Elegant Furniture

Chimanbhai Mehta, a successful cloth trader from Ahmedabad, put his son Aditya 
through a leading business school in 2003 so that he could start a new business. They
were looking for a suitable business to invest in. After looking at different options,
they chose to start a furniture business. Chimanbhai said;

“Ahmedabad is no more the peaceful laid-back city it used to be. Buildings

and malls and flats are coming up everywhere. It was during a morning
walk that I hit upon the idea of getting into furniture business. It is now
fashionable even among the middle class to spend on furniture and
decoration. In the olden days people used to buy flats late in life and then
continued to accumulate furniture and decorate it over time. But now
things have changed. Organized builders have come into the field and
loans are available for asking from the banks. People are paying for not
only their flats but even for the interiors before moving in the house.
People want a ready-to-live house.”

After thinking over this for some time, Aditya went to his father one day and said;

“Father, I think getting into modular kitchens will be a good idea. I have
observed the history of the Indian markets. Out of all the rooms in the
house, the entry seems to be easiest in the kitchen for convenience
products. The turn of other rooms like hall,  bathroom and bedroom
comes later but the kitchen is their priority. This happened for cooking
gas, mixers, fridges,  microwaves, chimneys. There is no reason why it
should not happen again for the modular kitchens.”

Chimanbhai agreed and soon a company called Elegant Furniture was formed.
Immediately thereafter, the question of applying for a bank loan came up. When
Chimanbhai and Aditya met Naveen Shah, the manager of the Indian Bank -
who stayed in the same building as theirs - this is what he said;

“Do not treat making of the application for financing as a “financial

exercise”. These days we do not judge applications for new ventures solely
based on financial criteria (like “days of inventory”, “Creditor days”,
“Operating Margin”) but we go more by  the soundness of the business
plan supporting the application. We want to see the quality of the
managerial thinking that has gone into making of the business plan.
Because, without sound plans and good management, the financial
projections will turn out to be a mere calculator exercise. For example,
there may be several ways of organizing your sales function or promoting
your product but we want to know why you have chosen a particular t
option and not the other one?”

Case by Prof S K Palekar for academic use & private circulation only. JAN 2020
Faced with the task of having to make a plan – including the marketing and sales
function - Aditya proposed that a market research be carried out so that the plan could
be made on a surer footing. The father did not much like the idea:

“I don’t think this is the right way to start a business when you have no
income. You will learn everything that is there to learn by doing the
business and not by making  questionnaires.”

Nonetheless Chimanbhai decided to go along with the son’s proposal. Aditya

appointed a market research agency to conduct a survey at the cost of Rs 3.5 Lakhs.
After 3 months, Aditya got the following “summary of findings” from the agency:

1. 65%  of what people spent on their kitchens was for “new  kitchens”.

The rest 35% was on re-doing or repairing existing kitchens. . 
2. Of this total spending on kitchens, the break up was as follows:
New kitchens : 50% on  cabinetry ,  35%  on  gadgets, 15%  on civil  work.
Re-doing existing kitchens : 60% on  cabinetry,  20%  on  gadgets,  20%  on civil 
work
3. The gadgets  business goes to retail  stores. The civil  work business goes to
small  time  contractors. Of the cabinetry business : 70% goes to local
carpenters,  30%  are ready-made kitchens. The carpenters work in-situ and on-
site to customize design, make and fit the kitchen. The modular kitchens are of
standard designs which are pre-fabricated and the fitting and installation is done
in-situ and on-site.
4. The customer’s source of finding civil work contractors and carpenters is the
hardware stores. These stores have a symbiotic relationship with these
craftsmen. The stores provides them with leads from prospective customers. In
turn the craftsmen provide business to the store because they buy materials
through these stores.
5. Most  of the customers  of these carpenters are  not  too  sure  in the end if  they 
paid a reasonable price  for  the  work  done  by these carpenters .  They  are 
also  not  happy  with  the  finish  of  the  work  carried  out  by these small  time 
carpenters. The work turned out by these carpenters looks quite different from
what appears in the catalogue and pictures shown at the time of placing the
order.
6. Fitted kitchen decision is more expensive and therefore people want to see
photos and demos of the kitchens supplied and also get many questions
answered before they give order.

After seeing the report, Chimanbhai exploded;

“Is this it – this scrap of paper ? You paid Rs 3.5 Lakhs for these few
lines? Aditya, each line costed you Rs 30,000 – was it worth it? It is all
common sense – nothing is new! I do not really know what you are going
to do with all this. How is this going to help you make a business plan? At
10% of this cost we could have taken our whole family out for a dinner to
the best 5 star hotel in the city. ”

Case by Prof S K Palekar for academic use & private circulation only. JAN 2020
Was Aditya correct in ordering the market research?
Whether and how this information
An be used for make a good marketing plan?

Case by Prof S K Palekar for academic use & private circulation only. JAN 2020