Business Plan: Globus Furniture

1. Business Detail

Globus Furniture is a brand which was started by Angela Hull in 2007, the headquarters of the business is situated in Islington, UK. Previously called, Baby Carts, the company used to specialise in making carts and prams for babies. In 2009, the company decided to expand to different forms of furniture, namely beds, coffee tables, chairs, armchairs and bookshelves. This plan will focus on the business plan for the expansion of this company.

At present, the company provides for a variety of furnitures; beds, dining and coffee tables, chairs, lamps, bookshelves. The company specialises in furniture which is mass produced and designed in such a way that it optimises the usage of space. Hence, a lot of the furniture that the company produces is foldable and can be tucked away.

The market that the business is presently trying to target are mid-level professionals who do not have a big budget to buy furniture. Globus’s claim is that their prices ensure that a two bedroom’s complete furnishings from Globus will cost under 1000 pounds. This is a popular scheme with their target group of newly graduated professionals and people with low to mid-income group. The motivation of the company is that they want to provide cheap furniture to people but without compromising on the quality.

2. Macro-Environmental Overview

The aim of this particular section is to consider the larger environment in which the business will operate. For achieving this purpose, the report will analyse the external environment in which Globus operates through a PEST analysis.

Political: Presently, Globus furniture is operating only in the UK and Wales. However, in the light of the recent pandemic, the business has taken a hit because of the imposition of lockdown regulations. The business has two locations across the UK. Because it doesn’t fall under the ‘essential stores’ in the regulations put forward by the UK regulations (bbc.com), the stores are currently closed because of lockdown restrictions. It is unclear when regulations will be lifted and it will be allowed to operate.

Economic: The pandemic has brought a hit in the business of Globus Furniture as, like many other stores which sell furniture, electronics and other retailers, it had to offer discounts much longer before the start of the festive season. However, the upside to offering these discounts is that people have been ordering furniture more. Additionally, the reluctance to step out has prompted people to pay delivery and assembly charges as well, thus driving up the profits for Globus furniture.

Social: A significant advantage that has boosted the sales fo Globus is the advent of stay-at-home working conditions, which has led to the sale of office furnitures like desks, table lamps and office chairs. Since Globus is not yet a supplier of bulk office furniture items, this could be the chance for Globus to get its foot in the door for establishing itself as a viable source for supply of office furniture as well.

Technological: Globus responded to the need of the hour and has a fully functional website in place, through which customers can shop for furniture. Additionally, it is developing a system whereby individuals can upload a picture of their rooms and living spaces to understand how the piece of furniture will look in it.

3. Market and Industry Analysis

There has been a steady increase in spending on furnitures and furnishing items in the UK, based on a report by Statista. The figures grew significantly in the year 2019 and it is postulated that it will grow further. The British Furniture Confederation reports that in 2018, furniture sales contributed to about 12.2 billion pounds to the economy of the country. Customers spent over 17 billion pounds in buying furniture that year.

While the facts and figures for how the furniture market for 2020 hasn’t been out yet, it is to be expected that the growth will not be as significant as last years. This is mainly owning to the fact that the UK has been under lockdown and economic strain because of the pandemic. At present, the dominant hindrance to the business is this present situation and competitive business like Ikea and M.

4. Competitor Analysis

In the UK, Ikea finds itself its fourth biggest customers, according to figures (statista.com). Hence, it is clear that the UK market has been clearly dominated to a great extent by Ikea. The appeal of Ikea comes from the fact that Ikea provides cheap furniture which have minimalist design and a wide range of furnitures and furnishings. It can afford to keep its prices down by providing customers the opportunity to assemble the furniture themselves (GQ).

Another competitor for Globus is Made, which is a furniture company which primarily operates from its online stores. In 2018, it reported an upward spike in sales of around 37%. Currently, the company is looking for ways to improve its online presence by shifting focus on their website. In their perspective, furniture is usually bought by people after they’ve physically examined them (Reuters, 6 February 2018).

A significant strength that both these businesses have over Globus’s is that they have more capital investment in their businesses, and a greater number of stores from which they operate. Additionally, their websites offer a more varied selection of furniture items which can be bought online, something that hasn’t happened with Globus yet.

5. Marketing and Pricing Strategy

Considering the current political and economic climate, this report believes that Globus should focus on digital marketing heavily. A good way to do this would be using augmented reality to make customers see how a particular furniture item would look in their living room. Additionally, the usage of social media needs to be done to connect with the consumers at a personal level. Currently, Globus doesn’t have a Facebook or Instagram account.

