Executive Summary
In the year 2008, Boffi was considered to be among foremost companies of Italy in the production of the high-class kitchens with a combined turnover of around seventy-one million euros. Boffi Spa won the award in kitchen sector named "Compassod'Oro", which was a significant design award given by “Italian Industrial Design Association” to the companies and the products that eminent themselves for design philosophy and hard work.
At the very beginning, Boffi was just a gigantic dream that emerged from a small laboratory; after seventy years of its foundation, product lines of Boffi were dispensed in more than sixty countries around the world and the brand was allied with exceptionality and the Italian design. As the time passes, Boffi also understood the importance of brand creation and internationalization. The international market was concentrated with competitors. In the wake of such grave competition and to become a strong competitor, the company started partnership and collaborations with complementary brands and brilliant designers.
This report provides the brief introduction of the company, the company environmental analysis, followed by the company’s internationalization moves that are discussed in detail. The company’s motives of internationalization, its national competitive edge and modes of entry are also discussed. The report is concluded with the recommendations.
Executive Summary 2
Introduction 4
Summary of environmental audit: 4
Design-Based Companies 5
Brand and the Production-Based Companies 5
Price-Based Companies 5
SWOT Analysis: 5
Internationalization: 6
External Analysis 6
Motive for Internationalization 11
Evaluation of National Competitive Advantage 12
Evaluation of model(s) of entry 12
Conclusions and Recommendations 13
References 14
Introduction
Piero Boffi founded Boffi in the year 1934, in small town named Cesano Maderno, in Brianza which was an industrial district in between the Como and the Milan, where the most imperative and renowned producers of the Italian furniture were located. At Caproni, Piero Boffi was as a craftsman who designed wooden propellers used in the making of aircraft.' In early 40’s while in the laboratory, he experimented the making of a single-unit furniture.
In the year 1947, this laboratory was then transformed into an industrial venture. The Piero, who was the pioneer, became successful with his sons namely Pier Ugo, Dino and Paolo, as they developed the insights of their father. Paolo and Pier Ugo contributed many of the innovations in the product lines and the technology, which was gradually implemented by Boffi. Furthermore, Dino who was the architecture student also provided the guidelines for the new product designs. Boffi for the first time started its production of modular kitchen cabinets in 1948(Bimol, S. &Saikia, 2014). After diversification and the brand extension, the international expansion in diverse markets was started. Mono-brand shops of Boffi were opened in many areas like Miami, London, New York, and Frankfurt (Andersson and Mattsson, 2015).
Summary of environmental audit
Boffi enjoys three large market which presents both environmental benefits as well as challenges. The three main environments include Italy. U.K and South Korea. The company is enjoying two mature market- Italy and UK and one Growing market- South Korea. Boffi environmental audit can be best analyzed using three different perspective, the current market, the new market and motivation for Internationalization.
Micro-environment Factors Analysis
In its current and new market, the company enjoys high end customers classified under group A and B. Although the company has capped its product selling price at $ 55000, the customers are able to associate this high price with superior quality hence the company continue to widen its customer base in both the current and international markets. It also faces competition in equal measures from design-based companies such as Varenna and Schiffini, brand-based companies such as Febal and Berloni as well as Priced-based companies such as Arn and arrex (Blomstermo and Sharma (2003); Foskett and Maringe (2010). Also, the company enjoys quality supplies from renowned designers and continue to get a boost of their public image from various media stations always reporting about its success and quality brands.
Macro-environment Factors- PESTLE Analysis
For many years, the company continue to enjoy political stability both in the current and new markets. This has contributed to economic prosperity through increased and continued production in both the environments. Additionally, the socio-cultural factors has played a crucial role in sourcing innovative employees. Boffi is set up in a community that practices craftsmanship leading to quality labor supply to support its product design processes. Technological advancements both in the dominant market and international market have played a crucial role in improving their efficiency and market penetration. Furthermore, the acquisition of trade licenses in various market have made it easy to open more branches with a better and improved waste disposal practices. The desire to explore the international market is motivated by the need to increase its global market share are respond to the growing consumer demands of quality products from the company.
SWOT Analysis
Strengths
Boffi enjoys financial prosperity with over 77 million Euro annual return. This gives the company a competitive age to be able to open more branches globally, improve its current production methods to enjoy modern economies of scales realized in technology and sustain progressive product promotion campaign through media campaigns which is vital in going ahead of your competitors (Dijst & Schenkel, 2002).
Weaknesses
One major weakness facing Boffi concerns the two mature markets they are participating. These markets are market with rapid product improvement and branding with increased competition which if not controlled can lead to wastage of resources and over concentration of a particular product line while ignoring other promising products (Karniel & Reith, 2011).
