The Selection of the Market and Justification and Opportunity Statement - Case Study Example

Lempriere Company Name Course Name and Code Instructor’s Name Date Executive Summary Lempriere family is renowned and trusted for its production and sell of wool; for more than one and half centuries, Lempriere has been and still is instrumental in supplying textile mills and fashion houses across Europe, Japan, USA and England with fine wool. The company’s reputation has been earned through quality and integrity. For instance, it is considered the oldest unbroken supplier relationship in fashion and textile. The company has been a wool supplier since 1987. In early 2013, Lempriere reached 90% of Wool Services International thus hitting a mop-up target. The company managed to reach this height of success through its exemplary international marketing strategy and having an in-depth understanding of international marketing environments. The company has identified two international markets Japan and Russia that it wants to expand its marketing operations into. This report discusses the company’s products background providing an extensive analysis of the business and product performance from the company’s domestic perspective. Accordingly, comparative country and product market attractiveness will be discussed including external market analysis, product market analysis, competitive analysis, and buyer analysis. Finally, the report will discuss market selection as well as their justification and opportunities; for instance, the paper will discuss the major opportunities that the company will be able to exploit in the new international markets. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Company and Product background 4 Comparative Country and Product Market Attractiveness 6 Russia 6 Macro-economic analysis 6 Product Market Analysis in Russia 8 Competitive Analysis 9 Buyer Analysis 10 Japan 10 Macro-economic analysis 10 Product Market Analysis for Fine wool in Japan 12 Competitive Analysis for Wool in Japan 13 Buyer Analysis of Woollen Products in Japan 13 The selection of the Market and justification and Opportunity statement 14 Conclusion 14 References 15 Introduction Lempriere is a wool manufacturing company that has been in operation for more 150 years. This report is an international market assessment of Japan and Russia; countries that the company has a strong drive to expand its international market. For this reason, the paper will discuss the company and product background; provide comprehensive comparative information with regard to country and product attractiveness by providing product market analysis, competitive analysis, as well as buyer analysis. Lastly, the report will select a better market for the company to enter by providing justifications Company and Product background Lempriere is a family company that has been in operation as a global wool supplier since 1857. The company is a family business that is dedicated to excellence in wool, has a tradition dedication to service quality; accordingly, the company has an inherent drive to be maintain its position as a global wool supplier (Lempriere Company, 2013). The company has sourced for over 2 billion kilograms of fine sheep wool from highlands of Tasmania, Alps of New Zealand, Australia, Patagonia and South Africa. Currently, the company is in its 5th generation stewardship and is being headed by William Lempriere as the Managing Director. Lempriere is firmly placed to offer its wealth of experience, dedication to quality and business integrity; given the fact that company has made smart business decisions for over 150 years, it strongly positioned to offer the latter (Lempriere Company, 2013). It has consistently maintained focus on expanding its businesses in the global markets, striving to understand the needs of the consumer, and above working to ensure that, the company business delivers quality value coupled with high-end customer service. The company implemented its global sourcing strategy in 2000, which resulted into rapid development of businesses in Argentina, USA, and South Africa. Currently Lempriere is regarded as one of the largest global wool merchants and processors. Since 2010, the company’s business has been on the decline: the demand for the Lempriere products across its main markets of China, Italy, and USA. The sales volume for woven products fell for between 5 – 15% and knitted products decreased by between 30 – 40%. The Merino wool business, which account for half of the company’s volume and 75% of its value is currently weak on the market. Customer spending on fine suits has been on the decline since 2007, similarly retailers are changing to cheap suits in order to remain in the market. Australia’s fine wool exports fell by 25% in the 2011-2012 financial years (Lempriere Company, 2013). The company mainly deals in fine wool; the main customers for the company are textile mills and fashion houses across the world. The company wool products were exceptionally performing well until 2011 when the company started registering decline in the sales due to reduced demand across its major markets in Europe, Asia, USA and South Africa (Lempriere Company, 2013). According to the company’s Managing Director, the prices of fine wool will regain their profitable levels by early 2014 because the demand for high-quality suit as well as knitwear is extremely low. With regard to this, the company has decided diversify its business operations. The company has a strong financial base together with vast international presence hence has the abilities and capabilities of expanding its marketing operations to more international markets. Comparative Country and Product Market Attractiveness Understanding the