Consultancy handout
Content
Company Introduction
Ningbo Kwung’s Wisdom Art & Design Co., Ltd (referred to as Kwung’s) is a manufacturing company based in Ningbo, China. They specialize in the design and manufacturing of scented candles, candle holders, and selected gift item accessories. Their headquarters includes their corporate offices, manufacturing facilities, and storage and warehousing facility. Their business model is based on a B2B model (Business to Business) with around 90% of their sales going for export (foreign markets). Kwung’s has a showroom in Guangzhou used during the Canton Fair exhibition biannually in March and rd September. It also has 3 party sales agents in Australia, the United Kingdom, Spain and a partner in the United States. Given their extensive product portfolio of over 200,000 items, Kwung’s average monthly sales range between 3-4 million US based on two standard product seasons; Spring/Summer and Fall/Winter with the months of June and July being their busy period as well the month preceding the Chinese New Year. Kwung’s only deals with ISO 9001 suppliers for raw materials from China and Malaysia and has received a number of regional awards and recognitions. [Insert Organizational chart and address]
Related Industry
A study made on the World Market for Scented Candles in 2009 by Prof. Philip Parker from INSEAD states that the potential market size for scented candles at million US Dollars. Scented candles in this report means all generally known products composed of all types of wax candles enhanced with aromatic oils or fragrances. The report estimated the potential for the Chinese market in 2009 at 425 million USD representing 12% of the global demand. However, the potential for foreign markets such as the U.S. was estimated at almost double that figure (801 million USD) representing around 22% of the global demand. This supports Kwung’s and other Chinese manufacturers’ direction to rely heavily on the export business as a source of turnover. However, some manufacturers are facing strict anti-dumping laws from U.S. regulators who are imposing a 108.3% tariff rate on candles with a petroleum base of over 50%. European regulators have more specifically applied ‘’ascending order’’ tariff rates on selected manufacturers. In terms of innovation, the industry is continuously looking to reduce the percentage of petroleum being used in the candles. This makes the candles more environmentally friendly and provides the company with the chance to market itself as a responsible manufacturer. Candle making is not only an art but also a science as well. Rigorous product testing on various technical features and aspects is an important activity undertaken by candle makers who are willing and able to become global export players. The challenge remains to satisfy country-specific codes on flammability, material safety and allowable amount of certain materials in the candles. A manufacturing company’s scope of activity now goes beyond the production of the actual candles and goes into working on new ways of generating colorful, creative designs not only for the candles but for candle holders and other home decoration accessories as well. Scented candle designs are inspired by various elements from nature as well aromatherapy and psychology.
1
The Problems (Consulting Project Questions)
Question 1: How to enhance the market share of Chinese candle production? Question 2: How to improve the efficiency of logistics of our company? Question 3: How to establish and grasp the distribution channel of Europe?
