External Assessment – The Cabinet Industry

3

¨  Competition
Micro Medium Big Box
companies companies

worse Economy of scale, price, quantity, better Western

professionalism Cabinets

high Customizability, overhead low

Industry revenue shares

¨  Increased customization trend
¨  Economy recession

Internal Assessment
4

In behavior transformation Mixed of experienced and

process from micro retailer to inexperienced employees which
medium companies impacts efficiency

Individual performance varies Top sellers bypass procedures to

despite standardize practices speed up quotes

Lack communication between Technology investment didn’t

designers, manufacturer and help with the communication and
installers. have put cash flow pressure

The budgeting process doesn’t

contribute to understanding the
risk of external environment.

2
 7/28/16

Business Model & Strategic Position

5

Value Chains Description

?
Research &Development Research cabinet trends, customer survey & designs
new product
Design Discuss cabinet customizations with customers and
translate them into manufacturing codes
Order Entry Key in the specification of a customer order into the
information system
Manufacture Manufacture ordered cabinets with certain level of
automation
Delivery & Installation Deliver and install cabinet, determine the quality
perceived by customer
Follow up & Warranty Ensure the job is completed with satisfaction of the
customer and handling user complaints.
Administration Management and various supporting role

Business Model & Strategic Position

6

No unique selling
position, not clear Differentiation or cost
which value chain is leadership?
the source value for
customer

Stuck in the
middle

Both cost and

Follow industrial No target market customization are
value logic group important

3
 7/28/16

Developing Business Model & Strategies Options

7

¨  External factors: Competition and Economy Recession

¨  What is the source of value? R&D? Design?

Manufacturing? Selling?

•  The product is standard cabinets (less complex)

Improve •  Value through economic of scale
manufacturing •  Can’t compete with big players

Become
Which one
Outsourcer
•  Doing manufacturing for other
is more
sustainable?
Develop more •  Focus on R&D and manufacture
complex cabinets

Mr. Smith’s Idea

8

¨  Redefined the business with new value creation:

solution instead of manufacture & selling, create
web-enabled kitchen set.
¤  Focuson R&D as the key element.
¤  Could identify niche or more targeted customer
segment

Risks:
¨  Economic recession

¨  Capability to adopt

4
 7/28/16

What’s Fundamental?
9

¨  Our answer: Execution!

Value Chains Current Assessments

Research & Development Mostly allocated to make adjustment to existing product

line instead of research cabinet trends
Design Focused on manufacturing product in demand by customers
instead of focus on customer centric.
Order Entry Administration-oriented, key factor: accuracy

Manufacture Cost & space are major constraints, large fixed costs.

Delivery & Installation The stage where the quality of product is perceived by
customer.
Follow up & Warranty Exist to resolve problems (reactive) instead of anticipate
problem (proactive)
Administration Management and various supporting role

Suggestions – Management Control Execution

10

•  Keep the current business model

Planning and •  Focus on customer service as value delivered to customer
Strategy •  Use information system for operational efficiency, automated entry, Human
Resource Information System and Customer Service

Informational •  Set and communicate performance plan and real time KPI

•  Invest in people skill development

Behavioral •  Knowledge sharing & strategic partnership

•  Cost control, Budgeting

Organizational •  Business Process Improvement

5
 7/28/16

What’s Next
11

¨  But these improvements will not change Western

Cabinets’ position.
¨  Still need to create new business model to make

fundamental shift in the long run.

¨  The improvements on execution can give the

company some grounds to exercise business model.