wool industry in Japan and Russia will provide relevant and vitally important information that Lempriere Company will base on when deciding on which country is best for it to diversify its marketing operations into (Fox, 2011). In this regard, this report section will conduct macro-environment analysis, product market analysis, competitive analysis, as well as buyer analysis in order to have a full comprehension of these two industries. Russia Macro-economic analysis It is the first step in strategic analysis that is vitally important in identifying the possible opportunities and threats in the industry (Applegate, 2011). This involves the evaluation of the political, economic, technological, social/cultural, and demographic factors, which have a direct impact on the company’s operations. Political factors After the breakup of the USSR in 1991, Russia’s political environment was slightly unstable not to effectively support economical activities including imports and exports. For instance, the demand for products from foreign countries fell drastically (Clow and Baack, 2011). However, the country has worked to ensure that its political environment stabilizes and currently the Russian political is encouraging (Fox, 2011). Stable political environment fosters the economic development of a country attracting investors from the world over (Cant and Heerden, 2011). The former USSR countries have stabilized their politics thus encouraging business activities within and outside their international borders (Aaker and McLoughlin, 2010). Lempriere business venture into the Russian wool industry will be receive warmly, given the fact that country’s politics are favourable for foreign investments (Mathur, 2011). Economic factors Like any other European country, Russia was extremely affected by the 2008 economic down turn. However, regardless of this, Russia has worked extremely hard to come out of the said recession and now it has a booming economy that is mainly driven by the resources sector positioning it as a major retail market for various products across the board. It has been reported that in the past five years, the country has grown economically improving from 11th largest economy to 7th largest economy on the globe (Clow and Baack, 2011). Similarly, studies have revealed that the country’s disposable income or its comparative purchasing power is outstanding being more than of countries like the UK and US. The country has no debts coupled with low taxes, factors that have encouraged the emergence of an indomitable middle class positioning the country for ripe economic exploits for now and in the future (Mente, 2012). Accordingly, it is estimated that the real per capita disposable income is expected to grow continuously at an average rate of 6.5 per cent per year. Given these facts, Lempriere investment in the Russian wool industry is a vastly wise undertaking that will help the company to strengthen its position as the best global wool supplier. Social/Cultural factors These factors are essential in analysing societal beliefs, values and norms that are held in a given society. Studies have established that Russians are knowledgeable and extremely discerning shoppers who have a habit of inspecting products a lot (Fox, 2011). They are also considered to be among brand conscious countries; they like dressing up and being trendy. They like to buy the best something that has been held in their cultural heritage since Tsar’s time (Clow and Baack, 2011). The cold environment that is experienced in the country for seven to eight months has dictated Russians to wear insulating clothes including coats, shawls, scarves, hats and gloves. With the gradually increasing middle class population, the demand for luxurious outfits is also gradually increasing. In this regard, Lempriere Company will have a ready retail market for its wool in Russia (Mente, 2012). Technological factors The continued improvement in technology has a great influence on the company’s business activities. Russians are among the developed world countries and hence her citizens are technological sound (Melville, 2012). Given this understanding, Lempriere Company should understand that many individuals as well as companies are shifting to online transactions in order to facilitate their purchasing activities. Product Market Analysis in Russia Despite the fact that market for fine wool has been moving constantly towards saturation, in the year 2012, the market for wool continued to grow steadily while the category became characterized by low consumer loyalties and a stable consumer base (Mente, 2012). In Russia, the value for money is still a major factor that greatly affects the behaviour of consumers especially of wool products. Russia emerged as position nine in the whole world on countries that produced the wool products (Clow and Baack, 2011). The effective development of the textile industry is one of the biggest priorities of Russia’s national security and real economic growth because it had one of the strategic industries, which produced goods that were used in each economic field and branch of industry. It should also be noted that indeed, Russia as a nation does not produce cotton fibber and thus it imports most of the materials from outside. Russia as a country is a potential emerging market for fine wool in the market (Misawa, 2011). The wool industry in Russia produces various products like for instance woollen and worsted fabrics, yarns for knitwear, shawls and carpets (Chang, 2010). Indeed, the total production volume for woollen products in Russia is position number seven in the whole world and the largest area known for the production of wool fabrics in the nation is the Central Federal District, which