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3 Individual ProjectPotential Strategies for Ferrer Furniture’s Global ExpansionKenneth C HolmesStrategic Management in Dynamic Environments MGMT690-1602B-01Professor Lance SpiveyColorado Technical UniversityJune 6, 2016Table of ContentsStrategic Expansion OptionsPage 3Increasing Revenues in the Current MarketPage 3Introduce New ProductsPage 3Create a Product Line for a Different marketPage 4Establish a Chain of StorePage 4Franchising or LicensingPage 4Mergers and AcquisitionsPage 4Selling GloballyPage 5Potential Methods for Ferrer’s FurniturePage 5The Importance of Multiple Global Expansion StrategiesPage 7ReferencesPage 8Potential Strategies for Ferrer Furniture’s Global ExpansionBusiness expansion research entails many considerations, and often a project team will begin with research focusing on the company’s capabilities, and internal and external advantages and disadvantages, and not address potential alternative options. Given this scenario, management has requested research regarding all potential expansion options, and their potential application for Ferrer’s Furniture. The following document discloses all research and findings.Strategic Expansion OptionsThere are numerous methods for expanding a business on a national and global scale, and they include: Increasing revenues in the current market; Introducing new products to the line; Creating a product line for a different market; Establishing a chain of stores; Franchising or licensing; Mergers and acquisitions; and selling globally. Increasing Revenues in the Current Market. Increasing revenues in the current market can be accomplished several ways: Moving current showrooms to larger locations in the area, thus adding valuable revenue generating space; Relocating showrooms to areas or facilities (Decorating centers, high-end malls, etc.) that cater to more affluent consumers, thus attracting the ideal customer; and creative pricing strategies, from running seasonal and holiday sales, to bundled room packages. Introduce New Products. For the furniture industry, this means venturing into areas not yet addressed, and is a natural evolution. This could mean designing patio furniture, a home accessories collection, a high-quality linens collection for bedroom and dining room, custom protective table tops, etc. Create a Product Line for a Different market. This means designing a furniture line with mid or low priced fabrications, and address the mid to low priced consumer, that wants a quality product for a lower price. This technique will require a greater cash investment, but when done correctly, will address more consumer markets, will create more competition in the mid to low price market, and will generate a large additional revenue stream. Establish a Chain of Stores. This method requires a large investment of money and time, will require an established plan for running each location, will require a staff trained in running a furniture store by company standards, and in furniture sales and product knowledge, but will provide access to the target consumer in areas across the country, and will generate a larger revenue stream than just a few locations. Franchising or Licensing. Franchising is a technique that provides interested entrepreneurs (Franchisee) the opportunity to own their own business, but do so under the licensed trademark umbrella of an established company (Franchisor), with less investment of time and money that a business from scratch requires, and will usually cost a minimum of $50,000 to $100,000 investment from the franchisee. Franchising requires the application of training manuals, an established system in place, regular communications between the two, and routine travel to franchised locations. Franchising enables the franchisor to expand their business by selling the right to own and operate a branch, take their knowledge, experience, and product line, requires less overhead, places responsibility of daily operations on the franchisee, receive fees and royalties from the franchisee forever, and have the franchisee absorb the bulk of the risk CITATION NA1653 \l 1033 (N.A., Franchise Businesses, 2016). Mergers and Acquisitions. A merger is when two companies of equal size join forces, share resources, and create one entity. An acquisition is when a smaller company is absorbed by a larger company, share resources, and create on entity. A solid integration strategy must be implemented, requires coordination of operations, logistics, routine communications, and a solid IT infrastructure. There will be expectations for performance, quality standards, and contractual agreement CITATION NA1654 \l 1033 (N.A., Understanding Merger and Acquisition Strategies, 2016). Selling Globally. Selling globally can be accomplished several ways including: The use of exporters, sales agents or trading houses. When using exporter services, the niche market must be identified, the client must be honest about the product and company capabilities, professional and diligent, respectful of their culture, expect long lead time, and be patient. This method allows the manufacturer to access foreign markets, market trend information, and be involved in the sale and terms