Charting your course with a business plan

Whether you’re operating a ceramic tile, stone, flooring or widget business it’s crucial to have a business plan in place.  The business plan, in essence, acknowledges your current position and identifies where you want to end up.  Articulating what you want to achieve and how you intend to achieve it are important steps that lead to a successful business.

 
A sailor who doesn't know what direction he is traveling will have trouble discerning between a good wind and an ill wind...

Just as the sailor has to steer his ship as he navigates the seas to his destination, business owners have to steer their companies through daily challenges and decisions.  Making the right decisions and course adjustments are much easier if you have a plan and a destination in mind.  Business planning is not a one- time process. Like the sailor who is constantly adjusting his course, businesses must also adjust course.

The current global and domestic economy has certainly presented challenges to many business owners, but also some opportunities.  If taking market share is part of your strategy this may call for broadening your product mix. Doing this requires intelligent research and planning - and every plan needs to include these key elements: Analysis of  strengths and weaknesses of both your company and that of your competition.

SWOT: Strengths, Weaknesses, Opportunities and Threats

The SWOT Analysis is a useful tool to determine internal factors (organizational) and external (environmental) factors affecting your company. Identifying strengths and weaknesses is basically an assessment of your company’s operations, products, services, and competition with the goal to capitalize on your strengths and minimize or eliminate your weaknesses. It is equally important to identify both opportunities and threats so you can either take advantage of a situation or ward off one.

Understanding the strengths, weaknesses, opportunities and threats of your company, and your competition’s, will help you determine your competitive advantages and disadvantages.  This will help to position your products and company in the market and develop the ideal product and service mix.

Don’t overlook these important steps:

Competitive Analysis 

The Competitive Analysis is meant to reveal your competitors’ strengths and weaknesses so that you may take advantage of them. Throughout history, military leaders who have emerged victorious have primarily been the ones who studied the strategies and tactics of their rivals. The same is true in business.

"Know your enemy and know yourself and you will always be victorious." 

-Sun-tzu, Chinese general and military strategist

These characteristics are based on your competitors’ assets and skills that make them a viable contender in the market. Once you determine what makes your competitors “tick,” you can start developing a plan of action that will help solidify your presence and leadership in the marketplace.

Remember though, that knowing your competition is a continuous process. Unless they are standing still, you need to keep a constant eye on their course too. You must know your competitors and your customers as well as you know your own company.

Positioning Your Product

Differentiating your product and services from your competitors is "Positioning" in marketing parlance.  Unquestionably one of the most important steps in business planning, it determines how to make your products or services stand out in the crowd, create value in your market and maximize your profits.  Positioning creates the perception of your product or company in the marketplace. Comparative examples are:

•    A commodity product equal to the competition that might create volume  vs. a high quality product that may produce lower volume but justify a higher price;

•    A company with a very knowledgeable staff vs. one positioned as a help-yourself operation with great prices.

Commodities provide the opportunity of high volume sales, where demand is already established.  When selling commodities, the key is to differentiate your company with the service you provide. Commodities can also open doors to allow you to introduce high end products that are more profitable.  High end products exude quality and credibility that can generate more opportunities and higher margins. The resulting product mix can perpetuate sales, increase market share and provide a higher average gross profit.   Remember, if you don’t differentiate yourself, your competitors will do it for you.

A key strategy in Positioning is determining your “value proposition.” If you’re interested in reading a bit more about this, here’s a short and simple overview
(http://www.businessballs.com/swotanalysisfreetemplate.htm).

Business planning is intelligently collecting information that allows you to realize the strengths, weaknesses, opportunities and threats to you and your competition.  With this analysis you can position your company and its products and services in an advantageous position that differentiates your company from the competition. Whether you do this yourself or use the services others such as my company, Ceramic Tile and Stone Consultants, or someone else from the Floor Covering Institute, I hope you do it  - and know that business planning is a must for success.

Donato

Donato Pompo  is founder of two well-known flooring industry companies focused on improving everything about ceramic tile and stone flooring and the businesses that produce and sell them. They are Ceramic Tile and Stone Consultants (CTaSC) and the University of Ceramic Tile and Stone (UofCTS).

