I. Crafton Industries is looking at the possibility of est. its own distribution centers or wholesale operations.
II. State of the industry (overall description of carpet industry is in case)
A. Porters Five forces
1. RIVALRY :
- Industry is highly concentrated < 100 manufacturers
- 5 companies produce 75% of floorcovering market
- 3 companies account for 85 % of residential carpet/ rug sales
- Less competitive industry; small number of firms, slow/ declining market growth rate, low product differentiation
2. Threat of Substitutes - Moderate; carpets and rugs are highly price sensitive have elastic demands compared to substitute such as vinyl
- Overall not many substitutes in market
3. Buyer Power
- Moderate
- Manufactures can threaten forward integration – can take over own distribution/ retailing
- Fragmented buyers, small number of buyers (not an everyday purchase item) and buyers are extremely price sensitive
4. Supplier Power - High - Highly concentrated industry, low availability of substitutes, switching costs are low, creditable threat of forward integration by manufactures
5. Threat of New Entrants - LOW, Industry growth rate is slow and in decline - Access to distribution networks hard ( 4 large manufactures have 75% of market shares) - Low product differentiation, economies of scale, and specialized production
B. Industry life cycle (DECLINE)

C. KSF: - Build further economies of scale in production and distribution - Cost maintenance and reduction
III. Distinctive Competency - Long established relationship with wholesalers - Adequate if not over coverage of its product - Distribution network coverage on large metro areas high
A. Differentiation focused a. high to medium priced ( price premium ) carpet producer b. narrow scope targeting residential segment of