of the contract; Licensing the company name with an overseas manufacturer, which entails licensing the company trademark and production methods to an overseas manufacture, and requires giving up some control; joint venture manufacturing, which entails partnering with an overseas manufacturer and/or retailer, and a formal agreement on production quality, distribution, and sales vendors; and marketing and delivering your own product directly. This method is the most expensive, requires extensive logistics, foreign language proficiency, cultural understanding, and experience with selling in overseas markets. Conducting business overseas may require an overseas partner, who will establish the necessary connections, or may need the aid of the country’s economic development agency, who will establish resource and distribution connections, and will require time, patience, the services of attorneys and accountants with overseas business experience, complying with overseas environmental and business regulations, and multiple visits to overseas partners. Potential Methods for Ferrer’s FurnitureFor Ferrer’s Furniture, there are several global expansion methods that could prove suitable, and they include:Relocating their two showrooms to larger facilities, decorating centers or high-end malls, which would require minimal expense, increase access to their target consumer, and provide minimal risk. Implementing bundled room packages would increase the customer value. Introducing new products (patio furniture, bedroom and dining room linen collections, custom table top protectors) would enable the customer to dress the entire home in one place, add value to the business, improve the customer’s perception of Ferrer’s furniture, will enhance the Ferrer’s Furniture name and reputation, and requires minimal risk. Adding a product line that uses mid-priced fabrications would be suitable. The line would be priced to address the mid-market consumer, that is less price sensitive than low-priced consumers, would expand Ferrer Furniture’s product range, and only compete against mid-market competitors. This method would require greater investment of money and time, but when done well will result in major revenue and profit increases.Establishing a chain of stores would expand Ferrer’s Furniture name into many more locations across the country, will make the product more accessible to the target consumer, enable the target consumer to try the product before they buy, generate tremendous revenues, and provide employment opportunities. On the flip side, it is one of the most-costly, since all responsibilities and costs of locations and construction, distribution, and staffing would be absorbed by Ferrer’s Furniture. Franchising or licensing would enable tremendous growth, and would require far less investment since Ferrer’s Furniture would provide the product and training, and the franchisee would pay an upfront investment (minimum of $50,000 or $100,000), would pay Ferrer’s Furniture fees and royalties forever, would handle daily operations, and would absorb most of the risk.Mergers and Acquisitions would expand their consumer reach, but management must accept they would be the sister company under the umbrella of the parent company, would require routine communications and an integrated IT infrastructure, and they would have to conform with parent company expectations, and contractual agreement.Selling globally through exporters, sales agents or trading houses, would be a convenient and less costly method, as the representative would establish distribution and logistics connections, and provide access to foreign markets and trends.Joint venture with an overseas retailer, manufacture or agent would provide extensive connections, and access to overseas markets and trends. It is also one of the most-costly since all costs of production and logistics would fall on Ferrer’s Furniture, would require cultural and foreign language proficiency, experience in selling overseas, the hiring of attorneys and accountants with overseas experience, time, diligence and patience.The Importance of Multiple Global Expansion StrategiesWhen planning global expansion, it is necessary to have several plans of attack. Global expansion requires a tremendous amount of research into which methods are the most practical, and have the capability of applying. Awareness of the company’s, production, logistics and financial capabilities will determine which methods are suitable, and available. Additionally, having multiple plans for expansion provides backup plans, which will prove essential if a plan proves unsuccessful, and provides options that will likely prove successful, potentially provide multiple revenue streams, and achieve the company’s mission, values and goals. References BIBLIOGRAPHY \l 1033 N.A. (2014, June 11). Seven Ways to Expand: From Local to Global. Retrieved from Community Futures: cf-sn.ca/business/business_expansion/expansion.phpN.A. (2016). Franchise Businesses. Retrieved from SBA: ? … ? How to Start a Business ? Business TypesN.A. (2016). Understanding Merger and Acquisition Strategies. Retrieved from Merger and Acquisition Strategies: ................
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