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Created with Fabric.js 1.4.5 Basset furniture already sources 40% of its furniture from Southeast Asia 83% of Bassett employees are employed internationally 100% of sales are domestic It's time to furnish the world Shipping and logistics costs account for 35% of total landed cost Expand Bassett internationally to tap into new markets and enjoy improved cost strucure Commodity risk - Furniture manufacturing relies on the following inputs such as foam, wood, and fabric that can be price sensitive. 1. Foam - Sensitive to oil prices 2. Wood - Construction demand can inflate prices 3. Fabric - Increases in home construction increase price Entering emerging markets in Southeast Asia would greatly reduce shipping costs because these markets are closer in proximity to the manufacturing facilities. The products that are produced internationally are also more appropriately priced for emerging market demographics. Bassett has already undergone transformation to globalize its supply chain in hopes of becoming more profitable. This is an example of the arbitrage strategy in Pankaj Ghemawats global strategy framework. Although this strategy has helped make domestic operations more profitable, Bassett has an opportunity to further capitalize on the globalization of its supply chain by entering emerging markets that are relativelyclose to international manufacturing facilities. Risk Factors Culture risk - Furniture is often times culturally significant. Therefore, Bassettmust conduct cultural due diligence before entering new markets. Weight to volume ratio - Furniture does not have high weight to value ratio. This is significant given Bassett's highly globalized supply chain. Prominent hedge funds Dimensional, Gamco, andRenaissance Technologies all have significant stakesin Bassett that total to around 33% of the outstanding shares. Although adequate furniture is seen a staple in many developed markets, furniture is an aspirational purchase for many emerging market demographics. Therefore, Bassett should target emerging markets with high discretionary spending. A survey found that 30% of customers in Indonesiawere planning to aquire property in the next twoyears. Increases in property purchases are correlated with increases in homebuilding which is a key indicator of demand for furniture. Relevant Facts
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