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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