Analyses and evaluate the micro-external environment of (two) international markets - Essay Example

? Micro-External Environment Bedroom furniture comprises various sub-products such as non-fitted bedroom furniture and fitted bedroom furniture. As reported by Mintel Oxygen (2012), each of the sub-products in the bedroom furniture segment is targeted for an individual customer group. Mintel Oxygen (2012) has segregated two types of bedroom furniture such as fitted bedroom furniture and non-fitted bedroom furniture in order to analyse the unique selling proposition (USP) of an individual product portfolio of the bedroom furniture industry in UK. According to Mintel Oxygen (2012), fitted bedroom furniture contributes in large proportion to the total sales revenue earned by the bedroom furniture industry. Fitted bedroom furniture includes built-in wardrobes, built-in drawers, fitted beds etc, and Mintel Oxygen (2012) has also pointed out that fitted bedroom furniture is designed for large bedrooms. USP of fitted bedroom furniture lies on the ability to provide variety in design, systematic fittings and synchronise with large space in the room. Mintel Oxygen (2012) has reported that non-fitted furniture is generally preferred by bachelors and individuals who do not have large space in the room for using fitted bedroom furniture. Non-fitted furniture includes bedside tables, customized chests of drawers, dressing tables, beds etc. A unique selling proposition of non-fitted bedroom furniture depends on its ability to provide a high degree of customization in terms of assembling bedroom furniture to customers. The next section of the study will discuss the market composition of Germany for the bedroom furniture segment. The German bedroom furniture industry is going through a critical phase in terms of shrinkage in demand due to the slow economic growth rate and dwindling purchasing parity of customers. Lynn (2010) has pointed out that sovereign debt crisis has decreased the retail merchandising growth rate in most of the European countries. Market Line (2012a) has reported that almost half of the German furniture industry is dominated by the bedroom furniture segment. According to Market Line (2012a), the value of the bedroom furniture industry in Germany is more than $25 billion, which is proportionate to more than 50% of the overall industry composition. Industry analysts have forecasted a compound annual growth rate (CAGR) of 3%–4% for the bedroom furniture industry. The bedroom furniture market in the country is fragmented due to presence of both domestic and international players in large proportion. Market Line (2012a) has been able to conclude that only 7% to 13% of buyers in the country prefer to purchase high priced premium luxury bedroom furniture for their home. The majority of buyers prefer to purchase mid-range bedroom furniture for their home. Customer segmentation for the German bedroom furniture industry can be done by using lifestyle criteria of Brassington and Pettitt (2007). According to lifestyle, bedroom furniture customers in Germany can be segmented as ‘singletons’ and ‘best agers’. Young professionals with a high spending capacity can be classified as ‘singletons’; these customers prefer to purchase customized non-fitted furniture, which can fit in their small bedroom. Couples with children and older people complemented with a high spending capacity can be classified as ‘best agers’; these customers prefer to purchase fitted furniture for their large bedrooms. De Mooij (2011) has pointed out that the purchasing behaviour of customer can be directed by personality and cultural orientation, which means that companies planning to expand their business in the bedroom furniture segment of Germany need to design their product in accordance with German culture for generating attraction among customers. The stable political condition of Germany will encourage retailers to invest in the bedroom furniture segment, which will help them to expand their business in the country. Gillespie et al. (2010) have pointed out that antitrust law in European countries such as Germany has been created in order to ensure fairness in market competition. Sovereign debt crisis has reduced both the GDP growth and spending capacity of German people, which has resulted in reduction of demand for high priced bedroom furniture. The social context of Germany has been affected by lifestyle, slow economic growth and decrease in disposable income among customers. Young professionals of the country prefer to purchase customized and small furniture whereas old people in the country prefer to purchase fitted furniture. Research work of Hollensen and Schmidt (2006) has shown that the pattern of customer interaction decides the linearity in demand for retail merchandises in European countries such as Germany; hence bedroom furniture retailers need to increase interaction with customers in order to increase scope for customer engagement. Germany is the technological hub of Europe, hence it is expected that retailers planning to expand their business in Germany will get benefited by the existing state of art technologies such as vendor management software, radio frequency identification (RFID), enterprise resource planning (ERP) etc of the country. The high degree of fragmentation in the German bedroom furniture market has decreased switching cost for customers, which in turn has increased buyer power significantly. Retailers are dependent on suppliers for incorporating the latest design and customization in bedroom furniture. This dependency has increased supplier power significantly. The low infrastructural cost requirement for setting up a bedroom furniture retail store in German has increased the threat of new entrants for existing players. Customers have the option to purchase low priced second hand furniture from online marketers or directly from owners. These aspects have increased the threat of substitute for the industry up to a significant level. Presence of global players such as