PART III - Application Questions: Please read the following Case and Answer All Questions Stokke is a family-owned business headquartered in Alesund, Norway. Established in 1932, Stokke has long been known for its innovative seating designs, such as the zero gravity chair, which have often been developed with the help of famous names in the Norwegian design world. In the late 1990s, looking for new growth possibilities, this long-standing chair company took a strategic change of direction. Instead of only designing seating furniture for a variety of market segments, they focused more closely on one segmentin which they were doing particularly well and which held great growth potential - babies. Or actually, the affluent parents of babies, who had an eye for ergonomics and style, who were willing to invest heavily in junior. Their famous Tripp Trapp chairs, which are adjustable for children ranging from 6 months until adulthood, were already big sellers in the baby segment. On the basis of this experience, they had an adjustable bed designed, that could be used from birth to old age. The Sleepi bed system was a baby crib la cot or a cradle], that could be converted into a toddler bed, then into a child's sofa, to be eventually transformed into two chairs. As with the Tripp Trapp, they found that when it comes to their babies, parents are discerning (smart) customers and willing to pay a premium for a quality product that is beautiful, intelligent and environmentally friendly. They also found that competition was very thin in this upscale part of the market. After this success in 1999, Stokke added a matching changing table in 2001. But their big step came in 2003, when after five years of extensive research, design and field testing, they introduced the Xplory baby stroller la pushchairl). This was a huge leap for a furniture maker to take, but the market opportunity they had identified was just too good to leave unexploited. A big advantage of coming into a totally new product category was that Stokke could entirely rethink the business, without any preconceived notions about the market and without the pressure to use existing technologies or facilities. To compensate for their lack on product know-how, Stokke invited the Norwegian firm K8 Industridesign to finish the product design. It was asked to come up with an innovative baby stroller, that fit with Stokke's design philosophy, meaning adjustable, with modem styling and ergonomically optimized (improving efficiency, comfort, and safety). In the same way, Stokke also found an external partner to manufacture the product to their specifications Building on this enormous success, Stokke has added more baby furniture, such as dosets, to their product line, but also an entirely new set of items, baby table top playing/eating mats. At the same time, to help them to focus on following opportunities in the premium segment of the baby market, Stokke decided to exit its traditional chair business. In 2006, all chairs not intended for children were brought into a separate company, still owned by the Stokke family for 40%, and are now sold under the brand name Varier. while the sales of Xplory strollers are booming in almost all of the 50 countries in which Stokke has authorized dealers, people without babies might still have no idea what this Porsche-for-babies looks like 2. In your judgment, why did Stokke decide, in 2006, to take all chairs not intended for children into a separate company, rather than being parented by it? 8