Northeastern University Forta Furniture Case Study Case Study QuestionsDoes Forta need to expand internationally?What are the reasons for and against waiti

Northeastern University Forta Furniture Case Study Case Study QuestionsDoes Forta need to expand internationally?What are the reasons for and against waiting to expand into Western Europe?What should Marita Petrescu do? Which brand is better suited for which market, and should entry be based on private label or branded products?Note: Your answers should be around 1000 words.Submit your MS Word document using the Turnitin dropbox located in the Assignments area of the course. D’Amore McKim School of Business
1. Basic Framework for Global Marketing
Ravi Sarathy
Northeastern University
Week 1 L1
Based on Terpstra, Sarathy, & Russow, International Marketing (9th ed.)
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D’Amore McKim School of Business
Global Marketing
Key points:
Firms and nations are becoming more dependent on
world trade, on buying from/selling to other nations
Global marketing may be achieved through exporting,
as well as by overseas production for sale in foreign
markets
Successful global marketing is a matter of perspective,
of being comfortable with foreign cultures, and
understanding differences between various foreign
markets
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D’Amore McKim School of Business
Defining Global Marketing
Researching and understanding global customer needs
Satisfying such global customers
Being better than other competitors
Organizing for and coordinating Global Marketing (GM)
activities (for example, product, price, distribution channels,
communication, social media, etc.)
Recognizing and acting efficiently within the constraints of the
global environment (governments, culture, macro-economy,
international finance, and marketing infrastructure differences)
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D’Amore McKim School of Business
Global Marketing (GM) as Both Export
Sales and Foreign Sales
Many U.S. and foreign multinationals sell more into foreign
markets from their foreign factories than through exports from
home market
Reasons: Competitive price, product adaptation, lower costs,
more timely delivery, face lower trade barriers
Hence, foreign direct investment (FDI) in overseas factories and
sales subsidiaries necessary for well-rounded GM strategy
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D’Amore McKim School of Business
Globalization of Markets?
Are tastes and needs converging across global markets?
Consumer product tastes may have converged less than
industrial product specifications
Global communications have …
Made consumers worldwide more aware of their shared
preferences
Contributed to creation of world brands
Led to the development of market segments that cut across
national markets (for example, video games, smartphones, and
fast food)
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D’Amore McKim School of Business
Key Issues for Global Marketing (GM)
Which foreign markets to target?
Should a firm adapt to different country markets?
What aspects to adapt?
Product/service attributes?
Branding?
Advertising, social media, and promotion strategy?
Distribution strategy? Global E-commerce?
Pricing strategy?
How does globalization affect new-product development
in multinationals?
How does globalization affect organizing for global
markets
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D’Amore McKim School of Business
Global Marketing (GM) Concerns
Export/import operations: direct and indirect
Overseas manufacturing and managing global supply
chains
Joint ventures with local and foreign partners
Licensing and franchising
One-time projects: build-operate-transfer (BOT) (for
example, building overseas energy plants and
infrastructure, such as roads, ports, airports, waterworks,
and sanitation, then handing them over once satisfactorily
operating)
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D’Amore McKim School of Business
Global Marketing (GM) Manager’s tasks
Planning and coordinating overseas marketing
Domestic marketing in multiple foreign markets
Managing and influencing controllable aspects of
marketing in the context of varying and often
uncontrollable foreign environments
Cultural sensitivity and adaptation—avoiding
ethnocentricity and self-reference criteria in
product development, evaluation, and decision
making
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D’Amore McKim School of Business
Why Firms Have Difficulty with Global Marketing
The trade barrier of the mind–discomfort with dealing
with different markets, income levels, geographic
distance, cultures, tastes, languages, and governments
Domestic firms with little overseas experience reluctant to
approach foreign markets
How can this difficulty be overcome?