A potent form of pricing strategy which can be used is using the 99 pricing strategy. This is because people tent to read from left to right and hence a price like 45.99 pounds will be read more as 45 pounds, even though it is closer to 50 pounds. Hence, the prices appear cheaper. Additionally, it is likely that people will hand the rounded out amount and not wait for the change. In addition to that, it is a good idea for the company to set their prices in reference to other furniture stores, so they don’t overprice or underprice their items.

6. Operations Plan

The operations plan will describe how Globus Furnitures will operate in practical terms.

6.1 Outlet and Storage

Currently, the business has two operational stores, one in London and on in Wales. The London store is located in Islington. Currently, the only storage facility they have is in the same location as their outlet store and transportation is not required.

6.2 Production Process

The production process starts from drawing by the craftsmen themselves. Globus produces over six new designs each year, as sales continue to grow. The timber required is already selected before the production process and the process moves into the carving, polishing and veneering is done. Chairs and artisanal edges on furniture are added in a special step.

6.3 Distribution Process

At present, Globus relies on third party transportation companies to transport furniture from outlets to its customers. It has limited online retail business, and uses the same third party transportation companies to transport furniture.

6.4 Leases and IPO

Currently, the company is leasing the outlet and the storage facility it is using. The kind of leasing which is used by the company is gross lease which pays according to per square feet. The reason why this kind of leasing is used is because the requirement for space at the outlet is not very large, the largest requirement for storage is at the warehouse. The warehouse’s lease is being renewed on a yearly basis since 2013. The business plans to expand exponentially in the next five years, following which it hopes to open its shares to the public. At present, the operations is being financed by the Hull family, since its inception in the year 2007. By 2025, the company hopes to issue and IPO, to raise greater capital for the business.

7. SWOT Analysis

Strengths: The company has a niche customer base and is a well known brand in the Islington area. It has been handled by the Hull family as a family business and the speciality item of baby bonnets and cribs are the most sought after in the market. The company has depended on dependable suppliers of timber over the years and can rely on the parent investment body in order to get steady capital supply. Globus provides for some well-loved furniture designs which are well-liked by its clientele.

Weaknesses: Despite being operational for over 13 years, the company profits have not grown in rate. Additionally, the advent of furniture stores like Ikea is severely affecting the profit rates of the business. The capital investment in the business has been steady over the years, but it is perceived that the capital investment in the business is not enough. The company needs to offer an Initial Public Offering in order to increase capital investment in its business. Additionally, in the product range, there is not as much range as the large retailers of business.

Opportunities: A good opportunity for the business is developing an artisanal range of furniture, since some of its already existing range already. The special designs that they design is classical, french-style corners on chairs and tables. The company can introduce a range of specially carved, slightly more expensive line of artisanal furniture. The advantage of that is, they already employ the artisans and woodworkers who could do this work for them.

Threats: At present, it faces the biggest competition from Ikea, which is a rapidly growing furniture business in the UK. Even though there are other brands of furniture, the reason why it faces the biggest threat from Ikea is because the target audience of Globus and Ikea is the same; mid-level furniture buyers who are looking for good quality furniture at a relatively cheaper rate. Another threat that the business faces in present times is the plummeting economic scenario of the UK; it is postulated that the second lockdown could potentially lead to a dip in the GDP and it could fall as low as 2.6% (The Guardian, 15 January, 2021). In this scenario, it is likely that people will not spend as much on non-essential items, like furniture. Unless the economy catches up quickly, there is a chance that Globus may suffer from financial deficit.

8. Financial Requirements

The expansion process of this business will need capital which needs to be added into the business operations.

8.1 Sales Forecast

The following is a sales forecast for a year after Globus expects to expand its business model. The following amounts are all in pounds.

8.2 Start Up Cost

The start-up cost for the process will be something around 200,000 thousand, the break up of which is included below.

8.3 Cost of Sales

On an average, the company expects that a renewed investment in the company will bump up the average price of their products up to a 15%.

References

BBC News. 2021. Which Shops Are Open And What Are The Rules About Click-And-Collect?. [online] Available at: [Accessed 15 January 2021].

British Furniture Confederation. 2021. The Industry | British Furniture Confederation. [online] Available at: [Accessed 15 January 2021].

Statista. 2021. Furniture Purchase Trend In The UK 2005-2019 | Statista. [online] Available at: [Accessed 15 January 2021].

Statista. 2021. Leading 5 Selling Countries Of IKEA Products 2019 | Statista. [online] Available at: [Accessed 15 January 2021].

British GQ. 2021. Ikea. [online] Available at: [Accessed 15 January 2021].

Staff, R., 2021. UK's Made.Com Sales Jump As Furniture Shifts Online. [online] U.S. Available at: [Accessed 15 January 2021].