FATHER SATURNINO URIOS UNIVERSITY

ACCOUNTANCY PROGRAM

T & C FURNITURE: A STRATEGIC COST MANAGEMENT

ANALYSIS OF A HYPOTHETICAL BUSINESS IN FURNITURE
MAKING INDUSTRY

A final requirement for MACC 317 – Strategic Cost Management (A32)

Instructor: Carl Angelo E. Cupay, CPA

Members:

ABALORIO, CARRYL MAE

CABALAN, GRACE ZESH
EMPIC, GAYE
LARONG, MARK DAVE
MONDEJAR, JINGLE
SUMAMPONG, KEA HANNAH

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Table of Contents

I. Defining the Business.........................................................................................................................3

Business Name..................................................................................................................................3
Vision................................................................................................................................................3
Location.............................................................................................................................................3
Size....................................................................................................................................................3
o Number of employees............................................................................................................3
o Investment requirements........................................................................................................3
o Organizational Structure........................................................................................................4
o Departments...........................................................................................................................5
Products.............................................................................................................................................5
Customers..........................................................................................................................................5
How the business works....................................................................................................................5
Finance sources.................................................................................................................................5
II. Environmental Analysis....................................................................................................................6
PESTLE Analysis...........................................................................................................................6-7
SWOT Analysis..............................................................................................................................7-8
SWOT Strategy.................................................................................................................................8
Benchmarking...................................................................................................................................8
III. Formulating Strategy.......................................................................................................................9
Critical Success Factors.....................................................................................................................9
Competitive Advantage Strategy..................................................................................................9-10
Discussion on Chosen Strategy........................................................................................................10
Other Pricing Strategies..............................................................................................................10-11

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I. Defining the Business

Business Name
“T & C Furniture”

Vision
To be the best and trusted provider of high quality, comfortable, and ideal wooden tables and
chairs furniture in the city and be one of the best in the whole country. To inspire people in knowing
and bringing out what image of wooden tables and chairs furniture satisfies their everyday life,
enjoying comfort and self-fulfillment.

Location
T & C Furniture will be located along one of the highways in Brgy. Ampayon, Butuan City.
This location is perfect for the business as there are things needed to consider due to its nature, it must
be not near from residential areas or houses but still accessible to the consumers. The reason for this is
that the production of these products follows certain processes like cutting, smoothing, polishing the
wood etc. that may cause noises, and paints will be used for the aesthetics of the furniture that might
produce odors, these matters might cause disturbance if there are houses nearby. The establishment
will be divided mainly into the store itself at the front where finished products will be displayed and
customers will be entertained, and the production area at the back portion. The location might not be
at the heart of the city but the barangay is gradually developing, establishments are starting to grow
making it one of the consumers best places to look for their needs.

Size

o Number of employees

T & C Furnitures has two relevant jobs in the production department specifically
hand craftsman #1 and #2 for the manufacturing of the tables and chairs. The company also
offers customized product that is based from the customers specification and satisfaction.

o Investment requirements

This company uses an extensive need for a working capital. Customized artisan wood
products are produce using premium quality of raw materials, a good amount of labor force
and a proper space or facilities for the production.

The company will need an investment capital worth Php 5,000,000 in order to start
the business. Total capital needed for start-up includes start-up expenses, tool, equipment,
machinery, software and supplies. The company plans to acquire a long-term 3-year
commercial loan, and the partners also plans to contribute capital for the facilities that will
help the company meet the requirement for the start-up.

Start- Up expenses (in peso)

Expenses  0
Total Expenses 0

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Start-up Assets (in peso)
Cash required 5,000,000
Total Asset   5,000,000

Start-Up Liabilities (in peso)

Liabilities 3,000,000
Total Liabilities 0

Planned Investment (in peso)

Investor                              5,000,000
Total planned Investment 5,000,000

Total capital                       5,000,000

Total Funding                    5,000,000

o Organizational Structure

Even small business like us also needs an efficient flow of organizational structure.
The company is a partnership business. It will be run by the appointed managing partner. The
managing partner is responsible for the overall planning and would decide for the best result
and development of the business.
The business will have 3 different departments: the accounting department which is
responsible for the finances to support business activities, the manufacturing department
which is responsible for the production, assembling and the making of the products. And the
sales and marketing department which are responsible for growing the sales of the business,
maintaining the good relationship to the customers, and monitoring and developing the
products, making strategies, planning for the betterment and development of the business.
There are two jobs needed in the Manufacturing department. Job 1 for the production
of the Table products and Job 2 is for the production of the Chair products. 

