Evaluation of Boffi’s Internationalization Strategy
Table of Contents
The internationalization strategy adopted by Boffi can contribute to the expansion of the company into the international markets. However, like in the case of many other companies entering international markets, the environmental factors existing in the new markets can impact on the level of success of the entrant. It is thus important that the management makes a careful consideration of the prevailing conditions with a view of managing them and ensuring that future entry into the international markets is not hampered by those factors. It is also important to adjust the company style to the conditions prevailing in the international market so as to attract consumers even if the company retains its identity and brand.
Boffi is originally an Italian company, and hence the style and brand have Italian coloring. The international markets that the company has entered have different cultural aspects and hence different style when it comes to choosing companies to buy their luxury products from. Boffi can overcome this cultural diversity by integrating its home style into the style of the international market of its operation. The aim of the current management brief is to provide an independent evaluation of the internationalization of Boffi and make recommendations for future internationalization options.
Summary of Environmental Audit
The current environment in the consumption of luxury goods offered by Boffi is good for the company. Given the prevailing conditions at the national and international levels, consumption of luxury goods is likely to rise as more people enter the middle class in most of the target countries. As indicated by Christopher (2007), the increasing demand for luxury goods in the European market is favorable for the companies like Boffi, which has a long history of the production and sale of high-end goods. In addition, the integration of the economies into the economic regional blocks, as well as globalization, helps to converge policies that govern trading in the international markets. Regional blocks ensure that policies governing investment by foreign countries are friendly to these companies and enable them to succeed in these markets. Globalization, on the other hand, ensures that differences in culture and lifestyle do not negatively affect the operations of foreign companies in the international markets. These aspects will help Boffi to overcome challenges like those being faced in the Japanese market, which it was forced to leave after a few years of operations. The reasons for exiting the Japanese market were the stringent legal requirements and the apathy of the Japanese consumers towards the products provided by the company.
At the same time, new markets are opening in Asia, America, and Australia, which gives Boffi an opportunity to establish its brand in these countries. What is more, the company has established itself as a high-end producer of luxury goods, targeting the rich strata of the society in these countries. Boffi also has well-developed channels to distribute its products using customized shops and mono-brands in the international markets. It makes the company easy to identify from the consumers’ perspective. Another area of strength for Boffi is a wide range of products. This diversity is important for customers who want to make a one-stop shopping.
In this case, the company can target not only individual consumers buying products for their homes but also corporate organizations that purchase furniture and other related products for their offices (Mankins and Steele 2005). As a well-established company, Boffi can easily initiate mergers and acquisitions in the international markets without many challenges. It is essential especially when entering new markets with different market policies and cultural aspects, which the company can take advantage of.
As the market continues to open up for luxury products, Boffi will need to address the consumers from the middle and lower class. Currently, the products that the company provides are targeted as high-end consumers’. However, the middle and low-class consumers will make an important segment in the market (Inkpen 2005). The company must address their needs by producing goods that are also targeting them. Similarly, the company will need to address the weakness that it exhibits through producing using the Italian style only.
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Consumers would also like to see various styles of the stock. It will reduce cases of rejection or apathy as was evident in the Japanese market. In terms of threats, the luxury market has low entry barriers, and more companies are likely to enter into this segment. This aspect is likely to reduce the market share of Boffi in its home country, as well as the international market. Moreover, machines are fast replacing human production, and hence the impact of technology is unpredictable to an industry that has long depended on the craftsmanship of people to make products.
Boffi can continue producing goods that meet the needs of the international market. Through this, it will be able to distinguish itself from other competitors who are focused on one market and, therefore, not able to satisfy the needs of the international consumers. Also, the company has an opportunity to explore new markets that are being opened through trading blocks and international collaborations. Additionally, Boffi is operating as a niche company producing for a specific segment of consumers; however, it can expand its product portfolio to cater to more consumers. The use of technology facilitated systems in distribution and marketing of products will also provide an opportunity for the company to reach more people in the market.
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For instance, the company can engage online marketing of its products by having a website where customers can do online ordering. It will give the company an opportunity not just to sell more but also reach a wider market even in countries where it is not currently operating. The available opportunities for Boffi have also been opened up through globalization that enables culture exchange, as well as a unified lifestyle. Consumers are, therefore, more likely to have similar tastes, which reduces the need for the company to research each market it intends to enter.
The international environment, especially in countries that Boffi enters for the first time, provides an opportunity for the company to make an entry with the products that serve the needs of the consumers. Most of the international markets are aware of the brand name Boffi and, therefore, very receptive of the new products. In Germany, for example, the use of luxury products is becoming more and more common. This fact indicates that the entry of Boffi into this market is likely to be successful.. What is more, the economy of Germany as a new international market is strong enough to support the luxurious products sold by Boffi.
At the micro level, Boffi needs to evaluate its strategies in supplier selection as well as the distribution channels it will employ in its new host market in Germany. Germany may not have the same distribution channels or same qualified suppliers of the products sold by Boffi in its stores. Thus, it is important to evaluate any new foreign market in terms of the existing infrastructure to allow for easier distribution as well as the availability of suppliers to meet the specifications of the company (Fortanet 2006). Boffi can consider importing products directly from Italy because of the proximity of the two countries to each other. In addition, both countries are members of the European Union, which translates to better economic relationships and easier policies between the two countries.