Hiring managers with international expertise
Contracting with third parties such as distributors and agents
Receiving government help
Understanding and accepting cultural differences
Passing of time and by accumulating experience
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D’Amore McKim School of Business
Foreign Market Assessment
Fit between product and market
Emerging versus mature markets size, growth
Entrenched competition, market share potential
Size of investment required, riskiness
Product and segment choices
Market-launch economics: Market goals, time horizon to
achieve returns; breakeven levels, opportunity cost, risk
Understanding consumer economics: how consumers in
each market choose between competing products
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D’Amore McKim School of Business
Standardization and Adaptation
Standardization of products and services
Can lead to lower costs, scale economies, integrated
research and development (R&D), production, and
marketing.
Adaptation shaped by:
Differences in purchasing power, buyer behavior, local market
conditions, regulatory variances and laws, and competitive
differentiation
Likelihood of incurring additional costs
Standardization or adaptation extends to product
features and attributes, distribution channels,
pricing, advertising, and service.
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D’Amore McKim School of Business
Global Marketing (GM) Mix:
Distribution, Pricing, and Advertising
Distribution channels vary by country; affect both efficiency
and cost of getting goods and services to the customer
Advertising—Should advertising and social media use be
standardized? What is the role of cultural differences, customer
expectations, and media availability?
Developing global brands
Pricing: Local purchasing power and affordability, competitor
pricing; impacted by currency fluctuations, transportation
costs, tariffs, and cost of adaptation
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D’Amore McKim School of Business
Supply Chain and Market Integration
Supply chain affects competitiveness
Globalization of value chain
What to make in-house
What to outsource
Factors affecting choice:
Cost, product scope (ability to manufacture a range of products), and
efficiency; local currency fluctuations
Quality, delivery time (local transportation and customs infrastructure),
intellectual property protection, contract compliance and enforcement
Local government regulations and restrictions
Changes over time, leading to change in supply-chain decisions
Critical role of information networks and databases: accessing timely
information
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D’Amore McKim School of Business
Global Marketing (GM) Organizational Structure
Organized by customer segment, line of business,
and geographic region
Affects ability to coordinate and to implement
unified approaches
Importance of country manager—local
knowledge, local networks, influence, and
cultural understanding
Organization structure can change, require
adjustment, reconfiguration, as learning about
international markets occurs
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D’Amore McKim School of Business
Impact of Cultural differences
Product acceptance; meeting local customer
needs
Ability to use direct selling and e-commerce
Sales force motivation and training
Setting and accepting behavior norms
Role of expatriates and local nationals in
marketing organization
Smooth functioning of global and virtual teams
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D’Amore McKim School of Business
Targeting Emerging Markets:
Greater Volatility and Crisis Situations
Dramatic changes in consumer economics: lower purchasing
power initially, but faster growth
Volatility, greater risk
Need for quick response planning; modified market and budget
goals as market conditions evolve
Coordinated action across multiple emerging markets
Agreement across organizational hierarchy
Between headquarters, and local units
Across peers, supervisors, and subordinates
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D’Amore McKim School of Business
Other issues relevant in Global Marketing
Ethical issues affecting global marketing
Selling to the Poor
The fortune at the bottom of the pyramid
Green marketing, environmental concerns
Standards setting and multiple standards in global markets
Who sets the standards? Control and first mover advantage
IP Development & Protection
Global Marketing and contending with National (country)
Interests
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D’Amore McKim School of Business
Key Decisions in Global Marketing
Analyzing market potential
Exploiting product life cycles globally
Overseas markets as sources of ideas
Geographic diversification, risk reduction
Test marketing, gradual entry into foreign markets
Choosing Mode of Entry
Gaining Competitive Advantage: (over local and foreign
competitors)
Lower costs, Scale Economies
Extent of product adaptation
Adaptation of marketing mix: channels, E-commerce,
pricing, social media, advertising and service
Responding to competition, imitation
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D’Amore-McKim School of Business
2. Exporting and Assessing Foreign Market
Potential
Prof. Ravi Sarathy
Northeastern University
Week 1 L2
Ravi Sarathy© 2015
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Ravi Sarathy© 2010
D’Amore-McKim School of Business
The Export Plan
Why export? (market potential, in response to
competition, learning about foreign markets)
Export mission/policy statement
Developing an export strategy
Can the product be exported? Is there a market?
