Charles Bowman's Father Case

West Lakes was started by Charles Bowman's father in Toronto, Ontario in 1970. Initially it started with the manufacturing of table lamps only but with time they expanded their business into floor lamps and other lighting fixtures. They opened a retail store and also started selling from its own website.

Charles Bowman took over the business in 1992 and at that time West Lakes used to manufacture majority of their decorative lamps in Canada itself. Soon Bowman realized that Asian market is cheaper for manufacturing because of its cheap labour cost, he started outsourcing the production to China. By 2006, 90% of the West Lake's production was outsourced which was 50% by 1999. The Asian sourcing helped Bowman in increasing the operational margin and at the same time it provides him the leverage of giving more discounts to the retailers.

The Canadian retail market was highly competitive where large chain retailers like Wal-Mart Stores Inc., Canadian Tire, Hudson's Bay Company and Sears Canada accounted for about one-third of the total retail market in 2006. West Lake had a very small share of the Canadian retail market but the prospects of growth were very bright. The sales in the home furnishing category had increased from $7.6 billion in 2002 to $9.7 billion in 2006 - a compounded average growth rate of around 15%. The increase in sales was mainly due to rise in home ownership. People between the ages 45 and 64 had higher levels of home ownership and also had generally higher incomes. The trends show that they spend more money on home products in the first two or three years following the purchase of their home and this worked in the favour of the home furnishing industry.

Because of the competitive nature of the market, almost all the manufacturers started outsourcing their production to Asian countries, especially to China, to have a competitive edge over pricing. Though, as an effect of this, consumers had access to a wide variety of merchandise at lower prices, they had to maintain a higher inventory level in warehouse to serve their customers on time. And because of keeping a higher level of inventory, cash flows for the West lakes were negative. Other than the negative cash flows, they had no other liabilities such as external long term loans and the company was mostly profitable.

West Lake had maintained a small manufacturing unit in Canada itself to meet the short run demands which used to produce for