Opportunities
The current financial strengths allows the company to collaborate with other designed based company to neutralize the competition in the market and to also expand its global presence. The company also has a window to hire the best professional designers in the market to give it’s a product some professional touch to enhance their market value. According to Bernard (2011), businesses that have financial muscles need to get the best employees in the market to improve on their product and services as it presents the best opportunity to beat the competitor.
Threats
The company faces several threats to its operations. First, there is threat of pricing as some companies producing similar products have lowered their prices to reflect production efficiency they enjoy. Next, increased competition and emergence of companies with almost equal financial strength such as Germany’s Bulthaup is likely to poach their key employees thereby, affecting their production and design lines. Also, the company is likely to face some legal hurdles regarding its global expansion strategy as some countries FDI policies may not favor the company operations as it may be enjoying in other countries (Stetco, 2015).
Internationalization:
External Analysis
Nigeria is situated in the West Africa, having 36 states. The country has the growing economy along with the attractive locations for business. Nigeria is considered to be “Next Eleven” economies. The “Next Eleven” concept or the N-11 countries submit to the list of eleven nations that possess great potentials and capability to become world’s leading economies by the 21st century (Blomstermo & Sharma, 2003).
Mexico is located in North America. According to the estimates, the population of the Mexico City is considered to be largest in Western Hemisphere. Mexico is heavily dependent on the economy of U.S and faced recession in past years that is attributed to the recession in the U.S economy. Mexico is recognized for the fashion, its socializing, the sports products and recreation.
PESTEL analysis of Nigerian market is as follows:
Nigeria has been classified as one of the emerging markets by CIA in 2010. The political temperature in this country seems soaring. Corruption and poor governance continue to scare away investors leading to a decline in economic growth which seemed promising in 2007. Yager (2004) argues that political instability is enough to take a state to its knee and as such should be prevented at all times as it will erode the economy.
Naturally, the socio-cultural aspects of the people of Nigeria revolves around their economic activities which include gas and oil supply. Much focus is given to these two commodities with little attention given to other sectors. Any decline in the prices of these commodities is enough to shaken the economic stability of the state and it becomes more risky trading in such an environment due to a possible drastic fall in the value of currency which such governments always adopt various monetary policies to stabilize the Naira (Anokhin et al. 2011) Also, the state is slowly adapting to technological changes to improve its services and industrial processes.
Legal aspects of doing business for internalization is always a tedious process which may discourage investors with short visa permit. Other environmental concerns are also wanting such as pollution and poor solid waste disposal. This will require a more proactive approach to business community social responsibility.
PESTEL analysis of Mexico market is as follows:
The major cause of the poverty in this country is its political economy. The corruption level is very high that exists in each and every part of its economy. IMF and the World-Bank have given the structural-adjustment policies to be applied in this country because its government does not bring out sufficient policies to support successful development. Mexico is classified as upper-middle-income by the World Bank. Forty-four percent people live under poverty line.
The economy is heavily dependent on the oil exports that lead to fluctuating economic growth. High economic growth rates are required to create the economic opportunity for the new entrants. Mexico is most populous country all around the world as well second most crowded country in the Latin America. Collaboration between U.S and Mexico all along two thousand miles common border comprises mechanisms to solve local problems; transportation planning, institutions, environment, and the health issues. The government is not carrying out sufficient policies for improved development in the country. Furthermore, corruption in the legal systems is very high.
SWOT Analysis of Nigerian market is as follows:
Strengths: Nigeria is having growth potentials and the stability. It offers a sound place for any business to flourish. Since it is considered among the list of the N-11 countries, it is given new expectations and hope for growth opportunities to the future investors. The monetary policy of this country mobilized and managed in a way that it does not allow excessive devaluation or appreciation of the currency. A Large population of Nigeria can be advantageous as it becomes the source of the workforce for both the new and present businesses (Blomstermo and Sharma, 2003).
Weakness: Nigeria biggest problems include the supply of power and the financial resources that hinder country’s competitiveness and productivity. These problems multiplied and forced many manufacturers along with businessmen to close or relocate their businesses to other countries.
Threats: Increased crime rates, frauds, the illegal acts, hostility, and corruption level leads to are falling reputation of the country. These factors hinder productivity and act as an obstruction in enhancing the business competitiveness. Since the country is not well-resourced, it is difficult to make good quality products locally.
Opportunities: due to high population, there is greater opportunity for the demand of products as well as services and supply may be low owing to poor environmental conditions. Nigeria is going through political, economic, and the social revolution, it is been developing with every passing day, more chances are there for the new business opportunities. The Nigerian Government in different publications as well as papers provided the opportunities for both locals as well as foreigners in business sectors (Calof, 1995).
