Decorative Interiors Inc.

Situation Analysis

Decorative Interiors Inc. (DI) is located in Vaughan, Greater Toronto Area and is owned by Rocco Rapini. DI primarily sells windows coverings, draperies and shutters. DI started in 1988 as home based business called Drapery Palace (DP). Rocco had 10 years of experience in sales then and under his effort DP sales also increased gradually. Rocco’s wife Conchetta also joined the business. The company was renamed Decorative Interiors.

 Vaughan has a diverse customer base including couples who buys budget based draping and also the wealthy customers, who want luxurious fabrics. DI caters to all types of customers. There exists a fierce competition in interior designing .There are 55 stores selling draperies in Vaughan city itself and 9 competitors within 10kms radius around DI. Moreover, the customers are very price- conscious and they can easily bargain and compare the prices. This makes retention of customers very difficult. Also, the primary source of advertising is word-of-mouth Hence, satisfying every customer to 100% is crucial for staying in business. So, DI provides additional services such as in-home consulting and order via call. Consulting services generally happens after dinner time and thus, more time and work from the employee.

Rapini is a perfectionist and had negative experience with decorators in past, he prefers to work on his own. From 1991-2001, the population of Vaughan grew by 37% and 24065 homes were constructed. With this boom, the number of customers of DI increased putting more stress on Rapini. This resulted in deterioration of his health due to this pressurized lifestyle.

In February 2005, DI shifted to a new store double the size of previous one for 300000 purchases and to finance this, a mortgage of 98000 is taken along with capital investment from Rocco but due to the nature of the business it did not help much in sales improvement. Moreover, Rapini had to fire his major sales contributor, Morris due to some conflicts and all this lead to the 40% decrease in sales of 2005 in comparison to the sales in 2004. With increasing competitions and customers becoming more price conscious, 2006 sales were declining too. This made Rocco put extra effort to bring profit back up. With his health deteriorating and the rise in stress, Rapini got a heart attack on July 8, 2006. So, his doctor has advised him to ‘change his lifestyle’. Hence, he cannot continue to operate his business as before.

Rapini has owned DI for 18 years now and it is his primary source of income. Thus, Rapini must continue his business or try to find alternate sources of income. Since Rocco withdrew wages of 50000 in 2005 and he believes 2005 is the worst year, it can be estimated that minimum of 50000 per year is needed for Rocco to support his family.

Rapini has an option of selling his business and staying at home. He was sure the sales would remain between 2004 and 2005 levels. Conservatively, Rapini can sell the business at a minimum of 538167, by valuing business at 7times the net profit of 2005. Using this money and keeping 50000 per year as Rapini’s withdrawal, Rapini has a steady income flow for 10 years. However, Rapini was running DI for 18 years and also he hates to sit idle in home doing nothing.