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Analysis and Recommendations on Strategic Direction

Porter’s Competitive Advantage Model

Porter’s competitive advantage model addresses the current dilemma at Smithfield Custom Furniture. The model can offer strategic guidance to achieve competitive advantage by either cost leadership or differentiation. Cost leadership according to Porter is about how a company can achieve economies of scale, operational efficiency, and cost minimization (Aji et al., 2021, p. 970). Cost leadership allows the company to attract more customers by giving them cheaper and more affordable prices than the competitors. At Smithfield, cost leadership is in line with the first option which is mass production and mass marketing the furniture at the lowest price point. The modernized systems at Smithfield’s production can help with cost leadership strategy and attract a broader customer base.

On the other hand, the differentiation perspective is where Smithfield can produce an exclusive and custom furniture line from premium materials. This exclusive line of furniture indeed will demand a premium price for the unique value they give to customers. Differentiation can create a competitive advantage for Smithfield if the customers find the furniture to be upscale from the rest of the furniture from competitors. The differentiation strategy will make Smithfield a much more competitive manufacturer for the top 7.5% of income earners across the globe. Comparing the two competitive advantage strategy options, Smithfield Custom Furniture should follow a strategy that aligns with the core competencies of the company, market conditions, and vision.

The Best Strategy to Pursue: Differentiation Strategy

From the two strategies, the best option for Smithfield is to pursue differentiation to bring a competitive advantage. Smithfield should produce an exclusive and custom furniture line that appeals to the top earners in the world. The decision comes from the view that the current furniture market has been saturated with competitors over the past few decades. Cost leadership strategy in a market where competitors have flooded can be detrimental for Smithfield as they would face intense price competition, low-profit margins over time, and commoditization of the furniture (Ketchen & Short, 2013, p. 90. Also, modern facilities can help produce high-quality custom furniture. The global rise in incomes demands more luxury brands and Smithfield can use this opportunity to find new customers in the high-end products. Therefore, the differentiation strategy is a good opportunity to stay competitive and attract high-end consumers seeking a luxury brand of furniture.

Market Research and Planning

To pursue the Differentiation strategy, Joan’s next action should be to perform comprehensive market research and strategic planning. Foremost, she should investigate the specific design preferences and features of the high-end customers. Analyzing the target market will offer insights into the preferences, lifestyle, and purchasing behaviours of a given customer segment, which in this case is the 7.5% of high-income earners globally (Rosário & Dias, 2023, p. 8). Joan should also assess the competitive landscape of luxury furniture. Evaluating competition means checking for the key manufacturers, their weaknesses, and gaps in the luxury furniture market. This knowledge combined with the internal strengths of Smithfield Custom Furniture can offer high-end customers premium-quality furniture. A strong marketing and brand strategy will position Smithfield as the top furniture brand for those seeking exclusive furniture. The company can collaborate with renowned designers to create a better brand and use a reliable supply chain. These steps will help Smithfield Custom Furniture to successfully enter the luxury furniture market.

References

Aji, A. I., Ramadhan, K. I., & Hidayatullah, L. (2021). Analysis of cost leadership strategy and core competitiveness points of Air Asia. In International Conference on Industrial Engineering and Operations Management. http://ieomsociety.org/proceedings/2021rome/429.pdf

Ketchen, D. J., & Short, J. (2013). Mastering strategic management. Simon Fraser University.

Rosário, A. T., & Dias, J. C. (2023). How has data-driven marketing evolved: Challenges and opportunities with emerging technologies. International Journal of Information Management Data Insights3(2), 100203. https://www.sciencedirect.com/science/article/pii/S2667096823000496

 

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