SWOT Analysis of Mexico market is as follows:
Strengths: the main comprehensive deliberate competitive advantage that is offered by Mexico is its unique geographical position: long border with U.S; coastlines that are facing Europe as well as Asia; doorway to the entire Latin America. By the NAFTA agreement, Mexico is a masquerade to have the economic revival. Mexico offers its companies an extremely literate, youthful and the cost-efficient labor force of around thirty-four million. The result of which, numerous multinational corporations have shifted their business setups to Mexico.
Weakness: Mexico is heavily reliant on its oil exportation. It creates an opportunity but economic volatility too as the oil prices fluctuate greatly. Furthermore, Mexico also had been facing serious environmental pollution issues. Resources of fresh water are scarce and much polluted in the north. (Blomstermo and Sharma, 2003).
Opportunities: The NAFTA facilitates Mexico to become a partner with world’s biggest economy i.e. the United States. This agreement eliminates all the trading deterrents like tariffs and the government subsidies. Mexico also offers young, talented, educated and plentiful labor force, which have appealed many of the multinationals to establish their operations here.
Threats: Mexico heavily dependent on U.S economy. As U.S comprise eighty-eight percent of the Mexico’s total exports. If Mexico persists to have the corruption problems in its system, overseas investors will be disappointed with prospects of running their businesses in Mexico.
Porter’s Five Forces analysis reveals the following of Nigeria Market:
In Nigeria, the competition is relatively less as compared to other intense competitive markets around the world. This is because the prices of oil products which forms the main trading product is regulated by the OPEC. Threats are the lack of proper infrastructure, power supply, and other resources which hinders mobility of factors of production (Dlabay and Scott , 2011).
The threat of the substitutes includes the local manufacturers that offer the products at relatively lower prices that would seem attractive to the customers. The market is highly populous leads to the high bargaining power of consumers. The barging power of supplier locally is low, as suppliers do not have enough resources to produce good quality products (Dijst, and Schenkel, 2002).
In Mexico, the competition is relatively less as compared to other intense competitive markets all around the world, but would increase in future because of the NAFTA agreement, facilitating free trade between three countries. Threats are the lack of proper infrastructure, environmental pollution, and other essential technical resources. The threat of the substitutes includes the local manufacturers that may offer products at moderately lower prices that seem attractive to customers.
The market is highly populous leading to the high bargaining power of consumers that may pressure the company to produce more innovative and attractive product than its competitors. The barging power of supplier locally is low, as suppliers do not have enough technical resources to produce superior quality products. Both the countries have the emerging economies while the economic growth rate in Nigeria is higher than that of Mexico. The potential for economic growth, technological advancements, and better lifestyles are more likely to happen in Nigeria than in Mexico.
Motive for Internationalization
At Boffi, no structured planning was made regarding which markets must be tapped for company’s entrance. Boffi entered markets that spontaneously had large potential, but it did not put must attention towards financial analysis, data, and extensive research referring to that market. It merely set the focus on preferences, tastes, and the cultures to discover which market is prepared to clinch and understand the Boffi style. The main motive of Boffi to enter new markets was to increase company’s total turnover (Calofand Beamish, 1995).
When Boffi has was begun its international expansion, the very first market it referred in the year 1972 was France. France had constantly been considered as the most important marketplace. A dealer's appeal became the motive for company’s entrance in France that was at the start took place by an agent.
Evaluation of model(s) of entry
Internationalization occurred by the development of mono-brand stores that carried out Boffi style as well as its philosophy across the globe. The company entered the markets internationally mainly through indirect channels i.e. agents and dealers. The mode of entry and channels used: direct or indirect was based on the type of target market. As direct investments may be very riskier initially, so the company took another way round for its market entrance by using the indirect channels.
In 1972, after the international expansion of the company in French through indirect channels, further expansion followed Great Britain, Netherlands, and Switzerland. In the year 1980, Boffi entered the Benelux market, the market entry way was difficult in Belgium because of stronger local production and conservative local tastes (Su, 2014). Later in the year 1986, Boffi entered the market of Great Britain. At the time of entry, the market was interesting not for the kitchen only, but even for the bathrooms. The genuine obstacles in this market were a lack of vendors that could manage a multifaceted product like the kitchens and also the existence of strict regulations for bathrooms (McDougall and Oviat, 1996).
Conclusions and Recommendations
Nigeria is an emerging market, which is not best for business today but will be in coming years. Boffi’s new market poses high risks, but there are potential for growth too. Currently, the standard of living in this country is not high enough to use the luxurious bathroom and kitchen units. However, in this developing economy new restaurant, hotels, motels will go to open that must be the Boffi’s target that will lead to ultimate success to the company. Whereas, Mexico is also an emerging market providing greater potential for new entrants to start up their business. However, due to lack of its economic stability and heavy reliance on the U.S economy, increased level of corruption in each and every element of the country, Nigeria is a better market for Boffi for its entrance. So Boffi must have to change and diversify its products as it moves globally apart from the Italian culture it follows, which is its forty, to capture greater market globally and successfully.
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