Beter Bed of Netherland, IKEA of Sweden and domestic players such as Hofner Mobel and Bauhaus has increased the competition level for the industry. Beter Bed exclusively focuses on bedroom furniture while IKEA emphasises equally other furniture segments. Both Hofner Mobel and Bauhaus offer a diversified range of furniture products such as kitchen furniture, living room furniture, bedroom furniture etc to customers. A bedroom furniture retailer planning to enter in the retail scenario of Germany can follow the website design of Hofner Mobel in order to design their own website. The vivid and 3D image of bedroom furniture on the website can help the retailers to increase brand visibility and customer engagement too. The next portion of the essay will discuss the bedroom furniture industry of Russia. According to Market Line (2012b), the value of the bedroom furniture industry in Russia is more than $1 billion and the market has been growing at a rate of 20% for the last two years. Customers for bedroom furniture products in the country can be segregated as singletons and best agers. Consolidated nature of the market resulted from presence of market leaders such as IKEA, Carpetright and Beter Bed. The structure of the Russian furniture industry is similar to the German furniture industry, hence a separate Porter five force analysis has not been shown in the essay. Consolidated nature of the industry has decreased buyer power slightly while market rivalry for the bedroom furniture segment has increased due to presence of global market leaders such as Beter Bed of Netherland, IKEA of Sweden and Carpetright of UK. Retailers planning to enter in the Russian market will face issues such as rigid government norms, unequal economic growth of different region, shifting consumer demand from low quality domestic product to international brands and a low level of technology integration in the business process. Albaum and Duerr (2011) have pointed out that export is the most common way for manufacturers and retailers to internationalise their business. It has already been mentioned that the setup cost of opening a retail outlet in Germany and Russia is moderate, hence retailers planning to enter in the bedroom furniture industry of Germany and Russia can think about establishing retail shops through 100% foreign direct investment. Other entry strategies such as joint venture, licensing etc are not much common for entering the retail scenario of small segments such as bedroom furniture in countries such as Germany and Russia. The British Furniture Manufacturers Association (2005) has reported that the average international export cost for the bedroom furniture industry lies in the range of ?100 to ?150 million. Research scholars such as Keegan and Green (2011) and Keegan (2001) have stated that companies need to design their marketing mix effectively in order to achieve a sustainable competitive advantage. Marketing mix for bedroom furniture in Germany and Russia can be explained in the following manner. Product Fitted and non-fitted beds. Price Premium pricing policy will be used in order to enhance the brand image associated with product and target the affluent class. Rich ‘singletons’ and ‘best agers’ will be the target customer. Place The distribution channel will comprise retail outlets and departmental stores, specialist stores, catalogue merchandisers etc. Direct contracts, agents, overseas offices and distributors will be used for maintaining an international distribution channel. Promotion Sales promotion and electronic display at point of sales (POS) will be used in order to generate customer awareness. Online B2B promotion will be guided by contact following the consolidation model proposed by Fawzy and Dworski (2010). SWOT analysis for the product can be done in the following manner. Strength Weakness Offering fitted and non-fitted beds will help the company to cater demand of different customer segments. Premium brand image. High price of the product. Focused customer segmentation. Opportunity Threat Adopting an online business model to cater demand of both B2B and B2C customers. Competitive threat from global players such as IKEA, Beter Bed and domestic players of Germany. The researcher has used the qualitative research method backed by secondary data sources such as books, database including Market Line, Mintel Oxygen, company websites and other online sources in order to accomplish the assignment successfully. References Albaum, G. and Duerr, E., 2011. International marketing and export management. New Jersey: Pearson Education.  Brassington, F. and Pettitt, S., 2007. Essentials of marketing. 2nd ed. London: Prentice Hall Financial Times. British Furniture Manufacturers Association, 2005. Benchmarking the export performance of UK furniture manufacturers. [Online] Available at: [Accessed 23 January 2013]. De Mooij, M., 2011. Consumer behavior and culture, consequences for global marketing and advertising. 2nd ed. California: Sage Publications. Fawzy, L. and Dworski, L., 2010. Emerging business online, global markets and the power of B2B Internet marketing. New Jersey: Pearson Education. Gillespie, K., Jeannet, J. P. and Hennessey, D., 2010. Global marketing. Stamford, Connecticut: Cengage Learning. Hollensen, S. and Schmidt, M., 2006. Marketing research: an international approach. New Jersey: Financial Times Press, Pearson Education. Keegan, W. J. and Green, M. C., 2011. Global marketing. 6th ed. New Jersey: Pearson, Prentice Hall. Keegan, W. J., 2001. Global marketing management. 7th ed. New Jersey: Pearson Education. Lynn, M., 2010. Bust: Greece, the Euro and the sovereign debt crisis. Hoboken, New Jersey: John Wiley & Sons. Market line, 2012a. Germany – Furniture & floor coverings. [Online] Available at: [Accessed 22 January 2013]. Market line, 2012b. Eastern Europe – Furniture & floor coverings. [Online] Available at: [Accessed 23 January 2013]. Mintel Oxygen, 2012. Bedrooms and bedroom furniture – UK. [Online] Available at: [Accessed 22 January 2013]. Read More