Methodology
Day 0: Meeting with the General Manager of the Import/Export subsidiary of Kwung’s Wisdom Art & Design Co at Ningbo University of Technology. Interview questions included summary of the company’s key activities, and a discussion of three main topics related to the problems/questions asked by the company. 1- Marketing & market share 2- Supply chain management and logistics 3- New business development / new market entry Day 1: First day at the company premises. Visit of two-story showroom showcasing Spring/Summer and Fall/Winter product samples. Visit of factory premises and production facilities including molding, assembly, and packaging activities. Visit of company storage facilities for raw material, finished products, and empty products/recyclable material. Conducted meeting with the head of the sales department to discuss current and future sales strategies. Day 2: Second day at the company premises. Conducted meetings with the heads of the Research and Development (R&D), Day 3: Day 4: Preparation of findings report and presentation. The team worked on answering the questions based on the feedback received from the interviews, the showroom and factory visits and the use of several business management tools and models. Question 1: How to enhance the market share of Chinese candle production? Keywords: Marketing, Market Share, domestic, foreign Kwung’s currently produces medium-end candles which are mostly used for decoration purposes. The company sells its products through supermarkets and importers/ distributors for reasonable prices. The company enjoys a strong R&D department as it is always updating its product catalogue and focusing on innovation. The company’s online selling service is still at the very initial stages for the Chinese (domestic) market. There is no advertising expenditure undertaken by the company as it generally does not any discounts or promotions with the exception of a one-time discount for new customers. The company participates in
2
the annual Canton Fair as well as other trade exhibitions held in major European cities (London, Frankfurt and Paris). Kwung’s primary main competitor was identified as King King Co. Ltd which owns factories in other countries such as Vietnam and South Korea. King King operates in three key foreign markets: United States, South Korea & China and Germany. They also design a variety of candles in-house. They use their own brand; they don’t use co-branding in some specialized products. An example of one of their customers is Wal-Mart. Kwung’s products for Europe usually have unique designs and they launched different products according to each of the different European countries they operate in. Co-branding is currently being used in Europe but the company is considering launching its own brad and is attempting to capture more market share in the different areas of European countries. Given the above information and the feedback received from the interviews, the following S.W.O.T Analysis table was created: Strengths 1- The company can design its own products, it has many patents. 2- The company is very innovative; they have many creative designs and concepts backed with R&D operations. 3- The product portfolio has a wide variety and the company is able to process bulk (high) and medium volume orders. 4- The products are handcrafted; they can be personalized or customized. Weaknesses 1- Brand Perception: European customers do not fully grasp the development of Chinese corporations so they don’t pay attention to products such as scented candles. 2- The company does not franchise any shops or own/operate any warehouses outside China. 3- They don’t have their own brand in Europe. 4- The company only relies on exhibitions to promote its activity. 5- There is no corporate advertisement program in place. 6- There are no sales promotions.
5- The company passed several QA/QC and conformity tests such as Bureau VERITAS, SGS, ISO 9001:2008, Chinese candle association).
Opportunities
1- Large demand in Europe and USA. 2- Market potential to grow in other regions around the world. 3- European competitors lack the craftsmanship and skills to produce candles.
Threats
1- Brand Reception/Feedback: Co-branding in the European Union might not be successful. 2- Legal: Stricter EU and USA regulations affecting the export activities of global candle manufacturers.
3
4- Promoting the display of selected products in international department stores (using shop-in-shop concept) to increase visibility. 5- Establish partnerships with more online retailers.
3- Threat of new entrants to the scented candles activity. 4- Continued recession in Europe affecting export volume. 5- Increase in cost of raw materials used in wax production.
Question 2: How to improve the efficiency of logistics of our company? Keywords: Supply Chain Management, Logistics
Logistics at Kwung’s Art and Design Co. Ltd. is a multimodal transport. The raw materials such as wax, capillary and fragrance materials are purchased from and shipped by the supplier to the company’s warehouse at Ningbo which is taken care by the supplier themselves. The raw materials are stored in the warehouse for a period of 2 weeks before entering the production process, where the candles are processed, manufactured taking about a month and packed properly in cartons in order to prevent damage before they enter the finished product warehouse being bar coded for tracking, labeled and safely stored for 2 weeks. From Finished product warehouse the cartons are transported to the Ningbo Beilun Port by trucks, which is 46 kilometers. The freight transportation usually takes about 2-3 weeks to reach the
destination port (European Union), the finished product is always sent to the country of the Distributor. The company’s transportation department takes care of the shipment. The shipping terms are FOB (free on board) and CIF (Cost, Insurance and Freight) as per the choice of customers (Distributor/Agent). Distributors make consolidation of different goods at the originating port as they are dealing with multiple products. In cases of urgency the air freight are used under certain conditions such as revised rate, quantity of the product that’s in the acceptable limit. So far, Kwungs’s Company has not experienced any return of goods due to damage, los s and delay. Customers are mainly focused on the quality of the product rather than the delivery time. Often, our old customers and big companies have strong relationships with the shipping companies; they have already negotiated and set prices for freight shipment. Once the shipment reaches the destination port the same will be taken care by the Distributor/Agent which includes the import tax, duties, custom clearance and local logistics.
