Case Abstract
Tim O’Brien, Founder of Tropical Salvage, was ready to launch a growth strategy for his company. He had spent ten years building the sourcing, production and marketing capabilities of Tropical Salvage. And he had worked successful with a not-for-profit partner to establish the Jepara Forest Conservancy to further the social and environmental missions that had provided the primary motivation for the company.
O’Brien had many key business decisions to make to actualize his growth strategy, including how to finance a new branded retail store, the best ways to build brand awareness of the products, and whether or not to extend the product offerings. The inspiration for Tropical Salvage came to O’Brien during a week of trekking in Indonesia in 1998. O’Brien had encountered stunning biodiversity juxtaposed with wasteful exploitation of natural resources and underutilization of craft traditions. As his travels continued he noticed old wooden structures being replaced by more secure structures built from concrete and rebar. In many instances no plan existed to re-use the old beams, boards and poles. The idea for Tropical Salvage struck – salvaging wood from deconstructed buildings can be a significant source of raw material for hardwood furniture production.
O’Brien started Tropical Salvage based on a conviction that “a reasonable and promising market-oriented strategy can contribute to positive change in a part of the world beset by extraordinary challenges.” Tropical Salvage uses only salvaged, or rediscovered, wood to build its line of furniture. The company uses a variety of wood salvage strategies – including demolishing old buildings, bridges and boats, recovering logs from rivers and lakes, mining entombed trees from the ground and taking trees from diseased plantation timber. Salvaged wood is cut into lumber, treated for insects and kiln-dried. From the kiln, woodcrafters construct the furniture. The product catalog includes roughly 150 different models and the company also builds one-of-a-kind custom pieces and furnishings built to commercial specifications. Tropical Salvage’s products are sold in its own warehouse as well as through retail partnerships in the US and Canada.
Although O’Brien is convinced he needs to expand through branded retail, he is aware of some significant challenges. First, there is an abundance of quality salvageable wood in Indonesia but as Tropical Salvage seeks additional sources it will need to ensure efficient salvage and transport processes to maintain the high margins that are important to its expansion efforts. Second, Tropical Salvage lacks a formal computer-based system to track and control its incoming and outgoing inventory. This approach may be strained with the introduction of one or more branded retail locations. Third, increased demand for its furniture is necessary in order for Tropical Salvage to expand its operations. O’Brien considers marketing to be his greatest challenge. And, finally, O’Brien needs to determine how to finance the expansion – through retained earnings, debt financing or venture capital. Each option presents different pros and cons and he needs to weigh each before moving forward.
This case study provides students with the opportunity to analyze a social enterprise operating in an intensely competitive global industry. Background is provided on the competencies of the company, the competitive dynamics in the industry and the challenges and opportunities presented by O’Brien’s intended approach to growing his business. Students will be tasked with looking at many facets of the business – sourcing, operations, marketing, distribution and finance – to derive recommended actions.
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