Organizational Structure

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 o Departments

The T&C furniture Inc has a total of 3 separate departments namely: Accounting and
Finance Department, Production Department, and Sales and Marketing department. (1) The
accounting department handles the company's finances. They are responsible for all the
business operations and finances to support the business activities. (2) The production
department is responsible for creating the product which includes cutting, bending, molding
of the wood, assembling, and finishing of the product. Between production stage, the
department works to enhance the efficiency of the production or assembly line so that it may
achieve output targets set by the business and guarantee that finished products are of the
highest value and quality to consumers. And lastly, (3) the Sales and Marketing Department,
they are responsible for generating the sales and promoting the business.

Products
The company offers table, chair sets, and dining sets which compose of a table (it may be
round, square, rectangular, or in any shape that a customer wants) and chairs that are made out of
molave, kamagong, narra, yakal, and tanguile trees. The business also offers product customization
according to customer’s wants and satisfactions.

Customers
The target customers for the business are: (1) business owners, and (2) all of the customers
who want to have a premium quality, fashionable and durable wooden tables and chairs furniture.

How the business works

T & C Furniture is a small partnership business that manufactures furniture- specifically
wooden tables and chairs, wherein it specializes in the manual production of high-quality furniture
primarily using only one material which is wood. These items may be made on a stock or custom
basis. Raw materials used in the production of the products are supplied directly from a manufacturer
of wood-based raw materials in the region.
Since design and fashion trends play an important part in the production of furniture, the
company creates their own designs with the help of the services of industrial designers, and customers
are also free to design and configure items themselves to suit their needs and tastes. Production
process then comes after where the items are made with the help of hand craftsman. Finished custom-
made products are delivered to customers, and stock products are displayed in the physical store of the
business and are for the sales department’s hands to sell off.

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 Finance sources
The five partners in the partnership business plan to contribute a capital amount of P500,000
each and has a plan to acquire a long-term 3-year commercial loan for the facilities, raw materials,
and other expenditures that may incur in the starting up of the business for the amount of P2,500,000.

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II. Environmental Analysis

PESTLE Analysis
T&C Furniture a small business which sells premium artisan and customized furniture
products; customer’s satisfaction, product quality and reputation are the main concern of the business.
PESTEL Analysis would help identify various factors on external macro environment factors of the
business. The content and result of this analysis will be the organization’s basis on improving, and
making better strategies. The model includes Political, Economic, Social, Technology, Legal and
Environmental factors in which the business operates and relates.
POLITICAL
The political factors are those that are influenced by the government. These factors are
significant and will highly affects the company, for they are based on the government’s stability, rules
and regulations, and policies a business must follow. These are the following political factors that
T&C furniture should analyze and watch out:

 Consumer Goods Pricing Regulation - Is there a Consumer Goods Pricing Regulation

Mechanism?
 Taxation - rates of taxation and incentives
 Government bureaucracy and intervention in the Home Furnishings & Fixtures
industry.

ECONOMIC
Economic factors are important as it plays a large part on what decisions a company should
decide and how they would execute such decisions. Economic factors directly affect the business and
economic issues will always have an impact on a company. Economic associates to the goods,
services, and money, and some of its factors include:

 Interest rates
 Exchange rates
 Taxes
 Inflation
 Economic growth
 Unemployment rate
 Recession
 Demand/Supply
 Labor cost
SOCIAL
One of T&C Furniture goal is to produce products that are customized and personalized to the
taste of a person and will capture the hearts of the society. We need to consider the social factors the
business may face in the industry and in the place where it operates. Society’s culture, beliefs,
attitudes, population, employment rate and status are just some of the significant things that have a
great impact to the business. By knowing these, we can have a better view of the society needs and
market wants. These are the social factors we have analyzed in the PESTEL model:

 Employment rate

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  Society status, structure, hierarchy and power
 Education level and standard in which the business operates
 Culture and beliefs of the market or possible consumers
 Leisure interest especially in furniture products or display

TECHNOLOGICAL
Technology innovations are raising fast and disrupt various industries globally. As a business
that mainly produces manufactured products, in our industry we need to have a well-developed
equipment and technology to catch up to the world trend. Creating an easier way of production and
convenient marketing and distributions are highly recommended in the furniture industry. The
technology analysis of T&C Furniture involves awareness and understanding the following impacts:

 Impacts on product processes and production

 Impacts on the value chain
 Technological advancement of other companies/competitors
 Impacts of the cost in different category of the business

LEGAL
As for legal matters, this is something a business needs to consider thoroughly before
establishing and operating such firm. Here specific laws being implemented by the state should be
abided in order to produce products and services:

 License and permit of the business to operate

 Trademark being peculiar to any existing establishments already
 Raw materials being procured from authorized people
ENVIRONMENTAL
With the increase in consumer’s environmental awareness and slow but gradual shift towards
sustainable living standards, a shift in trend of wooden furniture is taking place gradually. As a result,
these are the factors that are affecting the wooden furniture industry and must be taken into
consideration:

 A great attention of consumers has been paid to metal and plastic furniture.
 Not sustainable in the long-term as other cheaper manufacturers emerge
 Release of great amount of carbon footprint

SWOT Analysis
After the T&C Furniture performs PESTLE analysis, the following are the opportunities and threats
regarding the factors that affect or will affect the business.
Opportunities
● Consumer Goods Pricing Regulation
● Economic growth
● Exchange rates
● Demand/Supply E
● employment rate

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 ● Education level and standard in which the business operates
● Leisure interest especially in furniture products or display
● Trademark being peculiar to any existing establishments already Raw materials being
procured from authorized people
Threats
● Taxation - rates of taxation and incentives
● Government bureaucracy and intervention in the Home Furnishings & Fixtures industry.
● Interest rates
● Taxes Inflation
● Unemployment rate Recession
● Labor cost Society status, structure, hierarchy and power
● Culture and beliefs of the market or possible consumers Impacts on product processes and
production
● Impacts on the value chain
● Technological advancement of other companies/competitors Impacts of the cost in different
category of the business
● License and permit of the business to operate
● A great attention of consumers has been paid to metal and plastic furniture.
● Not sustainable in the long-term as other cheaper manufacturers emerge
● Release of great amount of carbon footprint

SWOT Strategy
T&C Furniture is an emerging business in the furniture industry. It surely is not an easy
journey provided by the factors listed above. But regarding those factors, the business will make full
use of all the opportunities to maximize the generation of profit, satisfy the needs and wants of the
customers and make sure that the business will run on a long-term basis. And also the T&C Furniture
will not avoid the threats, instead the business will come up strategic alternatives, plans and solutions
to minimize or extinguish, if possible, the threats of the business
T & C Furniture is a small company that makes furniture, particularly wooden tables and
chairs, with a focus on the hand creation of high-quality furniture using just one material. In the world
of furniture industry in the Philippines, there are plenty of it including the Cebu Furniture Industries
Foundation (CFIF), Chamber of Furniture Industries in the Philippines (CFIP) and more. Filipino
innovation and industry are the foundation of the T&C furniture industry's long-term success along
with other businesses. This allows for greater agility and flexibility in producing furniture that meets
the demands and preferences of customers.

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III. Formulating Strategy

Critical Success Factors

Operations (Process, work). This is considered as one of the critical success factors in the
furniture business because it is important to have a right way and method of how the business
operates, in terms of how they process each product or request, in order for the given projects not to
consume much time and customers to get satisfied to receive their orders as soon as possible.

Marketing. As it is a startup business, it should establish a clear and persuasive marketing

strategy that would attract potential consumers, by this, it will help the business to be known and
grow, not only locally, but nationally and then internationally.

Strategic Focus (Management). This is essential for businesses, especially to those

businesses within the same industry, as starting up, focusing on strategy is a must needed action to
keep feet on track, to have a clear and focused attention towards the planned path to take, goals and
vision, and what the business wanted to achieve in the future.

Finances (Assets and Liabilities). All businesses need finances in order to operate, that is
why the management needs to manage finances correctly, assets must be used appropriately to avoid
unwanted liabilities that could put the company at risk, worst to bankruptcy.

People (Personnel and staff). As the organization involves customer-centered focus, staff
and personnel must have good relationships with the clients, as the customers are important because
they are the ones who help the business grow, having good communications with them helps to build
strong and long-term relationships.

Skilled Resources (Workers). Doing product customization can be difficult and critical, but
having skilled resources, such as workers that are good at their job and specialization is a great
advantage to the business to be competitive and be ahead compared to business competitors.

