Written Analysis and Communication II

Assignment 2: Decorative Interiors

Submitted to
Dr. Rohini Patel

By
Vudikala Swapna
Section: A

On
03.08.2014

INDIAN INSTITUTE OF MANAGEMENT UDAIPUR

LETTER OF
TRANSMITTAL

From
V. Swapna
Consultant
July 15, 2006

To
Rocco Rapini
Owner
Decorative Interiors inc.

Subject: Recommendations for Decorative Interiors

Respected Mr. Rocco Rapini,

I submit report here with recommendations for Decorative Interiors. This report consists of
analysis of situation, options, evaluation criteria, evaluation of options and an action plan and
my recommendation of the best option available for the future growth of the business.

Outline of the Report

Decorative Interiors(DI) is the company established by Rocco Rapini in 1988, which
specialized in sales and services of upholstery, bedding, window coverings, wallpaper,
carpets and other home dcor items.
From 1992-2002, DI sales were grown resulting in profits. At the same time, work on Rocco
Rapini and his wife was also increased. They tried to hire decorators but resulted in negative
experiences. But finally they appointed Mary Morris as commission-based sales person. She
increased the companys sales to record values. But she behaves as a dominating person to
Rocco Rapini and used companys connections for her benefit. Rocco Rapini dismissed her in
august, 2005.
Since 18 months, sales were not improved and at the same time, interior design business
became more competitive. With the stress of business, Rapini affected with heart attack in
July 8, 2006 and doctors advised him to change his life style.
Problem statement is Rapini is thinking about whether to choose best alternative ways
available to continue his business or to consider doctors advice.
Available options were selling the business, convert to home-based operation, move the
business to cottage country and hire professional help.
Based on the criteria of health, future financial stability for his family, future growth of
business, my recommendation is to hire the professional which satisfies all the criteria.

2
TABLE OF CONTENTS:

Situation Analysis...
Statement of the problem
The Options
Criteria for evaluation.
Evaluation of Options.
The recommendation..
Action plan..
Exhibit-1.

Situation analysis:
Rocco Rapini who had an experience as an installer and as a salesman for 10 years started his
own business The Drapery Place in 1988 in the GTA. It is a home-based business that
specialized in the sale and service of custom-made window coverings such as blinds, shutters
and drapery. In short span of time, his business grown successfully competing many other
retailers and he became an authorized dealer of many brand name products.
In February of 1992, Rapini moved to a new showroom, named it as Decorative Interiors (DI)
and started providing some more new products such as upholstery, bedding, carpets,
wallpaper and other home dcor items. Leaving her job, his wife also joined him. While other
competitors are using different forms of advertising, he used word-of-mouth advertising
effectively and got succeeded in attracting customers.
Thus from 1992-2002, DI had moderate growth in sales competing 9 competitors nearby.
Rocco Rapini and his wife became very busy in handling sale calls, dealings and installations
with suppliers. They tried hiring new decorators but every time faced negative experiences.
In 2003, Mary Morris, a new decorator to DI who had strong relations with many wealthy
people joined DI as a commission-based sales person. With her involvement, DI sales were
increased to record levels. She did not follow Rapinis direction and started telling to clients
that DI was her business. Rapini was irritated but as sales growth was good, he kept quiet.
In July of 2004, Rapini bought new unit for nearly $300,000 which is double the size of
existing showroom and was ready for operation by February 2005. In March 2005, Morris
met with an accident and missed 3 months work but during that period also she worked from
home using DIs showroom product samples and continued business by making phone calls
to clients, making sales, drapery and getting profits for herself . Rapini got to know from one

of his suppliers that Morris was using his business connections to get benefit herself, not DI.
Rapini was disappointed with Morris Behaviour and dismissed her in August 2005.
Since 18 months, there is no improve in sales in DI as Rapini did not focus on sales due to
disturbances of dismissal of Morris and at the same time, interior decorating business became
more competitive making customers more price-conscious. Rapini thought that purchasing
new showroom was bad decision and listed it for sale. He and his wife started upgrading the
look of the showroom to satisfy buyer. In the p2rocess, he stressed himself and as a result he
got heart attack on July 8, 2006.
Now, thinking more about future financial stability for his family and future of his business,
he is considering alternative ways available to continue with his business as he was proud of
it and he had grown to a high position because of it. He did not like to give it up as it was his
life.
Statement of the problem:
Rocco Rapini had a heart attack recently and doctors advised him to change his lifestyle. So,
he is thinking about whether to choose best alternative ways available to continue his
business or to consider doctors advice.
The Options:
1.
2.
3.
4.

