The Comfort Zone

Strategy for Survival and Growth of the Business

Prepared by:
Pranay Kumar
 Table of Content
1. Introduction............................................................................................................4
1.1 The Comfort Zone: The Company....................................................................4
1.2 IKEA comes as a competitor ............................................................................4
1.3 Challenges for TCZ...........................................................................................4
2. Strategy Development............................................................................................5
2.1 Exploring the Strategic Landscape....................................................................5
2.1.1 Strengths ....................................................................................................5
2.1.2 Weakness.....................................................................................................5
2.1.3 External Environment.................................................................................6
2.2 Strategic Tools...................................................................................................6
2.3 Constraints faced in Strategy Formulation........................................................6
2.4 Strategy Formulation.........................................................................................6
2.4.1 Vision..........................................................................................................6
2.4.2 Mission.......................................................................................................7
2.4.3 Strategy.......................................................................................................7
3. Balanced Scorecard formulation and implementation.............................................8
3.1 Devising balanced Scorecard.............................................................................8
3.1.1 Financial Perspective................................................................................11
3.1.2 Customer Perspective................................................................................11
3.1.3 Business Processes Perspective................................................................12
3.1.4 Learning and Growth Perspective ...........................................................13
4. Merits of Balanced Scorecard Approach...............................................................14
The Comfort Zone

1. Introduction
1.1 The Comfort Zone: The Company
The Comfort Zone (TCZ) started as a company that specialized in selling
cheap second hand furniture to Landlords for furnishing the flats they
rented out to the students. Then over a period of 25 years, it evolved as
furniture provider specializing in bedroom and lounge furniture range
mainly aiming to the middle market. The product range consists of
branded as well as unbranded furniture. It has grown considerably in size
and now employs 25 people including the shop owner. It is basically an
owner’s company and his management style can be termed as a mixed
of paternalistic and authoritarian.

As far as promotion strategy is considered, the advertisements are

published in the local newspaper every week and advertising becomes
more intense in the months of December and January as it is the time for
festival shopping etc. On a weekly basis, the busiest days for the
business are the weekends. This often creates problem with the staffing
as the staff members wish to go for off on weekends resulting in
absenteeism on these days.

The product delivery process that TCZ follows is such that it is quite
comfortable for the customer to place orders and then receive the goods
as per his convenience at his place. This adds a point of a personal
relationship with the customers.

1.2 IKEA comes as a competitor

IKEA is a privately held international low cost home furnishings retailer.
IKEA furniture is well known for its modern, utilitarian designs and low
costs. An IKEA store is about to start its business in the city about two
kilometers from TCZ’s store. It will target the same segment of
customers to which TCZ is catering too. TCZ is going to face a stiff
competition on several grounds.

1.3 Challenges for TCZ Advantage IKEA

As IKEA is well known for its strategies of
standardized goods, TCZ is going to face
problems on the price front. IKEA is about
to offer products similar to that of TCZ at
- Better brand recognition
- Large product range
- Shorter product delivery
period.
prices about 50-70% low. Another challenge is that of the product range.
Even at such low prices, IKEA is having a product range larger than what
is being offered by TCZ. The third challenge is that of low delivery
charges and time. Since most of the products are standardized, they are
readily available in the warehouse. Adding to it is that IKEA delivers its
products in unassembled form, which makes them easier to transport as
compared to a completely built unit. It is difficult and expensive to
transport a complete bookshelf as compared to its parts being shipped
first and assembled later.

2. Strategy Development
2.1 Exploring the Strategic Landscape
We have explored the strategies based on an analysis of the strengths
and weaknesses of TCZ which forms the internal factors and the external
environment.

2.1.1 Strengths
The strength of the company lies in its long presence in the vicinity, and
its attention to the customers. It has worked by taking in view the
customers’ convenience. It gets the products delivered to the customer’s
place after consulting with him at a convenient time. Due to its presence
in the local market for a long time, it has also created a reach among
customers.

This company follows an astute marketing strategy combined with small

inventory holding, which has worked very well in its favour.

2.1.2 Weakness
There are several issues that put a constraint to the company’s
performance. The weakness is the long delivery time of the products.
Since the company maintains a small stock of fast moving goods, an
order apart from those available takes a time of 2-13 weeks. The long
time gap may sometime deter the customer from availing TCZ’s services.

Though the company has been taking up measures to have good

relations with its customers, it all gets over after the product is delivered.
No evidence was seen about the company using the consumer
information for repeat orders. A proper record keeping can help in getting
repeat orders. For this purpose, a good IT system is required which is not
there in the company.
Due to the customization strategy adopted by the company, the product
prices are higher that what can be expected from standardized stores. So
incase of presence of another low cost player, the company will be at
severe loss.