4
[Insert Supply Chain Diagram here]
Question 3: How to establish and grasp the distribution channel of Europe? Keywords: New business development, market entry Kwung’s wants to continue to grow its exporting business to Europe by opening new markets, specifically in Eastern Europe. The sales department, in accordance with the direction of the senior management team, has identified two countries as the target for potential growth: Russia and Poland. The significance of the two countries can be summarized in their regional effect; Russia represents a growth prospect for many global firms who are looking to capitalize on improving market conditions not only in Russia but also in surrounding CIS (Commonwealth of Independent States) countries who are benefiting from the revenues of oil and natural gas activities. On the other hand, Poland represents a geographic and commercial gateway to Eastern European countries that are joining the European Union (EU) treaties. Given Kwung’s experience in exporting to South and West European countries, we provided several recommendations for the company to follow based on a Scenario Planning process. Market Data (based on the 2009 Report on Scented Candles: World Market Segmentation per City and the 2011 Import and Export Market for Candles and Tapers in China): a- Russia Percentage imports from China (2011): 15.5% (Ranked as #1 import partner) Estimated Market demand for Scented Candles (2009): 61.70 million US Dollars Total Candles and Tapers Exports from China to Russia (2011): 7.833 million US Dollars (Ranked as #19 globally) Percentage of global scented candles demand (2009): 2% Top Cities in terms of demand: Moscow (approx. 30% of countrywide demand), Saint Petersburg (approx. 17%), Nizhni Novgorod (approx. 5%), Novosibirsk (approx. 5%) b- Poland Percentage imports from China (2011): 5.3% (Ranked as #4 import partner) Estimated Market demand for Scented Candles (2009): 36.85 million US Dollars Total Candles and Tapers Exports from China to Poland (2011): 9.211 million US Dollars (Ranked as #17 globally) Percentage of global scented candles demand (2009): 1% Top Cities in terms of demand: Warsaw (approx. 25% of countrywide demand), Lodz (approx. 13%), Krakow (approx. 11%)
5
Recommendations: Marketing and Market Share improvement: In order to enhance its market share, we recommend the company to consider the following recommendations: 1- To enhance its market share in China, the company can sell its products in scenic areas in Ningbo and they can increase their retail selling price as well in such areas because it is common practice in China. Chinese people and tourists will be possibly more inclined to buy. 2- Attempt to capture new vertical markets by directly selling to customers in the large department store, hospitality, spa and personal wellness market in China. 3- Open its own representative office in Europe with a showroom facility to showcase its products for potential customers. In addition, and in order to improve the efficiency of the company’s sales operations, customers can place orders with this office. 4- The company currently has sales agents in England and Spain to promote its products and capture new customers. It is recommended that Kwung’s increases the number of sales agents in other countries to achieve the same purpose. 5- Work with existing and newly-appointed European sales agents to explore the possibility of establishing a shop-in-shop concept with local gift item, souvenir, and specialty decoration retail stores. 6- Kwung’s can sell its products directly to gift shops and supermarkets, however, it is recommended that they continue trying to add more value to the candles in terms of design, colors, and aroma and try to adapt the candles to the various European countries’ cultures to make the products more meaningful for them. This is one way where the company can attract more clients. 7- Establish online sales channels in Europe as well as in China (which has already started) keeping in mind the difference between the products which are mainly sold in Europe and those sold domestically. This is recommended to facilitate the sales and enhance the market share. For online services, the company can sell their products on popular websites like Amazon in Europe. It is more financially sound to promote products with existing, hosted online e-retailers instead of investing in adding E-Commerce capabilities to their own existing website. 8- The company participates in the Canton Fair as well as other trade exhibitions in London, Frankfurt and Paris. They have to focus more in exhibitions, try to make more presence and expand into big cities for increase their advertisement. They should start looking for new geographic location and look for strong partnership – distributers.