Tools, Equipment and Facility. As the nature of the business involves working on wood to
convert into furniture, a facility is necessary to keep the raw materials needed, a good location to
avoid unwanted complaints from people, and tools and equipment for advancement purposes.

Competitive Advantage Strategy

As the nature of the business is to produce products that deal with designs, trends, and
customer’s preferences and needs, the best business strategy that can be applied to T & C
Furniture is Differentiation Strategy. Being unique and advanced compared to the
competitors can be a great advantage of the organization. Providing the products that would
satisfy the needs of the customers could be a great reason for them to give their loyalty to our
business.
Differentiation Strategy also dwells on customization of products depending on what
the buyer would prefer to be the design, standard, and outcome of the furniture. With this,
the value added due to the particularity of the product may permit the firm to charge a
premium price. And making sure that these products being produced do not have an

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alternative, substitute or alike will make the consumers choose our business to be the source
of their satisfaction through providing them high quality unique products. In addition, these
people do not look at the price of these items as what they focus on is to have the best kind of
product that suits their taste and interest in the furniture industry.
This strategy would greatly give contribution to achieve the critical success factors of
the organization being mentioned above. The operations, strategic focus, skilled resources,
and tools, equipment and facility will mostly be based on what and how the products will be
processed in consideration of what the customer would prefer, the satisfied customers will be
the one to recommend the business to the public that would solve the marketing matter and
for the finances, the value added on every item and process that will make the business earn
much profit will secure the financial matters of the organization.

Discussion on Chosen Strategy

The business can apply a differentiation strategy by means of letting consumers

decide their new design idea in production. Thinking, planning, designing, and execution
emerges as a result of decision-making procedures with both the designer of the business and
the customer that provide a more realistic representation of the uncertain status of state
transformation. This condition can lead to differentiation of customer’s consumption habits.
Technological advancement can also help and contribute to the production process in ways
that this helps lessen the time of production with the right machinery and resources being
used to make the product.
In order to implement this strategy, the company should first, design the
organizational structure accordingly to what the business needs. Creating a strategic map for
better understanding of the planned process is a must before proceeding to implementation.
The management will create a healthy environment in the workplace for everyone to be
comfortable and motivated and everyone in the business should engage in the plan and follow
the strategic map for directions. In each department, there will be someone who controls and
is responsible in that certain area to take care and maintain product quality. Implementing this
strategy often requires resources and skillful employees, it does not solely depend on the
management. To be able to successfully implement this strategy, all employees and workers
should cooperate and be work-oriented to obtain this desired quality production.

Other Pricing Strategies

The following are the relevant pricing strategies that T & C Furniture used in order
for the business to achieve the critical success factors listed above:
● Cost-plus pricing – This helps the business to reduce the cost of additional market
research, it provides a consistent and full coverage of incurred cost and the business
rate of profit, and easier for the business to communicate with the customers about
changes in price. This type of pricing strategy helps our business to monitor or trace

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 the cost incurred, whether the cost produces good results for the business or it is not
necessary for the business to incur such cost. Furthermore, the business can easily
provide and/or explain the information to the customers if there are changes in selling
price caused by some factors (production cost, environmental circumstances, etc.)
because this strategy has a clear and easy formula on making the selling price. The
more our business controls the flow of the cost, the higher the rate of return will gain.
● Penetration pricing – This pricing strategy helps the business to acquire consistent
and steady profit even if it is low and assure long-term profitability of the business.
Setting the business’s selling price lower than the other competitors attracts more
customers, whether it is a customer of the competitor or not.
● Psychological pricing – The business also uses this kind of strategy to make or utilize
psychological impact to the customers in order for them to assume that the selling
price is much cheaper than the selling price of the competitor's product.
● Loss-leader pricing – The business uses this kind of strategy to attract customers by
making promotions, like discounts or coupons. Even though the business is giving
discounts to the customers, the business will not incur loss because T & C assure that
the discounted price will not be below the cost price of the product.
● Discount pricing- The business uses this strategy to promote the businesses product
sales that are not part of the high-selling stack. As we all know, Customers are easily
drawn to products that have lower prices than usual because they feel like they are
making a good deal.
● Emphasizing Quality- The business also uses this strategy to emphasize the products
superior-quality compared to other brands. This strategy is effective when the
customer is satisfied with the product and willingly pays the price though it is
noticeably pricey.

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