Wood Flooring Forum: presenting forces of change in the wood flooring industry

If you are interested in learning about the growing flooring demand in Asia, the differences in channels (EU vs. US vs. Asia), environmental and legal issues affecting the industry (including an update on the ITC investigation), the growing pressure, opportunities and influence of sustainable building, or why marketing the environmental advantages of wood flooring is more important now than ever–then consider attending the Wood Flooring Forum (WFF) on March 21, 2011 in Shanghai. The forum is geared towards industry executives, buyers and marketers and takes place one day before Domotex asia/ Chinafloor opens in Shanghai.

The international Wood Flooring Forum (WFF)  presenting “The Forces of Change in the Wood Flooring Industry”– an overview of opportunities, obstacles and innovations in major flooring markets and the driving influence of sustainability. 

The Forum. A shortened formal general session makes room for a panel discussion by major wood flooring manufacturers including Armstrong, PowerDekor  and Nature. Afternoon breakout sessions offer intimate access to experts and practical information on market issues, channels and practices - presented in two tracks; one with an Eastern market focus and the other concentrating on Western markets.

Left: Shanghai Tower

A treat for the curious about sustainable building. Listen to an inspiring presentation about how sustainability in design, strategy and materials is creating one of the most sustainable structures in the world  - the Shanghai Tower. It uses wind turbines, a rainwater collection system, two envelope layers that surround nine interior sky gardens to improve air quality and an ingenious twisting design that mitigates lateral loads from wind. Michael Wiener, principal of Gensler, architects of the 121 story Shanghai Tower, will speak on the  future of sustainability as strategy and a viable financial approach in construction and materials.

Afternoon breakout sessions tailored to the Western audience will focus on Asia's market: (A parallel track will be presented for the those more interested in the US and EU markets).

Session 1: Defining the Asian Market. Asia’s construction boom is creating the largest floor covering market in the world. This session will examine the potential of China’s market and the burgeoning LEED and sustainable products market there. China is building more than 20 billion square feet of floor space a year to support its migrating populations. This huge construction boom will create an unprecedented shift in supply and demand and will also create opportunities for Western companies – a fact that some US manufacturers have already recognized, such as Anderson’s partnership with PowerDekor and Mannington’s partnership with Elegant Living, among others. (Similar information will be presented for both the EU and US markets).

Session 2: Doing Business in China. Business customs and practices in China as well as certifications, dispute resolution, transfer of title, banking and customs will be covered in this session. (Similar information will be presented for both the EU and US markets).

Session 3: Marketing and Sales in China. The channel to market in China is vastly different than in the US or Europe.  China’s largest flooring retailers will explain what suppliers must know about marketing, distribution and retail flooring in China. (Similar information will be presented for both the US and EU markets).

Panelists and participants include: Frank Ready, executive vice president of Armstrong World Industries and CEO of Armstrong Floor Products Worldwide; Mr Guo Hei, President of PowerDekor,China’s largest flooring manufacturer with more than 2,300 retail stores; Mr. Raymond Kwan, Deputy General Manager of flooring manufacturer Elegant Living (Baroque) with more than 800 retail stores in China; Mr. Ed Korczak, Executive Director of the National Wood Flooring Association;  Mr. Jurgen  Fruchtenicht, President of the European Federation of Parquet Importers (EFPI), a Brussels-based association of leading European importers of engineered and solid wood floorings;  Ruud Steenvorden, expert on European channels and logistics; Frederik Dreesman member of Home Decor International, a leading European wholesale distributor/buying group. Jim Gould, President of the Floor Covering Institute and Strategic Director of the WFF will give an overview of the growing Asian floor covering market and facilitate the discussion about the urgent need to increase marketing of wood flooring benefits.

Cost to Western attendees: - a reduced rate of $99 which includes lunch and translation services.

The Venue: the brand new 5 star Kerry Hotel in Pudong, Shanghai, only minutes from the Domotex asia/Chinafloor venue.

Date and time.  Monday, March 21st  9 a.m. to 4 p.m.

The forum is co-organized by China’s National Forest Products Industry Association, the Floor Covering Institute, LLC and VNU Exhibitions.

For more information or to register please contact Jimmy Zhao - jimmy.zhao@vnuexhibitions.com.cn or Jim Gould  jgould@floorcoveringinstitute.com.

If you are already headed to Domotex asia/Chinafloor (Asia's largest floor covering event) make sure you arrive in time to attend the WFF. If you haven’t made plans to attend Domotex, this is just one more reason to go.  I'll be there and I hope to see you there too.

 Susan

Susan Negley is Director of Communications for the Floor Covering Institute

New group opposes tariffs in engineered flooring "anti-dumping" investigation

This is an update to my last post about the anti –dumping allegations surrounding engineered hardwood flooring “Anti-dumping allegations will profoundly affect engineered flooring market regardless of investigation outcome.”

