Good Case Study On Haverwood Case

Haverwood Furniture produces medium- and high-priced furniture. The company is quite large and in 2007 its before-tax profit equaled to $3.7 million. Haverwood operates similar to many other furniture manufacturers and uses traditional distribution channels.
Now Haverwood has a problem concerning the planning process for the next year. The household furniture industry has been gradually growing and Haverwood has had more or less similar profit growth rates. Now the company sells its furniture in 1,000 department stores and specialty stores nationwide. The company needs more resources in order to maintain the growth rates, in particular 4% in 2008.
There two alternatives that make choosing an appropriate business strategy for 2008 complicated. The first option is to spend additional $225,000 on consumer advertising. On the contrary, the company may decide not to increase the advertising expenditures and focus more on hiring more sales people that will work directly with the stores and the customers.
Both alternatives make sense in the case of Haverwood Furniture. Consumer advertising may increase the number of customers and make them more confident about the quality of the furniture. Consumer advertising is usually carried out through the shelter magazines in order to highlight the new furniture. According to the various studies, the customers find buying new furniture enjoyable, but they lack the knowledge concerning the different models of furniture and for them the price becomes the defining factor. So the information about the products in the shelter magazines will help Haverwood Furniture become more popular. Moreover, the case study suggests that 85% of the customers read furniture ads and 95% get ideas from magazines, before they decided to buy furniture. At the same time, 99% of the customers state that they prefer to talk to a salesperson before making a purchase. It means that the second alternative may also be very effective. What is more, the company has a very limited budget, because it has set a limit on advertising in the amount of 5% of sales. Hiring one more sales representative would need only $147,000 a year, but it could resolve a lot of issues related to the sales and administration. The company is going to add 50 more accounts in 2008 and 10 sales representatives will not cope with so many duties.