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In terms of lifestyle, Germany is a developed country with a diversified taste for preferences. It does not have a closed system of culture or a unique lifestyle different from the one observed by Italians. As such, it is logical to assume that Boffi’s products will not encounter much resistance in terms of different lifestyle because German consumers are global in their approach and receptive of the new products that can meet their needs. The lifestyle led by the German consumers indicates that they can afford the products that the company provides to its consumers in Italy. Thus, there will be no need to introduce radical changes in the design of the products targeting this market.
The second market that offers good opportunities for Boffi is the Australian market. Australia has one of the fastest growing economies in the region. The country is also well connected in terms of economic collaboration with big economies in the world. The policies governing foreign companies are friendly owing to the business-minded nature of the government of Australia. The mutual relationships between Australia and Italy based on the bilateral treaty between the two countries can also facilitate the operation of Boffi in the Australian market. There is a big market for luxury goods in the country (Fortanet 2006). At the micro level, Australian consumers are diversified in their cultural aspects. There are many consumers in Australia who are willing to taste products from other countries. Even though this market is highly competitive with local sellers, Boffi’s experience and brand name will provide the company with a business advantage in the Australian market and attract consumers. There is also a need for a change of products. However, foreign products will be highly accepted in the market. The lifestyle in Australia is also high with many consumers being the representatives of the middle class.
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Motive for Internationalization
Globalization helps to bring companies and businesses on the international level allowing them to take advantage of the existing demand and provide the products or services that might be lacking. The internationalization of Boffi operations into new markets will provide an opportunity for the company to reach new consumers who are not provided with luxurious products. Moreover, integration into the international markets will help to reduce operations’ costs, removing the need for the company to export its products through subsidiary companies. By internationalizing its operations, the company will be able to bring its business experience closer to the people (Haezendonck 2008). In this way, the company will also be able to address the existing needs or complaints of consumers as they arise. It, therefore, ensures the provision of high-quality services to consumers whenever they purchase products from the company. Furthermore, it offers an opportunity for the company to expand the list of its products and provide new job opportunities to the employees. However, people employed to work in the stores in the foreign countries must be locals with a good knowledge of the market system in their country.
Evaluation of National Competitive Advantage
Italy, where Boffi is originated, provides a national competitive advantage for Boffi. In terms of demand, the Italian market has always been a pacesetter when it comes to the consumption of luxury products. To this end, there has always been a larger demand in Italy than in other countries where Boffi is currently expanding. However, the growing demand in those markets is likely to surpass the local demand in Italy. The advantage of the Italian market is fast dwindling in the wake of globalization and regional economic blocs. Also, the strong trend in the local market could have contributed for Boffi’s preparation to enter into foreign markets through the internationalization of its operations. In terms of structure, rivalry, and strategy, Italian companies are often small and run like family businesses (Tomlinson and Moor 2011). This structure is opposite compared to the markets like Germany, where businesses are big and hierarchical in their nature. As such, entering into foreign markets such as Germany will require Boffi to change the approach to management.
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In the Italian market, Boffi has relied heavily on readily available supporters who are seasoned and experienced in their work. To this end, the company has always enjoyed the competitiveness of the local markets with effective cost cutting and innovative inputs. At the international level, especially where Boffi might want to enter, there is likelihood that there will be limited supporters and higher costs on operations. The strong government involvement in the support of small and emerging companies, as well as seasoned companies like Boffi, has been instrumental in taking many Italian products to the international level. At the moment, government support is being turned to individual companies to offer resources and help needed to open up to new markets.
Evaluation of Mode(s) of Entry
Boffi has a number of entry strategies that it can use to enter the international markets. The first one is going solo, especially in the markets that already have the infrastructure to support the operations. The strategy can work especially well in marketing and importation of the required products. The company can also use mergers and acquisitions as an entry mode in markets like Australia and Germany with already many existing competitors. Forming mergers or acquiring other companies means that the company can benefit from the use of infrastructure and the knowledge base already built by the other company (Tomlinson and Moor 2011). It also helps to reduce the cost of entry because some policies and regulations have already been taken care of by the company that is merging.
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In addition, Boffi can choose to form joint ventures or alliances with existing companies in the foreign markets it is entering with the view of having stronger distribution channels while also utilizing the experience of those companies in the market (Mankins and Steele 2005). This kind of entry also provides an opportunity for the company to slowly learn about the culture of the consumers in the new market and hence facilitate the process of providing them with products that are directly addressed to their needs.
Conclusions and Recommendations
Boffi needs to incorporate research findings of international trends in the consumption of luxury goods in a given market before making an entry. It will help to prevent making wrong moves in the future as was evident in the Japanese market. The company should also consider online marketing especially in the countries where it cannot have presence. As such, online marketing will bridge the gap in the provision of products to such customers. The only challenge here might be the delivery of the ordered products. It will be sorted after the customer has agreed to purchase a given product. The international strategy also needs to involve key stakeholders of the company including owners and workers so that it is not something done by a few people at the company. Inclusive internationalization prevents non-supportiveness of some of the members and ensures that there is a rich source of information on what should be done and how.
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In conclusion, the internationalization strategy to be used by Boffi in the future will need to consider all the internal and external factors. Knowing about all the external factors can be challenging given that the company is entering into a number of markets. However, with the brand name, technology advancements, and high-quality products, Boffi should be able to overcome all the obstacles especially in those markets whose conditions are supportive of foreign investment.