contributes 50 per cent upwards of the whole market (Clow and Baack, 2011). The wool fabrics are therefore produced in Moscow, Tver, Bryansk and other areas. Lempriere investment should therefore consider if it is ready to compete in the saturated woollen products available in Russia or look for other relevant options. However, Lempriere investment will be capable of relying on its long history of 150 years to convince buyers to purchase the company products (Fox, 2011). It is therefore a fact that indeed, Lempriere investment can still be able to create a positive impact in the Russian Market despite the fact that there is a great market for wool products and various competitors wanting to sell the same range of products as the company (Mente, 2012). Competitive Analysis Most textile companies have eyed Russia as being the best market to market their wool and the related products. For instance, New Zealand led a delegation of some wool and textile companies to Russia in order to market their wool products. However, Lempriere investment is bound to have a competitive advantage because it has been long in the market and its wool products are renowned as opposed to the newcomers who are newcomers to the market and will therefore find a lot of difficulty penetrating new markets in Russia and other markets as well (Mente, 2012). Due to its experience in best management practices, the company will be able to outdo its competitors in how it handles its customers. Buyer Analysis According to the Chief Executive Officer of Textile NZ Elizabeth Tennet, the Russian Market provided business people with a great market potential to market lots of products which include among others, mid-micron outdoor-wear, strong wools, rugs and blankets. In addition, most Russian consumers or buyers used various components of wool, which were necessary in their day today lives. Given the fact that the possum merino items had hollow fibre, which provided warmth, Lempriere investment would suit the Russian market since it can be able to provide the buyers with such products. According to the World Production of wool in 2010, Russia was ranked number 9 out o f the top nations that produced wool (Fox, 2011). Lempriere investment will be able to capture the needs of the buyers in Russia because of its 150 years of experience in manufacturing various products, which meets the specific needs of their clients who have different cultural backgrounds. Japan Macro-economic analysis Political factors Japan is a politically stable country with sound economic policies that foster economic growth as well as necessitate good foreign relations. Japan has been and still is a politically stable country and it is not an emerging market. Its political stability has been instrumental in ensuring economic growth for decades (Mente, 2012). In this regard, Lempriere Company will enter a country with a great political good will that will ensure the thriving of the company’s wool business. Economic factors Japan has a strong and thriving economy that is rated equally with most of the western countries not only in terms of Global Domestic Product but also in levels of individual prosperity. The country is positioned as Asia’s leading economy. Similarly, Japan is a home of some of the biggest corporations in the world, and is renowned of its globally recognized brands including Toyota, Suzuki, and Nintendo with established business links across the world. Accordingly, the company has strong economical regulations that discourage corruption and malpractices but rather encourage hard work and innovation. Good corporate governance is a highly regarded value (Clow and Baack, 2011). In general, Japan’s economic environment is stable and thus suitable for economic investment; for this matter, Lempriere will have a better investing ground in Japan. Social/cultural factors Japanese business culture is a mystery to many people from across the globe; business corporations with business interests in Japan must work to understand this culture before entering this market (Fox, 2011). For instance, Japanese have respect for the elders, attention to details, and have religious commitment to have fun after work (Mente, 2012). They also prefer doing business based on personal relationships particularly after being introduced or recommended by someone who is in good books with the company; this helps in allowing them to place you on a hierarchy relative to themselves (Clow and Baack, 2011). Relationships are developed and maintained through greetings or seasonal cards. Business etiquette and protocol is highly observed in Japan. The old business engagement rules are still held strongly; face and hierarchy are of paramount importance as well as the significance of long term relationships are highly considered rather than specific business opportunities a company may push for. In Japan, patience is a virtue and capacity to content and hide frustrations will help in the success of your company. It is vitally important to understand Japanese way of operating and thinking and act in a manner that will make them, understand you. Given this understanding of the japans business culture, Lempriere Company must consistently work to understand the Japanese business culture works and tailor their business operations in a manner that will be acceptable in the japans perspective (Lancaster and Massingham, 2010). Accordingly, the company should empress the virtue of patience and calmness after entering this market there after they will gradually start earning their income on investment. Technological factors Japanese are technological sound individuals and like embracing technological improvement (Clow and Baack, 2011). The country is the second largest economy