2.1.3 External Environment

Till now there was no competition to TCZ from other players in this
segment, so it was easy going for it in a monopolistic existence. Based
on the Five Forces analysis, the power of buyers here was quite low due
to absence of any other option available to them. The power of suppliers
is also quite low as it is the only company selling their products in this
range. Adding to that is the relatively large number of suppliers to the
company. Apart from wooden furniture, there can be a threat from plastic
moulded furniture. The segment of furniture, i.e. bedroom and lounge
furniture, this company is providing cannot be catered to by molded
furniture. So this threat is also quite low. Competition is almost
negligible, so no threat exists from the rivals. The most significant here is
the threat of new entrants, which it is about to face soon. The low entry
barrier to this industry makes it more susceptible to new entrants.

2.2 Strategic Tools

Here, in order to develop a strategy for the company, certain tools will be
used which are mentioned here below:
 SWOT analysis to determine the company’s status
 Michael Porter’s Five Forces analysis for industry analysis.
 Balanced scorecard to formulate strategy and monitor its
implementation.

2.3 Constraints faced in Strategy Formulation

 Lack of quantitative information like the annual report and balance
sheet.
 Unorganized nature of industry and non availability of information
on other players.
 Information regarding consumers’ attitude.

2.4 Strategy Formulation

2.4.1 Vision
Keeping in view the purpose company is serving, a vision statement can
be developed. It should also take into account what TCZ aims at
achieving at the end of next five to ten years. So the vision of the
company can be:
 “Make homes more comfortable to live in”

A mission statement, goals, objectives, controls and plans are very much
required for implementing the strategies.

2.4.2 Mission
The mission statement shall pave a path for achieving the vision. So it
should bring out the values and characters brought in by the company.
So the mission of the company can be as follows:
a. Provide comfortable furniture at affordable prices.
b. Creating and maintaining a good relationship with the customers.

An objective is the action promised through mission being limited by the

time duration. TCZ is already into providing comfortable furniture, and
has been catering to the middle class who go for value for money
products. Going for further reduction of prices may not be immediately
feasible i.e. within the period of next two years, but it can be possible
after it has braved the competition from IKEA and then moved on for
growth strategies.

The second objective of creating and maintaining good relation with the
customers must be taken up with immediate effect as it will have an
impact on the survival strategies of the company as well.

2.4.3 Strategy

2.4.3.1 The Survival Strategy

The most important issue in front of TCZ is that of sustainability. In case
of competition from IKEA it has to sustain the impact from it. To address
this issue, a short term strategy is to be developed. The following steps
can be used as a tactical solution:
a. Increase the product offering: As per the case, TCZ is mainly in
to bedroom and lounge furniture, so the product offering can be
increased in other ranges as kitchen furniture like furniture and
cupboards, and garden furniture which go well with the lifestyle of
the people there.
b. Reduce the delivery time: The long delivery time poses a
serious problem for the company. So in order to reduce the
delivery time, most crucial step can be that of increasing the
warehouse size, keeping in mind the products that are asked for
the most by the customers.
c. Leveraging on technology: Making use of technology, TCZ can
keep a track of the inventory, use trend analysis to determine the
demand and supply scenario for different products and thus may
help in keeping the inventory costs at its lowest. Making better
usage of customer related information can help in getting repeat
orders from its customers.
2.4.3.2 The Growth Strategy
After sustaining the impact of competition, TCZ will have to move on to a
strategy that may put it up on the growth path. This path shall include
the following steps:
a. Opening of another store in an adjacent town or starting
another store in the same town offering little more customized
products than IKEA. With its knowledge of the competitor as well
as the local people, the company can be able to capture more
customers.
b. Providing solution than products: Another step that can be
taken up along with the new store, it can go on to offer complete
interior solution to the prospective customers to protect and
increase its margins. This will help in increasing the profitability
margins with minimal investments and can be worked out well
with its already existing contacts in the furniture industry.

3. Balanced Scorecard formulation and implementation

3.1 Devising balanced Scorecard
The balanced scorecard studies a business from four perspectives which
are as depicted in the diagram below.

Financial
Perspective

Customer Vision and Business Process

Perspective Strategy Perspective

Learning and
Growth
Perspective
Perspectives of a Balanced Scorecard
 Each of these perspectives is being shown in the table below, keeping in
view the vision and strategy for the company.