6
9- Kwung’s can also create and market sales promotions (not for a single product but for a range/family of products) in selected periods of the year in order to give incentives to distributors and attract the seasonal customers. Supply Chain – Kwung’s Scope of Logistics Works
In overall, Kwung’s Company has an efficient logistic system which has been observed and verified with the respective department. Our observations include as follows: Packed and stacked correctly so that the final product arrives in a good condition Labeled and bar-coded correctly to ensure that the goods are handled properly and arrive on time and at the right place Documented currently to meet local government requirements as well as proper collection standards and as per customer’s choice Insured against damage, loss and pilferage and in some cases, delay. The Logistics Expense for this company is kept at the minimum which is heavily supported by suppliers and distributors logistics services.
Methodology Interviewed the Administrative and Human Resource Director regarding the Supply Chain of Kwung’s Company are being managed. Interacted with Vice General Manager who helped us to understand the various levels of Logistics which is incorporated by the organization. Factory visit gave us a good idea of warehouse arrangements.
Scenario Planning – Market Entry into Russia and Poland The below 8-step planning tool can help Kwung’s management team and various department formulate a strategy to enter the Russian and Polish markets taking into account the contribution of internal and external stakeholders. The top line is the theoretic process stage while the lower line is a practical recommendation 0. Theoretic scenario Planning Process stage
1A. Identify the people/organizations who will contribute a wide range of perspectives. 1B. various departments (sales, marketing, R&D, Logistics, Administration, and Human Resources) and the company’s existing network of customers, distributors and raw material suppliers need to be involved in
7
varying degrees with senior management’s plan by providing market research effort, technical and commercial inputs, experience, ideas, observations, and suggestions to enter the Russian and Polish markets. 2A. Comprehensive interviews/workshop about how participants see big shifts coming in society, economics, politics, technology, etc. 2B. to ensure time efficiency, each department can elect a representative to communicate the department’s view on the required success factors and necessary actions to be taken in order to ensure a successful market entry. For example, Russian market has huge potential for online retail, so marketing and sales teams need to identify top Russian online retailers and work with local Chinese contacts who have successfully sold to Russian online customers in other products. 3A. Group (cluster) these views into connected patterns. 3B. Create list of ideas and suggested action items per department in preparation for market entry. Ideas generated across departments and functions are welcome as they represent a common understanding/agreement of both suggesting parties. 4A. Group draws a list of priorities (the best ideas). 4B. Senior Management, or a nominated party at its discretion, studies the list of ideas and suggestions and identifies the best ones. Customer acquisition process can then start, led by the sales department and the marketing team. 5A. Create rough pictures of the future, based on these priorities; stories and rough scenarios. 5B. Create a business situation by confirming a ‘’first sale’’ or ‘’trial order’’ for a first-time Russian and/or Polish customer. Identify all of elements of this situation by ensuring company’s internal systems, procedures, and controls can support the introduction of a new customer and a specific product line. 6A. Add further detail to get impact scenarios. Determine in what way each scenario will affect the corporation. 6B. Company can choose to run an extra iteration of the business situation; explore follow-up procedures with the trial customer by collecting feedback and refining the list of action items and suggestions. 7A. Identify early warning signals; things which are indicative for a particular scenario to unfold. 7B. Use Risk Management techniques to mitigate or transfer some of the risks involved in the business situation in areas such as logistics, commercial payment terms, delivery terms, product design, and required R&D, testing, and compliance actions as required.
8A. the scenarios are monitored, evaluated, and reviewed.
8
8B. Assign responsibilities among various employees and departments, ensure progress on new market activity is periodically reported and progressively updated, ensure business situation is now turned into a part of the company’s Standard Operating Procedures (SOP).