in the world after the US, this means that it has substantially innovated and helped in the global technological advancements (Hutt and Speh, 2012). Given this facts, Lempriere Company has conform to the current business technologies to help it further its wool marketing operations in Japan. Product Market Analysis for Fine wool in Japan The Textile mills in Japan includes the fabrics and the yarns and the value of each and every segment meant for consumption is actually defined as being the domestic production coupled with the imports less exports which are valued at the prices of the manufacturers. The total revenues for Japan’s textile markets hit $24.5 billion in 2012, which represented a yearly annual change or CARC of negative 2.9 per cent between the years 2008 and 2012. Competitive Analysis for Wool in Japan In heart of Japan’s Capital City Tokyo, the campaign for the demand of wool entered its second year with a partnership between two famous fashion retailers known as Matsuya and Mitsukoshi in the year 2012. Using the banner known as Warm up Ginza, various departmental stores actually showed or displayed their woollen products in their storefront windows with Matsuya displaying woven products while Mitsukoshi displayed their knitted products. However, Lempriere investment intends to capitalize on the weaknesses of these partnerships by entering the Japanese Markets as a single entity and offering various products, which are not offered by their competitors (Clow and Baack, 2011). As a result, they will able to give their competitors stiff competition since they will be capable of offering unique products which cannot be found anywhere in Japan at relatively cheaper costs. The WoolMark Company will be a major competitor for wool products for Lempriere investment but the company will be capable of countering this competition by offering unique wool products, which are not offered by their competitors due to the high experience that the company has (Fox, 2011). Buyer Analysis of Woollen Products in Japan Given the fact that Matsuya and Mitsukoshi held a very successful min-fashion show in which its staff wore the woollen products, this is a clear indicator that indeed, there will be many buyers for Lempriere investment’s products since the major wool messages were relayed to a greater audience (Mente, 2012). According to Toshiya Inoue, WoolMark Company’s Country Manager in Japan, the reaction of the Public towards this event, which was held in the Centre Street of Giza, was actually a great success. Due to this fact, Lempriere investment intends to use modern and sophisticated means of marketing and promoting their products to ensure that customer awareness was created among the potential clients. However, Lempriere investment will also need the support of high profile brands in Japan like for instance Gotairiku, Untitled, 23-ku e.t.c to ensure that their products can well be recognized by the clients (Clow and Baack, 2011). The selection of the Market and justification and Opportunity statement Given the fact that Lempriere investment has two optional markets in which it can locate its business operations (namely Japan and Russia). It can well be observed that Japan is capable of presenting a much greener and potential market for the company’s (Lempriere investment) growth and expansion strategies as opposed to Russia, which is more economically stable and may not want the disability of their businesses. Indeed, Lempriere investment should select Japan as a potential market since there is still new room for improvements as opposed to Russia’s markets, which are already having many competitors. Conclusion The success of any business enterprise in the process of internationalizing its business products depends highly on how such an organization conducts the market analysis, competitive analysis and buyer analysis. This is because understanding what the clients wants and doing exactly what they want makes it possible for such an organization to not only succeed but grow ensure what is on the market is what is wanted by the clients. It is therefore essential for business entities to do thorough market research on international markets before making any efforts of penetrating such markets. This is because this will lead to a reduction of costs that could be incurred while investing or expanding in new markets which future forecasts indicate the y will be economically redundant. References Clow, K., and Baack, D. 2011. Cases in Marketing Management. New York: Sage Publishers Mente, B. 2012. Japan: Understanding & Dealing with the New Japanese Way of Doing Business. London: Cultural-Insight Books Chang, A. 2010. A Legal Guide to Doing Business in the Asia-Pacific. New York: American Bar Association Fox, S. 2011. Business Etiquette for Dummies. New York: John Wiley & Sons Melville, I. 2012. Marketing in Japan. London: Routledge Publishers Misawa, M. 2011. Current Business and Legal Issues in Japan's Banking and Finance Industry. London: World Scientific Applegate, J. 2011. 201 Great Ideas for Your Small Business, 3rd Ed. New York: John Wiley & Sons Mathur, U. 2011. Global Business Strategies: Text and Cases. Jakarta: I. K. International Pvt Ltd Lancaster, G., and Massingham, L. 2010. Essentials of Marketing Management. London: Routledge Publishers Cant, M., and Heerden, C. 2011. Marketing Management: A South African Perspective. London: Juta Academic Aaker, D., and McLoughlin, D. 2010. Strategic Market Management: Global Perspectives. New York: John Wiley & Sons Hutt, M., and Speh, T. 2012. Business Marketing Management: B2B, 11th ed.: B2B. London: Cengage Learning Lempriere Company. 2013. Home. Available at http://lempriere.com.au/ [Retrieved on 14 October, 2014] Read More