Which market/countries? (market attractiveness and
strategic importance)
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
The Export Plan (cont.)
Corporate goals: What does the company expect from
exporting?
Resources: What managerial, financial, marketing,
partnering, and production resources will be needed?
What advantages do we have that will help us in
exporting?
Competition: How strong? How do we compare?
Expected performance: desired results, metrics
Do we go ahead? (as opposed to scattershot international
order taking)
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Export Market Analysis
Product potential: Value to customer, product acceptance
Industry analysis and dominant competitors
Demand estimation—market size, growth rates, relative
importance of various potential market segments
The firm’s resources, competitiveness; its international
experience
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
An Exporting Plan
Target markets: Primary and secondary markets, rollout
plan
Product adaptation: Is it needed?
Distribution decisions
Pricing
Getting paid: Sales terms, F/X issues
International sales organization
Goals: Sales, market share, contribution, profit, and ROI
forecasts
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
The Financial Budget and Plan
Pro forma financial statements
Sensitivity analysis: What if, changes occur in …
Exchange rates fluctuation
Market size and market share variation
Cost structure and pricing variation
Trade barriers and tariffs
Competitive response
What might go wrong?
Backup plan and tactics
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Assessing Global Markets (GM)
Environmental scanning
Preliminary screening of key markets
Demographic/physical environment
Social/cultural, technological, economic, political
environments; environmental and legal
environment sources of information:
Sources of market information:
Primary and secondary data
Government assistance: for example, U.S. Dept. of Commerce –
International Trade Administration, Ex-Im Bank, etc.
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Exporting: Key Questions
Which are the largest and fastest growing markets? Barriers to
entry?
Competition: How do we compare with competition? Their
product offerings? Strengths?
Where are the best opportunities?
Focus—target a few key markets (at least initially).
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Making the Initial Contacts
Potential buyers and distributors
Trade shows, exhibitions, and trade missions
U.S. Department of Commerce
Market research reports
Agent/distributor service
Matchmate (buyers) program
Similar organization in other countries (for example,
Japan Export & Trade Research Organization (JETRO)
The importance of visiting foreign markets
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Indirect Exporting
Using agents and third-party distributors
Export management and trading companies:
Specialize by industry/country
Other alternatives: OEM sales and licensing
Selecting and evaluating distributors: Terms,
territory, targets, and control
Maintaining control:
Be careful in selecting the intermediary.
They can affect your revenues, market share, and reputation.
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Direct Exporting
Sales reps and distributors
Direct selling
Local standards: Engineering and redesign of
product/service, compliance with local regulations
and standards
Buyer preferences, likely point of purchase
Overseas support: Inventory, showrooms, and service
Cultural Factors:
Willingness to cold call
Expectations of reciprocity
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Direct Exporting (cont.)
Branding, labeling, and packaging: Customization
Advertising and social media
Warranties; after-sales service, support, and consulting
Intellectual property protection considerations
Customer training and education
Customer feedback and complaint handling, maintaining
positive customer relationships
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Pricing
Price buildup in exporting:
Freight, tariffs, F/X impact, and distributor and retail
markup
Total impact: Price escalation
How to ensure product affordability?
Contribution from exports to allocated costs (for example,
research and development (R&D) and overhead)?
Terms of Sale: FOB, C.I.F. ex-warehouse, etc.
Currency of quote, F/X fluctuations
Countertrade and barter
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Pricing (cont.)
Financing the sale and getting paid—Need to
offer customer financing, duration of credit, and
risk
Letters of credit and banker’s acceptances
U.S. Ex-Im bank financing and loan guarantees,
export credit insurance and guarantees
Credit checks, collection, and arbitration
Factoring receivables (forfaiting)
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Logistics
Export licenses and regulations (based on product, country, and
end use)
Customs duties in the importing country (includes using freight
forwarders)
Precise documentation (Bill of Lading, packing list, etc.)
