Marketing and Upper Price Points
2. What are the benefits and risks associated with the acquisition of PLFD? Risks * Manchester only authorized to use Paul Logan name for three years (p. 1) * PLFD lines characterized by bold styles and fashionable colors, whereas MH favored conservative, functional designs (p.
3) * New products introduced by MH could not use the Paul Logan brand name (p. 3) * Heavy competition from cheaper imports (p. ) made it difficult to maintain mid- to upper price points * National Furniture Company (biggest PLFD competitor) stepping up advertising and initiating price reductions in response to MH/PLFD merger and aggressively pursuing a strategy to exploit the uncertainties associated with the pairing (p. 5) * PLFD core customers more fashion-conscious than MH core customers and considered themselves to be trend setters (p. 5) * A major furniture chain which carries PLFD products has expressed displeasure with the merger and is reevaluating their decision to carry PLFD products (p. ) * The debate associated with the brand-name transition strategy and the huge implications associated with the ultimate decision (p. 6) * Promotional debate, which has huge distribution network implications (p. 7) * PLFD favored “push” programs in the form of volume rebates and purchase allowances * MH favored “pull” programs such as national advertising * Should co-op advertising strategy aim at the trade (push), the end consumer (pull), or some combination of both? Benefits: The merger dramatically expanded MH overnight and provided them with a strong brand and an instant market leader position in the household furniture segment (p. 1) * Over 150 SKUs of high quality furniture with a #1 or #2 position in the categories they competed in (p. 2) * PLFD is an instantly recognized and respected brand in furniture (p. 2) * The acquisition included PLFD sales, management, and design teams, 10 distribution centers, inventory for all 150 products, and the right to use the PL name for three years (p. ) * PLFD had a well established sales force (p. 2) * PLFD had strong ties to leading distribution channels (p. 2) * PLFD had a talented design team (p. 2) * The acquisition is very consistent with MH’s ultimate goal of providing a complete family of household furniture products in mid- to upper price points (p. 3) * Both MH and PLFD produced products in the mid, mid-upper, and upper price points (p. ) * Synergy potential between PLFD’s design skills with respect to colors, shapes, and textures coupled with Manchester’s engineering strength, manufacturing expertise, and ergonomic innovations could be a winning combination (p. 3) * Strong housing market (lots of new construction) and US economy in general in early 2005 * Furniture manufacturers relied on innovative and stylish product innovations to fuel growth once the housing boom of the 2000s cooled (p. ) * MH/PLFD partnership is a good combination of innovation and style * PLFD had strong relationships with buyers from major furniture chains, department stores, and wholesalers that sold to the smaller, independent furniture and specialty stores (p. 4) * 2003 Manchester survey showed that 30% of customers favored upscale department stores, 25% specialty shops, 20% large furniture chains, and 15% small, independent furniture stores (p. 5). * These preferences consistent with where PLFD products are currently sold (45% upscale furniture stores and chains, 30% specialty stores, and 25% department stores (p. 4)