This document provides an executive summary and case analysis for West Lake Home Furnishings LTD regarding a proposal to reduce retail prices for a signature line of lamps from $69.99 to $29.99 for one year through a large U.S. retail chain that accounts for one-third of West Lake's wholesale business. The analysis evaluates rejecting the proposal, accepting the proposal, and negotiating with the wholesale customer. It is recommended to accept the proposal as it would significantly increase immediate sales and profits, expand market penetration and market share through prominent shelf space, and maintain a good relationship with the important wholesale customer.

1. Case Analysis on
WEST LAKE HOME FURNISHINGS LTD.
A report submitted to
Professor Swatantra
In partial fulfillment of the requirements of the course of
Written Analysis and Communication
On
December 24, 2011
By
Sasikumarparupalli
2011PGP853
(Section E)
INDIAN INSTITUTE OF MANAGEMENT
INDORE

2. Executive Summary
Charles Bowman, the CEO of West Lake Home Furnishings LTD came across a proposal of
reducing the retail price of a signature line of decorative lamps from $69.99 to @29.99 for a
period of one year. This customer has a large U.S based retail chain accounted for one-third
of West Lake’s wholesale business in 2006. He also assured for providing prominent shelf
space to their product.
West Lake Home Furnishings LTD is intending to stay at top of its business and is very eager
to grow. After analysing the benefits like increase in profit, growth of sales, market
penetration, effect of reduced price on other businesses and the rapport with the
wholesaler, it has been decided to accept the offer. Large and promised order for a year is
the justification for accepting the reduced price in the offer.

3. Problem Statement:
To take a decision on “whether to accept the proposal or to reject it”.
Evaluation Criteria
Increase in Profits
Growth in Sales
Market penetration & Market Share
Effect of price reduction on other customer’s retail pricing
Maintaining good rapport with the wholesale customer
Evaluation of Options:
Rejection of the proposal
An immediate growth in sales cannot be achieved after rejecting the proposal. The
growth in the retail store will follow a steady trend. In the retail sector, profits can be
increased by hiring a sales consultant. Similarly, by improving the marketing strategy &
internet sales profits can be increased.
Market penetration will be following normal trend. There is a chance that the wholesaler
may get the consignments directly from Asian suppliers, which may reduce the market share
of West Lake in due course of time. Any competitor accepting the offer by the wholesale
customer can also affect the brand value and market share of West Lake.Rejecting the
proposal may also affect the relation with the Wholesale customer and may lead to
subsequent loss of business with them.
Accepting the proposal
An immediate growth in sales from the wholesale business can be achieved with
immediate effect. Profit from Retail store and Internet sales can also be increased to some
extent.Future prospect for a better growth also is obvious.
Market penetration of the signature line of decorative lamps and thereby the brand West
Lake will be deep due to the prominent shelf space at the wholesaler’s retail chain all over
and due to the increase in sales by five times. Market share of West Lake will also get
increased by this. By accepting the offer, West Lake can rule out the chances of other

4. competitors taking up the offer and chances of the wholesaler getting consignments directly
from Asian suppliers are ruled out, thereby avoiding a potential competition.
Reduction in retail price of Signature line of lamps for the particular Wholesale customer
can later make other wholesalers negotiate on price, which can lead to a reduced gross
margin from the entire wholesale business. This can be controlled by linking it to thevolume
of purchases, which can ultimately lead West Lake into a high volume – low margin
company in the long run. A good relation can be maintained with the wholesale customer,
thereby assuring present and future association with them.
Negotiating with the Wholesale customer
Recommendation:
It is recommended to accept the offer from the wholesale customer as it fulfils all
criteria for evaluations.