Conclusions
Appendix x: Kwung’s R&D Activities
Testing and Certifications:
ISO 9001: 2008 Bureau Veritas SGS REACH Testing BSCI (Business Social Compliance Initiative) Shanghai Tianxiang and Chentai Pharmaceutical Machinery Co. Ltd
9
Ningbo Kwung’s Wisdom Art & Design Co., Ltd (referred to as Kwung’s) is a manufacturing company based in Ningbo, China. They specialize in the design and manufacturing of scented candles, candle holders, and selected gift item accessories. Their headquarters includes their corporate offices, manufacturing facilities, and storage and warehousing facility. Their business model is based on a B2B model (Business to Business) with around 90% of their sales going for export (foreign markets). Kwung’s has a showroom in Guangzhou used during the Canton Fair exhibition biannually in March and rd September. It also has 3 party sales agents in Australia, the United Kingdom, Spain and a partner in the United States. Given their extensive product portfolio of over 200,000 items, Kwung’s average monthly sales range between 3-4 million US based on two standard product seasons; Spring/Summer and Fall/Winter with the months of June and July being their busy period as well the month preceding the Chinese New Year. Kwung’s only deals with ISO 9001 suppliers for raw materials from China and Malaysia and has received a number of regional awards and recognitions. [Insert Organizational chart and address]
Related Industry
A study made on the World Market for Scented Candles in 2009 by Prof. Philip Parker from INSEAD states that the potential market size for scented candles at million US Dollars. Scented candles in this report means all generally known products composed of all types of wax candles enhanced with aromatic oils or fragrances. The report estimated the potential for the Chinese market in 2009 at 425 million USD representing 12% of the global demand. However, the potential for foreign markets such as the U.S. was estimated at almost double that figure (801 million USD) representing around 22% of the global demand. This supports Kwung’s and other Chinese manufacturers’ direction to rely heavily on the export business as a source of turnover. However, some manufacturers are facing strict anti-dumping laws from U.S. regulators who are imposing a 108.3% tariff rate on candles with a petroleum base of over 50%. European regulators have more specifically applied ‘’ascending order’’ tariff rates on selected manufacturers. In terms of innovation, the industry is continuously looking to reduce the percentage of petroleum being used in the candles. This makes the candles more environmentally friendly and provides the company with the chance to market itself as a responsible manufacturer. Candle making is not only an art but also a science as well. Rigorous product testing on various technical features and aspects is an important activity undertaken by candle makers who are willing and able to become global export players. The challenge remains to satisfy country-specific codes on flammability, material safety and allowable amount of certain materials in the candles. A manufacturing company’s scope of activity now goes beyond the production of the actual candles and goes into working on new ways of generating colorful, creative designs not only for the candles but for candle holders and other home decoration accessories as well. Scented candle designs are inspired by various elements from nature as well aromatherapy and psychology.
1
The Problems (Consulting Project Questions)
Question 1: How to enhance the market share of Chinese candle production? Question 2: How to improve the efficiency of logistics of our company? Question 3: How to establish and grasp the distribution channel of Europe?
