Case

EyWood Furniture Ltd Case

Introduction

At the end of 2009, Jackson Lee, president of EyWood Furniture Ltd (EWF) noticed that the company had lost market share for simple desk to its competitors, however its market share for corner workstation had substantially increased. He found that EWF’s prices were much higher than its competitors’ prices for simple desk but lower for corner workstation. These price differences made Jackson confused and he decided to hold a meeting with Tracy Ng, his controller, Simon Lau, his director of manufacturing, and Anthony Wong, his director of sales and marketing to discuss the problem.

Company Background

Established in 1999, EyWood Furniture Ltd (EWF) is a medium-sized Hong Kong furniture manufacturer which aims for providing economical and durable wooden furniture in great China area. The products provided by EWF include desks, bookcases and wardrobes, among which desks are major products. EWF set up its head office at Wanchai, Hong Kong to handle issues like marketing, finance, accounting, and management. Because of high costs of labor and real estate at Hong Kong, EWF built up a factory at Guangdong, China to conduct all manufacturing activities.

In response to the increasing awareness about environmental protection and more stringent legal requirements in target markets, EWF has rigid specifications for materials that could be used in production. The EWF experts carefully scrutinize not only the hardwoods they select, but also the veneers they select. EWF purchases hardwoods from suppliers in Malaysia and Indonesia, and veneers from suppliers in Taiwan. All suppliers chosen by EWF have their own warehouses in Guangdong, so usually it just needs several hours to send the ordered materials to EWF’s factory after EWF places a purchasing order. Materials other than woods include water-resistant glue which is formulated from polyvinyl acetate, relevant hardware (e.g., screws) which is usually made from steel,...