Download Global Strategy for Furniture Industry Globalization

Phase 1 Discussion Board 1
Kenneth C Holmes
MGMT690-1602B-01
Professor Robert Spivey
May 18, 2016
Global Strategy for Furniture Industry Globalization
This document marks the beginning phase of possible global expansion for John and
Deborah Ferrer’s U.S. based furniture company. The housing market has seen a major downturn,
and the competition has created more affordable furniture lines for lower priced retailers, the
effects of which have a negative impact on the furniture company’s sales and profits. In an effort
to overcome these difficult times, John and Deborah have considered entering the global market,
and have designated myself, Kenneth C Holmes, as the Project Manager. The project will require
research regarding developing a global marketing plan, selecting at least three potential overseas
locations for furniture production and distribution, a personal choice and explanation of which
one is most suitable, and discussion regarding why the other choices are wrong. The following
document discloses all research and findings.
Global Strategy Defined
Starting with global marketing, which is the visualization and creation of a product or
service to be sold on the global market, and taking advantage of the benefits of international
commercialization opportunities, all to achieve the objectives of the organization’s global
marketing strategy (N.A., 2016). A global strategy is actually three strategies in one, a global,
multinational and international strategy, each of which addresses specific global goals, and
provides the plan and stimulus for achieving the organization’s global marketing goals (Lynch,
2014).
International Strategies
There are three general types of international strategies: International Strategy,
Multinational Strategy and Global Strategy. An International Strategy is one where the
company’s primary focus is on the domestic market, but has plans and goals for selling their
product or service overseas, and therefore requires an international strategy to achieve those
goals. In this case, the firm’s competitive advantage evolves around their domestic market. A
Multinational Strategy is one where the company sells their products or services both
domestically, and in multiple global markets, and the company has a marketing strategy for each
market, to account for local tastes and competition, and to create a competitive advantage. A
Global Strategy is one where the company sells their products or services all over the world,
looks at the global market place as on large market place, offers minimal product or service
differentiation, and achieves their competitive advantage because they market on the global scale
(Lynch, 2014).
Potential Globalization Locations
Based on available research, there are three countries that would fulfill the requirements
of John and Deborah’s furniture company, and those countries include: The Netherlands, Italy
and China.
The Netherlands has the distinction of being the gateway to Europe, the 6th largest EU
consumer market and importer of furniture for Western Europe, offers furniture manufacturers
three ideal consumer markets to target for their sales goals: One group is creative and the first to
try new furniture trends, another group is affluent and willing to pay top dollar for quality, and
the third group takes interior design seriously, and enjoy purchasing fashionable and trendy
furniture. The Netherlands market represents 4.3% of Europe’s furniture sales, and their per
capita average of 205 Euros is higher than the EU25 average. Furniture importing has declined,
while exporting has increased, including re-exporting throughout the EU. The downside of
producing and selling in the Netherlands includes: The labor standards are similar to the U.S.,
with the average labor hour of 32,75 euros for the furniture industry; and the furniture industry is
dominated by specialist retailers connected to buying groups, and franchising organizations who
have a strong hold on the market, especially the low to mid-priced market (N.A., THE
DOMESTIC FURNITURE MARKET IN THE NETHERLANDS , 2006).
Italy boasts numerous furniture accomplishments including: The world’s largest furniture
exporter; Second largest global furniture producer; Industry leader of visually appealing and high
quality furniture; International trendsetter based on style and workmanship; and innovations in
production technology. Italian furniture has a history that goes back to ancient times, and modern
Italian furniture production taps into that history to define western furniture style. The downside
of producing in Italy is that the labor standards are similar to the U.S., with an average cost per
hour of 27,40 €, making labor costs high (Funkhitz, 2016).
China has experienced extensive economic growth since it opened itself to the
international market place two decades ago. China’s furniture industry is expansive, heavily
based on regional tastes, has enjoyed vast expansion because of open global marketing, and is
popular as an exporting base. The result is extensive foreign investment in production facilities,
largely due to low labor costs, and reduced import tariff rates. Foreign companies will have to
deal with China’s tax regulations, policies of incorporation, determining the ideal furniture
markets to tap into, and establishing the ideal distribution networks (N.A., China Furniture
Industry, 2004).
Country of Choice
Of the three countries, Italy represents the best option for establishing a production
facility, and for marketing the company’s product line. The benefits to producing in Italy
include: Italy is known for its quality, craftsmanship and styling that is appreciated on a global
scale; Italy is the second largest furniture producer in the world; Italy is part of the European
Union (EU), and trade is a big part of membership. Trade with the rest of Europe will provide the
company with invaluable connections to the rest of Europe, and the taste for Western Style
furniture; the European market has a liking and taste for quality furniture, which is more
expensive, and fits the parameters of which the company produces; Italy also has major
connections with Asia (China, Japan and South Asia), creating additional avenues of revenue
generation; and lastly, the Italian furniture industry is dominated by family owned businesses,
which fits John and Deborah’s organization style.
Opposition’s Choice
Cost conscious analysts would likely choose China as the best option for establishing a
production facility, and marketing the company’s furniture line. The fact is, China would be an
excellent choice. China excels in production, has extensive experience producing high quality
furniture, has access to all Asia markets, has low labor costs of 2,25 per labor hour, reduced
import tariffs, attracts tremendous foreign investment, and is a popular exporting base.
Additionally, China’s massive growth has created a great deal of wealth, and a market for highend luxury items. The disadvantages include dealing with tax regulations, environmental
policies, policies of incorporation, regional tastes requiring variations of products, and shipping
time and cost.
Realistically, China is an excellent choice, they are a major global exporter, and have
access to markets around the world. As the Project Manager, China would be an excellent base
of operations to address the Asian markets because of their location, but for addressing the EU,
Italy would be more practical, and would provide access to the markets more suitable for the
company.
Conclusion
The decision of where to expand on the global market must come first. Since each market
has different tastes, and requires a specific marketing plan, the marketing plan must be developed
based on the region, consumer markets in the region, must include specifics regarding production
and distribution, and be carefully planned to achieve the most profitable results.
References
Funkhitz. (2016). Italian Furniture Industry. Retrieved from Scribd.:
https://www.scribd.com/doc/75157922
Lynch, R. (2014). What is global strategy? And why is it important? Retrieved from Global Strategy:
www.global-strategy.net/what-is-global-strategy
N.A. (2004). China Furniture Industry. Retrieved from RESEARCH AND MARKETS:
www.researchandmarkets.com › … › Household › Furniture
N.A. (2006, September). THE DOMESTIC FURNITURE MARKET IN THE NETHERLANDS . Retrieved from
CBI: www.philexportcebu.org/pdf/CBI_TheNetherlands.pdf
N.A. (2016). Global Marketing, Definition. Retrieved from Business Dictionary:
www.businessdictionary.com/definition/global-marketing.html