Selling the Business

To Convert Business again to a Home-based Operation
Moving the Business to Cottage Country
Hire Professional Help

Criteria for Evaluation:

1. Health
2. Future financial stability
3. Future of Business
a) Sales
b) Expenses
c) Growth
d) Population
Evaluation of Options:
1. Selling the Business:

As doctors advised Rapini to change his lifestyle, selling the business is a good option.
But by selling the business, he will get $450,000 with which he cannot make survive his
whole family of four members. By without improvement in sales i.e., even if sales would
remain stable he will get income as $76,881 per year. If he continues to run the business
he will get $450,000 within 6 years easily. No future for the business.
2. Convert to a Home-Based Operation:
Since Home-Based Operation, he has to work for almost 24 hours and more physical
work is included which is not at all good for his health. As they grown to the current
position from home-based only, future financial stability can be expected. Sales would
decrease by 30% and cost of goods would increase by 2%-5% since suppliers would not
give any more favourable discounts. But operating expenses can be reduced around 35%
i.e., nearly $55000. Image of company will reduce. Since the business is at Vaughan,
Canadas fastest growing city where 37% population had grown from 1996-2001, he can
hope for growth of the business.
3. Moving the business to cottage country:
Due to travelling to new place and due to journey, health may get affected. Since less
competitive and people are less price conscious, profits increases. Expenses may increase
due to travelling, operation issues and rent. Business connections will go down leading to
fall down of brand image of the company. In Meaford, population had decreased by
3.35% in 1996-2001 and dwellings constructed in 1991-2001 were 160 and in Thornbury,
population had increased by 0.45% in 1996-2001 and dwellings constructed were 80. But
in Vaughan, population had grown by 37% and dwellings constructed were 24065. So we
can clearly conclude that future growth of business can possible in Vaughan city than in
those two small towns. Since growth is not possible by moving to north towns, financial
stability for family in future cannot be expected.
4. Hire Professional Help:
By hiring sales manager and part-time installer replacing Rapinis job, health problem can
be solved. From exhibit 1, the salary for both sales manager and part-time installer would
require $90,000 and overall transactions will make profit of $169,288.30 approximately
by 2006 nearly. So, future financial stability for his family will not have any problem.

Growth of business is clearly shown through profit and expenses, sales, population all
remain same.

The Recommendation:
Hiring the professional is the best option available satisfying all criteria mentioned above.
Health problem can be solved. Growth of Business is clearly shown referring to exhibit1 .Future Financial Stability can be easily achieved.
Action Plan:
1. Hiring procedure of qualified sales manager and installer should be done carefully so
that again Morris case should not be repeated.
2. Employees should be motivated towards the increase of sales, products and profits.
3. Advertisements through news-papers and television will be helpful.
4. Giving discounts, rewards for both the workers and customers will make business
more active and profitable under this competition situation.

Number of words in main body=1087

Exhibit-1
statement of earnings
2005
%
$3,78,7
10
Revenue
43.00 0.00
$1,28,0
3
COGS
00.00 3.80
$2,50,7
6
Gross Profit
43.00 6.20
$1,49,6
3
Total Operating Expenses
79.00 9.50
Net Income(Loss)Before
$1,01,0
2
Interest & Tax
64.00 6.70
$6,50
Interest Expense
0.00 1.70
$94,5
2
Net Income(Loss)Before Tax
64.00 5.00
$17,6
Tax
83.00 4.67
$76,8
2
Net Income(Loss) After tax
81.00 0.30

2006
$6,41,0
00.00
$2,02,0
98.00
$4,38,9
02.00
$239679.
00
$1,99,2
23.00
$1,99,2
23.00
$29,93
4.700
$1,69,2
88.30

Total operating expenses in 2006 =expenses of 2005 +

$90000(combined salary of both sales manager and installer)
Total increase in income from 2005-2006 =$92407.3

%
10
0.00
3
1.50
6
8.50
37.0
0
3
1.50
3
1.50
4.
670
2
6.83