Learning &
Financial Customer Business Process
Growth
Perspective Perspective Perspective
Perspective
1. Increase
efficiency of
present
employees
1. Retain
1. Reduce delivery time 2. Higher
1. Sustain sales existing
Objectiv 2. Entering solution employee
2. Increase customers
es Segment involvement and
Profit 2. Acquire new
commitment
customers.
3. Faster transfer
of skills/
competencies to
new store
1. Increase the
1. i)Reducing the delivery efficiency by
1. Maintain
1. Repeat time by 5 days. 10%
existing sales
business from ii) Entering into closer 2. High motivation
level in next 4-
existing ties with level
Targets 5 months
customers Manufacturers 3. Capturing the
2. Increase
2. Doubling the 2. Entering solution learning and
profits by 10%
customer base segment in 6 months to transfer to the
within a year.
a year time employee at the
new store.
1. Revenue per
1. i)Days taken from
1. % of employee.
order booking to
customers 2. Administering
delivery.
1. Level of sales giving repeat questionnaire at
ii) Inventory level
2. Growth in business regular interval
maintained by
Metrics profits Vs 2. Number of for checking
manufacturers for fast
Growth in new employees’
moving items
sales. customers motivation level
2. Monitoring monthly
added 3. Time invested in
progress to enter the
training for the
solution business
new store.
1. Training present
1. i) Modularize the
employees.
existing product
2. Improving
offering.
employee
1. Educating ii).Analysing the past
1. Offering satisfaction by
existing trend for identifying the
special adopting roaster
customers fast moving items and
discounts to system.
about new entering into a tie-up
maintain sales. 3. i)Capturing the
Initiativ offers. for the level of
2. Launch of skills/ core
es 2. Finding inventory level
another store competence and
customers’ 2. i) Start with concept
and value develop
needs for note
added standard
customized and finalisation
solution. training
solution overall plan within a
modules.
month
ii) Use of computer
ii) Developing monthly
for the above
milestones
purpose.
The above mentioned points have been discussed in detail in the
sequence in the following section:

3.1.1 Financial Perspective

Objectives
The most important objective from the financial perspective is to
maintain a certain level of profit. While TCZ is facing competition from
IKEA and is under survival mode, it should try to maintain the profit it
had in the past. Then after this duration it can go for steps to increase
the profits.

Targets
Making the objectives more specified, the targets have been clearly
stated for the short term as well as long term strategy. First target talks
about maintaining the existing level of sales in the next few months
during which it is under severe competition from IKEA. Then TCZ will go
for taking initiatives that will help it increase its sales, so the target for
that time is to achieve an increase of 10 percent in the profits.

Metrics
For measuring sustained sales, the level of sales shall be the criteria.
This shall give an immediate indicator if the company is losing its sales
to the competitor. This shall be used till the competition for TCZ takes a
slowdown. There after the measure shall become a comparison of growth
in profits to the growth in sales. This factor will become important as
tackle the competition; the margins will be allowed to fall in the form of
discounts. So after sustaining the competition, TCZ will focus on
increasing its profits by increasing its sales. Then this measure will
provide an ideal measure of growth on both the fronts.

Initiatives
To sustain the competition on the price front, the prices shall be allowed
to fall in the form of discounts. This special discount shall be offered to
the regular customers to the shop. Then TCZ shall go for expansion to
another store and will be offering products that are customized as well as
present a better value for money proposition.

3.1.2 Customer Perspective

Objectives
In this situation when a competitor is offering standardized products at
significantly low prices, it becomes difficult to make the customer stick to
own firm. Thus the main objective here becomes to retain the existing
customer base. Losing customers to the competitor will hurt the business
a lot. After this attempt of retaining the already existing customers,
acquiring new customers also becomes a very important objective as
that will decide the growth for TCZ in the future as well as help in
improving margins..

Targets
Bringing repeat business from the existing customer base is very
important because it shows the customers’ belief in the store. So this
becomes a target for survival of TCZ. While looking for increasing the
customer base, an optimistic target has been setup. This may not be
difficult to attain due to the expansion plan of the store.

Metrics
The repeat business from customers is a very significant aspect from the
business point of view. So as a metric the percentage of customers who
are bringing repeat business to TCZ has been taken up. The second
metric is easier to work with but is equally significant. The number of
new customers that are being added is a measure that can indicate the
response for the initiatives taken by TCZ. And since TCZ is going to add a
new store, this measure will be important to give an idea of how well is it
doing in the new city.

Initiatives
Creating awareness of ones product is a very important aspect in any
business. Similarly, in this case, if one is offering new propositions, the
customer must come to know of it, else there is no point in offering
anything new. The first initiative here should be informing customers
about the new products as well as the special discount offers going on.
The second initiative takes in account TCZ’s idea of offering more
customized solutions. Customers shall be asked for what would be their
response for the complete interior solutions and what would they like to
have customized.

