MK Marketing Management,
CASE: FINE HOMEFURNISHINGS OF KAZAKHSTAN. September 2008
1. What are the principal, and secondary problems faced by Mr. Voinov?
One of the principal problems of Home Furnishings Company (FHC) is quality control and low quality of home furnishings for export. Another principal problem is unexpected fluctuations in demand in local and export markets. To deal with it Mr. Voinov should make this fluctuation to be expected – to analyze reasons of these fluctuations. The secondary problems are low ROI, caused by low profits due to low quality and sales as well as variety of labor problems, complicated by psychological reasons. Particularly, it is difficult for local workers to switch on and off higher quality standards only required for export.
2. Why is the business of home furnishings a cyclical and a seasonal business? How can Mr. Voinov solve the "cause" of the problem?
Home furnishing business is cyclical and seasonal because it depends on micro- and macroenvironment. When oil prices rises, domestic demand for home furnishings increases because Kazakhstan economy heavily dependent on oil. Increase in oil prices means economic growth for Kazakhstan and gives more purchasing power for its citizens. Moreover home furnishings products are not a first-needs products, so the demands for it growing when country well-being is increasing. At the same time foreign demand is decreasing when Kazakhstan oil price goes up, because Kazakhstan exports becoming too expensive and less competitive on foreign market.
The demand on export depends from interest rates because a lot of purchases in US and Europe are done on credit. Lower interest rates mean that consumers can afford cheaper credits (low interest expenses), so they buy more. Controversially in case if interest rates increases, it is becoming more expensive for consumers to borrow funds (interest expenses increase), so they buy less.
The seasonality of export demand for home...