Evaluating Internationalization Strategy

Date: Nov 8, 2018

Introduction

The international market is subject to a number of factors that companies should consider before moving in. In many cases, they are forced to make changes in their way of doing business to reflect the demands of the international market (Jansson 2007, p. 43). In the contemporary management of international markets, many companies have tried to retain their style in terms of shops and brand as one of the ways of fighting local competition (Aswathappa 2013, p. 14). The Italian company Boffi, a kitchen products maker, has used several strategies to succeed in international markets despite the challenges it has faced. This analysis provides the evaluation of Boffi internationalization strategy and offers a recommendation on suitable future internationalization options available to the company.

Summary of Environmental Audit

Boffi’s success in the international markets is driven by its ability to identify opportunities and produce products that meet the customers’ tastes and preferences. It, however, faces challenges in terms of regulations, legal requirements, labor, and competition from other kitchen producers. Boffi has taken advantage of its internationalization strategy by building a brand for its products. It serves high-end customers who can invest their money in the most private place in their houses. The distribution channel that the company uses in terms of mono-brands and customized shops across the international market also means that the company remains identifiable to its customers amid stiff competition. The company has diversified its products and markets. It does not engage in mass production without having identified the market where its products will be sold (Mennen 2010, p. 17).

Lifecycle Analysis

Boffi started its internationalization strategy by substituting its line managers and launching new products. However, the company management identified potential markets without market research, financial, and data analysis. Dealership in the new markets was done through distributors before the company decided to enter directly in the distribution and relationship with the final customer. In some markets, the company used indirect channels to enter the market with the purpose of opening up mono-brand stores (Mentis, 2013, p. 20). It instead opened Directly Operated Stores and integrated some retailers. Designers were trained in DOS to manage the centers. It used exclusive shops for its brand of kitchens and bathrooms. The non-exclusive shops were used as stopovers that had other brands; they were operated in the markets where it was not convenient or too risky to have the mono-brand store. Boffi flagship shops were used to promote the company’s image as the owner of the brand. They were located in major cities like London, Paris, New York and Rome. Boffi studios were owned by autonomous dealers, but they stocked the same product range as Boffi flagship.

SWOT Analysis

Boffi has had a number of strengths in its internationalization strategy. The company has been able to adapt and vary its products in line with tastes and preferences of customers in different markets. It has also been able to launch the new product designs using the same brand thus keeping it visible to the customers. The use of Directly Operated Stores also allowed the company to sell its main products alongside the newly launched products.

However, the company is faced with a number of threats. First, the international market is characterized with the legal and technical requirements that might be difficult to fulfill. This has been the case with Japan and Great Britain. Some markets like the USA require radical customization because of differences in kitchen sizes, voltage and unity measures. In addition, the existence of strong technical regulations in promising markets means that the company is not able to do business effectively there. There has also been lack of proper technical competencies in markets like Greece.

In its weaknesses, the company has not been able to invest much in market research. This means that it has been risking its investments in some potential markets that it has not been able to penetrate. An example is the Japanese market where the company was forced to withdraw after failing to meet the legal requirements. The company has also failed to keep up with competition in niche markets with Germany producers.

Boffi’s ability to enter new markets with diversified products including kitchens, bathrooms, wardrobes, and lights presents it with a unique advantage over its competitors, which can be exploited. It also has the opportunity to enter into a highly competitive niche markets through customization and better designs. The company also has prospects of entering into contract business through turnkey projects for real estates and hotels. It can also venture into developing its own counterparts in international markets to manage complex product through training (Wrice 2004, p. 45).

External Analysis

With such challenges, Boffi should consistently analyze the external forces that could affect its expansion strategy in the international markets. One of the external forces that the company must deal with in the two countries is the competition with companies that produce the same products. German kitchen makers proved to be a threat to the expansion of the company in European and Asian markets (Hoskisson & Hitt 2008, p. 33). This was also felt in Greece. The country’s proximity to Germany meant that Boffi faced stiff competition with the German producers. Thus, for it to stay competitive in these international markets, Boffi needed to brand itself in terms of quality of its products. It also had to address the cultural and political environment in the international market to customize its products for particular markets. Another country where Boffi had to do much to increase its competitiveness was the USA. For example, the kitchen size in the US is a little bigger than the one in European countries. This meant that the company needed to adjust the size of its kitchen product to meet the needs of the American kitchen.

Developing unique product designs for the international market that identified the company from its competitors has been Boffi’s source of strength, and the company should continue taking advantage of the same in these two countries. However, the designs need to incorporate quality in terms of the technology and material used to make the final products. Craftsmanship is another element that determines the uniqueness of the product of a given company on the international market (Wang & Ceecee 2010, p. 34). Thus, it can establish strong communication channels through international fairs and specialized press to help in ensuring that the distribution of products is done using selective points. Investments in mono-brand stores and directly operated stores located in capital cities of the two countries can enable the company to strategically meet its clients wherever they are located (Goldman & Nieuwenhuizen 2011, p. 55)

Advertising and communication using different media like television, testimonials, and sponsorship of local tournaments and teams is another important internationalization strategy. Boffi, being a company with much potential in international market, can utilize this strategy to overcome the pressure from other companies in both Germany and the USA (Grunig & Morschett 2011, p. 23). With low investments in research and design, Boffi could invest in sub-line production with a different target and still maintain the competitiveness of its products.