3.1.3 Business Processes Perspective

Objectives
The part of the business that is proving a bottleneck for TCZ’s
performance is the large delivery time of products to the customer, so
the first objective here is to reduce that delivery time to a point where it
becomes competitive to IKEA if not better than them. Another area the
company shall look at is to enter the value added solution segment
which indicates another line of business. This is required to open another
avenue particularly to harness the developing skill and competence
level.

Targets
As a target here is the reduction of days in delivery of products to the
consumers. Since different type of products require different level of
work, so it is not possible to deliver each of them in the same period. So
the target here is to reduce the delivery time by five days depending on
the work and customization of the products.

Entering solution segment is another target that can be achieved in 6

months time. This can be achieved by understanding the customers’
requirement with that of the competence level of the company.

Metrics
Since the delivery time is a very important factor here, it is brought in
here as a metric. The time taken from the booking of the order to the
order delivery has to be measured and accordingly measures to speeding
up the process shall be taken.

Bring modularity to the products will help in speeding up the product

manufacturing. So another important metric here can be determination
of the percentage of furniture or their parts which can be standardized
and modularized.

The entry into solution business needs monitoring of the blueprint plan at
regular interval which shall be at lest once in a month in the beginning
and at shorter interval later.

Initiatives
It has to reduce the time of delivery of products by having a good
inventory of products. This can be done effectively by keeping a tab on
the type of products moving fast or the ones in vogue. A proper
monitoring will help it in reduce the delivery time which is a huge
advantage that IKEA will have over it.

Attempts to modularize the furniture and their parts will help TCZ in
speeding up the delivery process. Along with that, increasing the size of
warehouse will help in speeding up the delivery process for fast moving
products.

Developing monthly milestones after finalisation of blueprint is must.

This comes after preparing the work breakdown of the over all plan.
Meticulously following the plan is foremost to enter a new area which
may have its own uncertainties.

3.1.4 Learning and Growth Perspective

Objectives
In this perspective, how well are the employees are equipped with
knowledge to cater to the functions of the company are considered the
most. This knowledge makes them utilize the time in a better manner.
Thus the objective here is to increase efficiency of the employees.
Further the high involvement and commitment level is desirable.

Targets
To have a specific target on the efficiency aspect of employee, an
increment by 10 percent has been set up. High motivation level of these
employees is required to be achieved for getting high involvement.
Another target here is to capture and analyze the learning of the existing
employees and transfer it to the employees of the new store. This target
has been has kept to obtain the same level of productivity from the
employees of the new store as is obtained from the old store.

Metrics
The best measure of productivity per employee is in the calculation of
revenue generated per employee. This is due to the fact that it considers
the employee involved directly in the sales process as well as those
involved in the back office operations.
High motivational level is possible to be measured by administering
questionnaire at regular interval.
Another important measure here is the time taken to train the employees
of the new store. This reflects on the learning obtained from the previous
operations experience and how well has that been converted into
training modules.

Initiatives
Since the learning and growth perspective talks about what has the
company achieved in terms of knowledge, an important aspect of people
management exists in TCZ. The staffing problem is already there in TCZ
and if not managed properly, it can be problematic when going for the
second store too. So to sort out this issue, a roaster should be prepared
allowing the staff to go on leave in different days of the week, keeping
the strength maximum on weekends when the shop sees the maximum
footfalls.

The employee training should be emphasized in accordance with the

growth plans the company is having for the future. For this purpose,
training modules should be developed and standardized to maximize the
learning and minimize the time taken to train. Leveraging of technology
in terms of computer will a long way to achieve this.

4. Merits of Balanced Scorecard Approach

There are several merits of implementing the balanced scorecard which
is very evident from the study as well as the strategy formulation and
implementation process. The most important of all here is the
consideration of the entire organization in a single plan and not handling
different departments individually. This gives a complete view of the
overall strategy and the planning is for the benefit of the organization as
a whole. After planning for the complete organization, it allows the
departments to have their specific objectives and accordingly plans to
achieve them. Such a planning involves the entire organization in the
process.

Apart from this the management utilizes the balanced scorecard to

obtain the following objectives:
 Obtain clarity and consensus about strategy
 Achieve focus
 Leadership development
 Strategic intervention
 Educate the organization
 Set strategic targets
 Align programs and investments
 Build a feedback system
One only needs to be careful about the implementation challenges particularly the
resistance from the existing management style.

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Bibliography
1. The Balanced Scorecard: Translating Strategy into Action by Robert
S. Kaplan, David P. Norton, 1996.
2. Balanced Scorecard, 2nd Edition by Nils Goran Olve, Anna
Sjostrand, Wiley, June 2006
3. Lecture Notes on ‘Strategy into Action’ – Prof Mike Rawlinson