Should frontier workspace solutions limited (FWSL) consider adding luxury vinyl tiles (LVT) to its residential sector product portfolio to increase profitability?

Should Frontier Workspace Solutions Limited (FWSL) consider adding luxury vinyl tiles (LVT) to its residential sector product portfolio to increase profitability?

Frontier Workspace Solutions Limited (FWSL) is a high-end service provider distributing furniture-related products and services sourced from over seventy brands. However, amidst the pandemic, FWSL has experienced a profit decline due to the majority of projects being put on hold. Over 2019, its profits have declined by 12 million HKD, which made up nearly 10% of the business's total profits. Additionally, due to the predicted growth of Hong Kong’s residential market, FWSL plans to expand its residential sector in hopes of increasing the revenue in this area of the business. Hence, the business is considering adding luxury vinyl tiles (LVT) flooring to its existing residential sector product portfolio to increase profitability.

Firstly, I would like to thank the Director of FWSL for her cooperation and willingness to help me throughout the process. I would also like to thank both of my parents for their support and constant encouragement. Finally, I would also like to thank my business teacher for the professional advice and guidance that he has provided me with during this project.

FWSL is a multinational distributor of furniture-related products and services catering to a variety of sectors. On account of the pandemic quietening Hong Kong’s economy, many of FWSL’s projects have been prolonged or postponed, leading to a significant fall in profits. Hence, FWSL is considering adding luxury vinyl tiles (LVT) to its residential sector product portfolio to increase profitability.

This report examines the feasibility of selling LVT in the residential sector by conducting interviews with FWSL’s director, head of sales, and a project manager from a firm specialising in interior design. Potential clients were also surveyed to gauge the level of interest in LVT flooring and define the target market. Hereafter, a SWOT analysis was composed to summarise the interview results, while an Ansoff Matrix was used to determine the nature of the strategy. Additionally, CFFs were constructed and Lewin’s FFA was used to quantitatively evaluate the driving and restraining forces for this proposed change.

In conclusion, FWSL should add LVT flooring to its residential sector product portfolio to increase profitability. It is recommended that additional financial resources are acquired beforehand for purchase costs, marketing is prioritised, and a just-in-case stock control system is implemented.

Since 2002, FWSL has been a purveyor of furniture-related products and services with distribution sites throughout the Asia Pacific. With a commitment to “help clients create great spaces”, FWSL aims to work with environmentally-conscious partners whilst diversifying its product portfolio so that new sectors can be serviced. Currently, FWSL offers products and services across commercial, hospitality, residential, and institutional markets.

With the ongoing Covid -19 pandemic, most of FWSL’s projects have been put on hold and prolonged, resulting in a loss of 12 million HKD in 2019 and forcing the company to cut costs accordingly. To address this issue and improve profitability, FWSL is considering selling luxury vinyl tiles (LVT) in its residential sector. The firm is targeting the residential sector because of the forecasted availability of approximately 28,000 residential units in the coming year (Ka-Sing 2022). As such, FWSL believes that the residential market demonstrates a high potential for growth.

Should Frontier Workspace Solutions Limited (FWSL) consider adding luxury vinyl tiles (LVT) to its residential sector product portfolio to increase profitability?

Two interviews were conducted with internal stakeholders within FWSL: the director of the company and the head of sales (Appendix 1 & 6). The interview findings consisted of data regarding the business’ rationale and objectives, and the feasibility of implementing this project based on its current standing. Such qualitative data was acquired as the foundation for the SWOT analysis, Ansoff Matrix, and Lewin’s Force Field Analysis. The quantitative data was used to aid the construction of the cash flow forecast.

Clarence Lui, a project manager at Kompass Creative Design Limited, was interviewed (Appendix 8) to gain insight into the level of demand for LVT flooring and its advantages and disadvantages. This information was used to create relevant questions for the survey.

A survey (Appendix 9) was sent out to 20 potential customers to gauge the level of interest in LVT flooring and better define the potential target market. Despite the respondents being selected through convenience sampling, it had been assured that this group would likely engage with a business like FWSL.

Paul Hoang’s business management textbook was used with his revision guide to define and apply relevant BM concepts and correctly interpret the qualitative and quantitative data provided. FWSL’s official website was also used to obtain relevant background information.

Despite the objectivity of the interview questions, information is being collected from individuals who have large stakes in the success of the business and would therefore refrain from portraying it negatively. As such, their responses may include elements of bias. This might affect the construction of strategic tools.

Although the survey was distributed to 20 potential clients of FWSL, the sample size of 14 respondents is limited. Hence, the data gathered may be unrepresentative of the target market’s level of interest in LVT. A larger sample size of 50 potential clients could be used to reduce misinterpretations. Nonetheless, it is important to consider that the overall validity of the survey may be impacted.

Due to unknown variables, the use of approximations in FWSL’s numerical data, and the uncertain future of Hong Kong’s economy, the financial projections may not be fully reliable. However, they can still be used as estimates for the project’s financial feasibility.

Using the information extracted from the Director of FWSL (Appendix 1) and the company’s head of sales (Appendix 6), a SWOT analysis was constructed.

35.7% of the respondents’ homes are between 1500 to 2000 square feet.

28.6% of respondents are willing to spend $400,000 to $500,000 HKD on their home renovations.

50% of respondents will allocate 20% to 30% of their home renovation budgets to flooring.