Mode of transportation:
Containerships, air freight, and ground
Timely delivery and reliability
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
The People Factor
Willingness to go international—greatest export
barrier is in mind
Managerial expertise—experience in
international business
Culture and language
Organization structure
Leadership and commitment—Top management
champion of the export effort
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Alternatives to Exporting
Licensing and export management contracts
Joint ventures and foreign direct investment (FDI)
Build-Own/Operate-Transfer (BOT)
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Common Mistakes of New Exporters
Failure to develop an international marketing plan before
beginning to export
Insufficient commitment by top management to
overcome initial roadblocks
Insufficient care in selecting distributors
Neglecting international distributors and favoring
domestic ones
Chasing orders instead of selective and orderly
international marketing
Neglecting exports when domestic business is booming
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Ravi Sarathy© 2015
D’Amore-McKim School of Business
Common Mistakes of New Exporters (cont.)
Assuming that successful home market product and
marketing techniques will work anywhere
Unwillingness to modify products to meet preferences or
regulations of other countries
Failure to print sales, service, and warranty information in
local languages
Unwillingness to seek help in exporting (that is, from an
export management company)
Failure to consider alternative modes of entry such as JVs
and licensing
Inability to provide readily available after-sales service in
overseas markets
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D’Amore-McKim School of Business
Recommended Readings on Exporting
U.S. Department of Commerce Export Guide
To cite
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9 -9 1 8 -5 4 7
REV. APRIL 2, 2019
JOHN A. QUELCH
KARTHIK EASWAR
Forta Furniture: International Expansion
In January 2015, Marita Petrescu, the chief marketing officer for Forta Furniture, was visiting an
international trade show where large furniture brands went to discover the trends that would shape
their industry. She was with Constantin Cernat and Alexandra Dobreva, the respective vice presidents
of Forta’s two brands, Forta and Abilit. It was the first time that Forta had visited this show. Petrescu
would take her insights back to Forta’s headquarters, where she would meet the next week with Forta’s
owners. They expected her to recommend whether Forta should expand into foreign markets.
Forta was the leading firm in the Romanian furniture market, but its growth had slowed since 2010
as IKEA and other foreign furniture companies increased their penetration into the Romanian market.
In response, Forta acquired Abilit in 2013. This was the first big move that the new CEO of Forta, Vasile
Mirea, made when he succeeded Alfred Mirea, his grandfather and Forta’s founder.
If Petrescu recommended expansion, she also had to develop a plan for doing so. Where should
Forta expand? How quickly? How much money and how many resources should it invest? Should it
do so as a private label or as a customer-facing brand? a Many companies regularly used a private-label
entry strategy to get traction in the new market, learn how it operated, and then build their own brands.
Petrescu believed after a couple of years selling private-label furniture, Forta could explore options to
license, build a brand, or even create a joint venture with a local brand.
Petrescu had commissioned two reports analyzing different market opportunities, but she wanted
to see the international competition to decide if Forta could compete on the international stage.
Country Background
After more than 40 years of communist rule that ended in 1989, Romania, like many eastern
European countries, began to transition to free-market capitalism. In 2004, Romania joined the North
a A private-label company makes products that it sells to other manufacturers, distributors, or retailers, which typically carry
these products under a different name.
________________________________________________________________________________________________________________
Harvard Business School Professor Emeritus John A. Quelch and Georgetown University Professor Karthik Easwar prepared this case solely as a
basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Although
based on real events and despite occasional reference to actual companies, this case is fictitious and any resemblance to actual persons or entities
is coincidental.
Copyright © 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or
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This document is authorized for use only by Karun Kapoor (KKAPOOR18@GMAIL.COM). Copying or posting is an infringement of copyright. Please contact
customerservice@harvardbusiness.org or 800-988-0886 for additional copies.
918-547 | Forta Furniture: International Expansion
Atlantic Treaty Organization (NATO). In 2007, it became an official member of the European Union
(EU). Romanian companies could now freely import to or export products from other EU nations.
In the early years of Romanian capitalism, the economy grew significantly. Even as its population
declined from 23.2 million to 20 million, 1 Romania’s gross domestic product (GDP) rose from $42…
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