Methodology
Day 0: Meeting with the General Manager of the Import/Export subsidiary of Kwung’s Wisdom Art & Design Co at Ningbo University of Technology. Interview questions included summary of the company’s key activities, and a discussion of three main topics related to the problems/questions asked by the company. 1- Marketing & market share 2- Supply chain management and logistics 3- New business development / new market entry Day 1: First day at the company premises. Visit of two-story showroom showcasing Spring/Summer and Fall/Winter product samples. Visit of factory premises and production facilities including molding, assembly, and packaging activities. Visit of company storage facilities for raw material, finished products, and empty products/recyclable material. Conducted meeting with the head of the sales department to discuss current and future sales strategies. Day 2: Second day at the company premises. Conducted meetings with the heads of the Research and Development (R&D), Day 3: Day 4: Preparation of findings report and presentation. The team worked on answering the questions based on the feedback received from the interviews, the showroom and factory visits and the use of several business management tools and models. Question 1: How to enhance the market share of Chinese candle production? Keywords: Marketing, Market Share, domestic, foreign Kwung’s currently produces medium-end candles which are mostly used for decoration purposes. The company sells its products through supermarkets and importers/ distributors for reasonable prices. The company enjoys a strong R&D department as it is always updating its product catalogue and focusing on innovation. The company’s online selling service is still at the very initial stages for the Chinese (domestic) market. There is no advertising expenditure undertaken by the company as it generally does not any discounts or promotions with the exception of a one-time discount for new customers. The company participates in
2
the annual Canton Fair as well as other trade exhibitions held in major European cities (London, Frankfurt and Paris). Kwung’s primary main competitor was identified as King King Co. Ltd which owns factories in other countries such as Vietnam and South Korea. King King operates in three key foreign markets: United States, South Korea & China and Germany. They also design a variety of candles in-house. They use their own brand; they don’t use co-branding in some specialized products. An example of one of their customers is Wal-Mart. Kwung’s products for Europe usually have unique designs and they launched different products according to each of the different European countries they operate in. Co-branding is currently being used in Europe but the company is considering launching its own brad and is attempting to capture more market share in the different areas of European countries. Given the above information and the feedback received from the interviews, the following S.W.O.T Analysis table was created: Strengths 1- The company can design its own products, it has many patents. 2- The company is very innovative; they have many creative designs and concepts backed with R&D operations. 3- The product portfolio has a wide variety and the company is able to process bulk (high) and medium volume orders. 4- The products are handcrafted; they can be personalized or customized. Weaknesses 1- Brand Perception: European customers do not fully grasp the development of Chinese corporations so they don’t pay attention to products such as scented candles. 2- The company does not franchise any shops or own/operate any warehouses outside China. 3- They don’t have their own brand in Europe. 4- The company only relies on exhibitions to promote its activity. 5- There is no corporate advertisement program in place. 6- There are no sales promotions.
5- The company passed several QA/QC and conformity tests such as Bureau VERITAS, SGS, ISO 9001:2008, Chinese candle association).
Opportunities
1- Large demand in Europe and USA. 2- Market potential to grow in other regions around the world. 3- European competitors lack the craftsmanship and skills to produce candles.
Threats
1- Brand Reception/Feedback: Co-branding in the European Union might not be successful. 2- Legal: Stricter EU and USA regulations affecting the export activities of global candle manufacturers.
3
4- Promoting the display of selected products in international department stores (using shop-in-shop concept) to increase visibility. 5- Establish partnerships with more online retailers.
3- Threat of new entrants to the scented candles activity. 4- Continued recession in Europe affecting export volume. 5- Increase in cost of raw materials used in wax production.
Question 2: How to improve the efficiency of logistics of our company? Keywords: Supply Chain Management, Logistics
Logistics at Kwung’s Art and Design Co. Ltd. is a multimodal transport. The raw materials such as wax, capillary and fragrance materials are purchased from and shipped by the supplier to the company’s warehouse at Ningbo which is taken care by the supplier themselves. The raw materials are stored in the warehouse for a period of 2 weeks before entering the production process, where the candles are processed, manufactured taking about a month and packed properly in cartons in order to prevent damage before they enter the finished product warehouse being bar coded for tracking, labeled and safely stored for 2 weeks. From Finished product warehouse the cartons are transported to the Ningbo Beilun Port by trucks, which is 46 kilometers. The freight transportation usually takes about 2-3 weeks to reach the
destination port (European Union), the finished product is always sent to the country of the Distributor. The company’s transportation department takes care of the shipment. The shipping terms are FOB (free on board) and CIF (Cost, Insurance and Freight) as per the choice of customers (Distributor/Agent). Distributors make consolidation of different goods at the originating port as they are dealing with multiple products. In cases of urgency the air freight are used under certain conditions such as revised rate, quantity of the product that’s in the acceptable limit. So far, Kwungs’s Company has not experienced any return of goods due to damage, los s and delay. Customers are mainly focused on the quality of the product rather than the delivery time. Often, our old customers and big companies have strong relationships with the shipping companies; they have already negotiated and set prices for freight shipment. Once the shipment reaches the destination port the same will be taken care by the Distributor/Agent which includes the import tax, duties, custom clearance and local logistics.