A group of distributors, retailers and importers has formed a third party in the ant-idumping and investigation of engineered wood flooring from China.  They are the Alliance for Free Choice and Jobs in Flooring and directly oppose the mission of the Coalition for American Hardwood Parity (CAHP) which is leading the cause against China.  The leaders of the recently formed group, AFCFJ, state its function is to educate themselves and the industry about real world conditions which will point to the fact that duties on imported products should not be increased.

So now here are the players in the bid for the engineered wood flooring market in America:

•    The action against China comes from the CAHP, lead by giants Mannington and Shaw. They claim that Chinese manufacturers have an unfair advantage (low prices) and are injuring the entire domestic hardwood flooring industry. They allege the unfair advantage is derived from Chinese government subsidies and manipulation of the Chinese yuan to the detriment of the US industry.

•    The AFCFJ group, which was formed at Surfaces, believes that the petition against China is a threat to independent distribution and is an attempt to eliminate private label programs in America’s flooring industry; effectively “driving the independents out of the market by cutting them off from their source of supply.”

•    A loose coalition of Chinese manufacturers and their US partners who strenuously deny the allegations and blame US manufacturers for losing market share as a result of their inefficient manufacturing methods and lack of innovation.  It remains to be seen whether this group will join with the AFCFJ.

•    The ITC (International Trade Commission) which is conducting the investigation -  has stated there is sufficient evidence to launch an investigation by the US Department of Commerce with a final determination expected around the end of July 2011.

More background: Read my previous post for more background. “Anti-dumping allegations will profoundly affect engineered flooring market regardless of investigation outcome.”
The AFCFJ has just published a FAQ with their full position. In the last 24 hours some of the flooring industry media outlets have published on this topic. Read Floor Daily: Group to Fight Wood Dumping Charge  and Hardwood Floors Blog: AFCFJ Formed to Oppose Tariffs on China.

AFCJF was formed by a collection of American distributors importers and retailers, the majority of whom purchase engineered hardwood flooring products from Chinese manufacturers which are then sold under private label brands. These products thus compete directly with products manufactured and sold by US manufacturers. The claims of the new alliance include:

•    The petition brought by US manufacturers is in reality a blatant attempt to eliminate American independent distribution private label programs.

•    Independent American distributors and retailers are delivering what consumers want in their particular marketplaces.

•    The real reason American manufacturers have lost market share is because of lack of innovation in product assortment including species.

•    Some US manufacturers manufacture their products in prison facilities whereas US law prohibits the import of products made using prison labor.

•    If US manufacturers are successful in their petition the number of American jobs lost across the US flooring industry will be far greater than those lost in manufacturing plants if the petition is unsuccessful. Furthermore selling prices will increase as a result of any increase in duty which may drive consumers to different less expensive flooring such as laminate or vinyl (much of which is produced off shore).

So that’s the update and as I said earlier the action is starting to heat up and confirms once again my often stated belief that the relationship between manufacturers and distributors remains highly adversarial. My thoughts at this stage are:

•    Interestingly, there has been no comment from or mention of either Mohawk or Armstrong -  the two largest US manufacturers both of whom have strategic relationships with Chinese manufacturers.

•    The issue obviously continues to take up valuable management time when all parties need to be focused on other aspects of the market.  By the way, engineered flooring imports last year amounted to about $120 million.

•    There vast majority of domestic product is peeled face and all imports from China are sliced face.  This may be a small distinction but it's a fact that most imports in question are different from the domestically produced product.

Finally I do not want to be seen to take sides in this issue but the following thoughts keep coming back to me:

Certainly for at least the last decade US companies have been saying they compete in a global economy which is a huge opportunity for them and one they must use all their efforts to exploit. Consequently I think it is shortsighted and unwise to want to add the proviso “provided it does not hurt our current domestic business.” We suddenly have three coalitions which may well lead to increased confusion and misunderstanding as well as continuing to feed the legal practitioners. Where will it go from here?  One thing is for certain – it will mean higher prices to the US consumer.

This is the perfect venue for you to weigh in and voice your thoughts…what do you think?

As always, thanks for reading.

David

David Wootton is President of The Wootton Group, an independent flooring consultancy, and a member of the Floor Covering Institute. He is past CEO of both Columbia Flooring and Harris-Tarkett.