Production and brand-based approach to product design is another strong factor that Boffi can incorporate to achieve high brand-awareness and price quality ratio in these markets. This is a strategy that competitors of Boffi have utilized largely. The approach is important in selecting the price range on the market (Frey 2012, p. 5). Already, Boffi had branded itself as a high range kitchen manufacturer. This strategy meant that the company could not compete with other manufacturers that marketed themselves as both medium and high range companies (Casillas, Acedo & Moreno 2007, p. 39).

While the understanding of the dynamics of the international markets is important, having a defined strategy on how to approach the market helps a company to remain relevant. The creation of a strong brand to differentiate and identify products is essential to the international market (Stonehouse & Houston 2013, p. 54). The establishment of strategic actions with a focus on a specified period can also help Boffi to participate in functions that will enable it realize the achievement of its objective. However, product design should be emphasized through strategic collaboration with notable designers in the two countries and countries where they compete for the market. Management of product designs should also be centralized with one director to bring out the synergy in the products from different manufacturing sites. Equally, collaboration with other complementary brands in the high-end international market should be particularly encouraged to strengthen the international presence (Tomlinson & Moor 2011, p. 65). This will translate to the creation of a brand that encompasses a vast number of products that the company finally gives to the customers. Finally, diversification is important in the introduction of a new category of products using the same brand (Sekhar 2012, p. 19).

Evaluation of Modes of Entry

As seen in its entry to Spain and Denmark, the company used agents to enter new markets. Its reasoning was that the markets’ purchase potential was still very low. The mode was also appropriate for improving the company’s turn over. This was the same case with Eastern countries and Russia. Because most of the activities that are outsourced may be seen as trivial and detached from the central function of the company, it is almost easier to neglect the quality of services offered by outsourced companies (Nigam 2005, p. 29). The essence of aligning with local designers is not limited to cutting on costs and best quality products to clients in an international market. The entry strategy should be executed with caution to avoid a negative effect on the overall productivity of the company (Tate & Brown 2009).

The international market is ever growing, with many emerging opportunities (Andexer 2008, p. 56). A company with a well-conceived internationalization strategy is more likely to succeed in doing business (Young 2007, p. 23). However, Boffi should ensure that it is accompanied with proper and insightful analysis and evaluation of the market based on the factual research findings prior to the entry into the international market (Spulber 2012, p. 71). Its ability to form alliances and acquisitions, as well as increase the product range will be appealable to customers from different markets (Grant 2002, p. 11). Equally important is the use of computer technology and applications to view the performance of the company’s subsidiaries in different countries as well as support efficient procurement and processing of its products (Mankins & Steele 2005, p. 67).

Internal Analysis of Strategic Entry to International Market

A company may require a human resource base with skills and experiences to enter successfully into international market (Inkpen 2005, p. 72). Boffi’s strategy involves the establishment of dedicated training centers for the new employees. However, the company also needs a strong management team that can embrace the business philosophy of maintaining the brand identity. Boffi should also embrace the utilization of research as a tool to help it understand the barriers on the international market while deciding which market to enter (Doole & Lowe 2008, p. 37). The company should also continue to take advantage of the markets where it has been doing well. For instance, the Boffi products are doing well in international markets that are close to Italy. This is contrary to faraway markets where the company ships the ready-made products (Vyuptakesh 2012, p. 34).

Evaluation of National Competitive Advantage

Nationally, the company has taken steps aimed at enabling it to continue enjoying its competitive advantage. The top management of the company is represented by people with experience in leadership; thus, it has been able to invest in creating customized products. The company also has a well-qualified labor force in the wood industry, capable of attracting many specialized producers. This allowed Boffi to produce kitchens in the high-end market. The company has also invested in product design in collaboration with well-known designers to give it an upper hand (Yadong 2009, p. 21). Moreover, it has formed alliances with complementary brands in the high-end markets to strengthen its international and national market presence. Boffi may continue enjoying this advantage since it has also had the ability to diversify into a new product line using the same brand in a low-level competition segment of bathrooms. Finally, the company has remained focused on its core business of kitchens and bathrooms while using lights and wardrobes to strengthen its offer.

Recommendations and Conclusion

Just like other companies operating in the international markets, to be able to develop effective retail structures, Boffi needs a link between distribution and internationalization of products. This will help deliver the philosophy and style of the company in an international perspective (Haezendonck 2008, p. 36). Acquisition of similar product companies in the international market can also contribute to the Boffi’s marketing concept. Acquisition can help position the company as a reference brand for a selected clientele with a taste for customized products.

Equally, the customized designs need to consider the design culture and the personal details (Singh 2011, p. 9). The legal requirements and policies in the international market is also a factor that can influence Boffi’s attempt to diversify its business in an international perspective. For instance, local traders are most likely to have a better understanding of the location of distribution centers where they can meet the clients without difficulties (Fortanet 2006, p. 32). Use of modern technology in the design and manufacturing of the products is another influential factor that will impact on the development in the international market. The technology use could allow the company to make cross selling because the product range in branded shops is diversified and customers are likely to make purchases in diversified shops (Jansson 2013, p. 97).

The company should also invest in research and design to develop products that meet regulations and legal requirements, tastes, and preferences on the international market. There is also the need for Boffi to implement a training program for designers and architectures that focuses on the local talent to allow international community to participate in design and production of products.

In conclusion, the internationalization of a product requires a deep understanding of the factors and dynamics of international business. The prospects of acquisition, branding, customizations, legal and cultural requirements, training and management, and channels’ distribution face any company that want to diverse into international business. With better insight, use of technology, proper communication channels, diversified products, and strategic partnership, Boffi will be able to gain a competitive advantage even in countries where it has stiff competition.

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