4
[Insert Supply Chain Diagram here]
Question 3: How to establish and grasp the distribution channel of Europe? Keywords: New business development, market entry Kwung’s wants to continue to grow its exporting business to Europe by opening new markets, specifically in Eastern Europe. The sales department, in accordance with the direction of the senior management team, has identified two countries as the target for potential growth: Russia and Poland. The significance of the two countries can be summarized in their regional effect; Russia represents a growth prospect for many global firms who are looking to capitalize on improving market conditions not only in Russia but also in surrounding CIS (Commonwealth of Independent States) countries who are benefiting from the revenues of oil and natural gas activities. On the other hand, Poland represents a geographic and commercial gateway to Eastern European countries that are joining the European Union (EU) treaties. Given Kwung’s experience in exporting to South and West European countries, we provided several recommendations for the company to follow based on a Scenario Planning process. Market Data (based on the 2009 Report on Scented Candles: World Market Segmentation per City and the 2011 Import and Export Market for Candles and Tapers in China): a- Russia Percentage imports from China (2011): 15.5% (Ranked as #1 import partner) Estimated Market demand for Scented Candles (2009): 61.70 million US Dollars Total Candles and Tapers Exports from China to Russia (2011): 7.833 million US Dollars (Ranked as #19 globally) Percentage of global scented candles demand (2009): 2% Top Cities in terms of demand: Moscow (approx. 30% of countrywide demand), Saint Petersburg (approx. 17%), Nizhni Novgorod (approx. 5%), Novosibirsk (approx. 5%) b- Poland Percentage imports from China (2011): 5.3% (Ranked as #4 import partner) Estimated Market demand for Scented Candles (2009): 36.85 million US Dollars Total Candles and Tapers Exports from China to Poland (2011): 9.211 million US Dollars (Ranked as #17 globally) Percentage of global scented candles demand (2009): 1% Top Cities in terms of demand: Warsaw (approx. 25% of countrywide demand), Lodz (approx. 13%), Krakow (approx. 11%)
5
Recommendations: Marketing and Market Share improvement: In order to enhance its market share, we recommend the company to consider the following recommendations: 1- To enhance its market share in China, the company can sell its products in scenic areas in Ningbo and they can increase their retail selling price as well in such areas because it is common practice in China. Chinese people and tourists will be possibly more inclined to buy. 2- Attempt to capture new vertical markets by directly selling to customers in the large department store, hospitality, spa and personal wellness market in China. 3- Open its own representative office in Europe with a showroom facility to showcase its products for potential customers. In addition, and in order to improve the efficiency of the company’s sales operations, customers can place orders with this office. 4- The company currently has sales agents in England and Spain to promote its products and capture new customers. It is recommended that Kwung’s increases the number of sales agents in other countries to achieve the same purpose. 5- Work with existing and newly-appointed European sales agents to explore the possibility of establishing a shop-in-shop concept with local gift item, souvenir, and specialty decoration retail stores. 6- Kwung’s can sell its products directly to gift shops and supermarkets, however, it is recommended that they continue trying to add more value to the candles in terms of design, colors, and aroma and try to adapt the candles to the various European countries’ cultures to make the products more meaningful for them. This is one way where the company can attract more clients. 7- Establish online sales channels in Europe as well as in China (which has already started) keeping in mind the difference between the products which are mainly sold in Europe and those sold domestically. This is recommended to facilitate the sales and enhance the market share. For online services, the company can sell their products on popular websites like Amazon in Europe. It is more financially sound to promote products with existing, hosted online e-retailers instead of investing in adding E-Commerce capabilities to their own existing website. 8- The company participates in the Canton Fair as well as other trade exhibitions in London, Frankfurt and Paris. They have to focus more in exhibitions, try to make more presence and expand into big cities for increase their advertisement. They should start looking for new geographic location and look for strong partnership – distributers.
