West Lake Home Furnishings Ltd.

SITUATION ANALYSIS

Westlake Home Furnishings Ltd. deals in lighting and light fixtures and has expanded considerably in this segment since its inception.

Lighting and fixtures market in 2007

The $71.5 billion global lighting and fixture industry is a high growth, competitive industry. Quality and product innovation remain key competitive strategies, while price has emerged as a strong platform in recent years(1). Therefore, in order to survive in this industry it is imperative for Westlake to diversify geographically as well as within the product line. The market appetite can be judged by the fact that an expansion in revenue occurs despite a reduction in price.

Competitive strength of the market

The market for lighting and light fixtures in Canada consists of a large number of players. As a result of this, no particular seller can influence the price and hence create a considerable impact on the market share. Moreover, ease of entry allows new competitors to enter the market in varied product segments. Product differentiation in such a case becomes an important factor. This is true especially in terms of introducing product variety such as custom lighting and features which Westlake has identified as a potential growth area.

Distribution Channels

A major marketing component of the firm refers to the channels of distribution that are in operation presently. Huge dependence on the wholesale segment can be observed which accounts for about three quarters of the Westlake's sales. This channel of distribution particularly is extremely price sensitive and imposes pressure on margins. The retail sector not only provides more visibility to the firm's product but also helps in appealing to new target audience.

The Internet market

The lighting fixtures industry is profoundly affected by the growing role of the Internet.

A) Process- Until recently, the manufacturing process was separate from that of marketing and selling. Internet is changing things dramatically, affecting lighting design, procurement of components, marketing, relations with installers and clients.(3)

B) Business to Business scenario (B2B) - Internet also plays a role of procurement in the B2B sector by affecting lighting fixtures distribution, both from the producer to the wholesaler and from the producer to stores. Changes are more visible in North America, where the use of the Internet is more widespread, but Europe and industrialised Asia are following. (3)

C) Profits- Unlike a brick and mortar store, cyber markets do not give rise to physical costs and thereby not only ease pressure on margins but also serve as a useful advertising tool.

Westlake has identified huge potential in the Internet segment but has not been able to effectively realize this potential.

Emerging markets

Global lighting fixture demand is estimated to grow 5.1 percent annually (4). Fastest gains are predicted to occur in developing areas, particularly China and India. Besides, a rise in living standards, coupled with increased real estate activity, is expected to position China as the leading market for lighting equipment, with growth in the industrialized Western Europe and North America exhibiting less than global average. As a result, Westlake's major production shift to China is not only a cost effective measure but also opens up new target markets.

Technology and Innovation

Westlake's competitive advantage lies in the fact that they employ modern designs in manufacturing their product. This is an important aspect in the current market scenario where spurred by elevated energy costs and growing environmental concerns, businesses and households

...