6
9- Kwung’s can also create and market sales promotions (not for a single product but for a range/family of products) in selected periods of the year in order to give incentives to distributors and attract the seasonal customers. Supply Chain – Kwung’s Scope of Logistics Works
In overall, Kwung’s Company has an efficient logistic system which has been observed and verified with the respective department. Our observations include as follows: Packed and stacked correctly so that the final product arrives in a good condition Labeled and bar-coded correctly to ensure that the goods are handled properly and arrive on time and at the right place Documented currently to meet local government requirements as well as proper collection standards and as per customer’s choice Insured against damage, loss and pilferage and in some cases, delay. The Logistics Expense for this company is kept at the minimum which is heavily supported by suppliers and distributors logistics services.
Methodology Interviewed the Administrative and Human Resource Director regarding the Supply Chain of Kwung’s Company are being managed. Interacted with Vice General Manager who helped us to understand the various levels of Logistics which is incorporated by the organization. Factory visit gave us a good idea of warehouse arrangements.
Scenario Planning – Market Entry into Russia and Poland The below 8-step planning tool can help Kwung’s management team and various department formulate a strategy to enter the Russian and Polish markets taking into account the contribution of internal and external stakeholders. The top line is the theoretic process stage while the lower line is a practical recommendation 0. Theoretic scenario Planning Process stage
1A. Identify the people/organizations who will contribute a wide range of perspectives. 1B. various departments (sales, marketing, R&D, Logistics, Administration, and Human Resources) and the company’s existing network of customers, distributors and raw material suppliers need to be involved in
7
varying degrees with senior management’s plan by providing market research effort, technical and commercial inputs, experience, ideas, observations, and suggestions to enter the Russian and Polish markets. 2A. Comprehensive interviews/workshop about how participants see big shifts coming in society, economics, politics, technology, etc. 2B. to ensure time efficiency, each department can elect a representative to communicate the department’s view on the required success factors and necessary actions to be taken in order to ensure a successful market entry. For example, Russian market has huge potential for online retail, so marketing and sales teams need to identify top Russian online retailers and work with local Chinese contacts who have successfully sold to Russian online customers in other products. 3A. Group (cluster) these views into connected patterns. 3B. Create list of ideas and suggested action items per department in preparation for market entry. Ideas generated across departments and functions are welcome as they represent a common understanding/agreement of both suggesting parties. 4A. Group draws a list of priorities (the best ideas). 4B. Senior Management, or a nominated party at its discretion, studies the list of ideas and suggestions and identifies the best ones. Customer acquisition process can then start, led by the sales department and the marketing team. 5A. Create rough pictures of the future, based on these priorities; stories and rough scenarios. 5B. Create a business situation by confirming a ‘’first sale’’ or ‘’trial order’’ for a first-time Russian and/or Polish customer. Identify all of elements of this situation by ensuring company’s internal systems, procedures, and controls can support the introduction of a new customer and a specific product line. 6A. Add further detail to get impact scenarios. Determine in what way each scenario will affect the corporation. 6B. Company can choose to run an extra iteration of the business situation; explore follow-up procedures with the trial customer by collecting feedback and refining the list of action items and suggestions. 7A. Identify early warning signals; things which are indicative for a particular scenario to unfold. 7B. Use Risk Management techniques to mitigate or transfer some of the risks involved in the business situation in areas such as logistics, commercial payment terms, delivery terms, product design, and required R&D, testing, and compliance actions as required.
8A. the scenarios are monitored, evaluated, and reviewed.
8
8B. Assign responsibilities among various employees and departments, ensure progress on new market activity is periodically reported and progressively updated, ensure business situation is now turned into a part of the company’s Standard Operating Procedures (SOP).
Conclusions
Appendix x: Kwung’s R&D Activities
Testing and Certifications:
ISO 9001: 2008 Bureau Veritas SGS REACH Testing BSCI (Business Social Compliance Initiative) Shanghai Tianxiang and Chentai Pharmaceutical Machinery Co. Ltd
9
