EXPORT OF ITALIAN FURNITURE IN AUSTRALIA

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Table of Contents

EXECUTIVE SUMMARY

The report is concerned with the export of Italian furniture to Australia. The company chosen for furniture export is Las Mobillis. Las Mobillis specializes in unique and innovative office furniture. Italy is known for its world class furniture, and it is one of the largest exporters of furniture in the world. Australia has an adequate furniture industry, but it has potential to absorb imports because it is going through an economic growth. The entry mode chosen for export of Italian furniture is indirect export. Indirect export is chosen because Italy does not have prior experience in exporting furniture to Australia.
Porter’s generic marketing strategies framework is used to identify the competitive strategy appropriate for export of Italian furniture. The competitive strategy chosen for Italian furniture is differentiation. Differentiation is chosen because something new needs to be offered to the Australian market to be able to sell it. We plan to offer high quality and expensive furniture at a premium price.
 

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Marketing mix strategy is used to identify the position of Australian market. Market segmentation is conducted to be able to identify the target market. The target market for our furniture is metropolitan cities like Sydney, Wollongong and Newcastle. The reason for choosing Sydney, Wollongong and Newcastle is the greater number of offices present in these cities. A positioning map is also drawn to identify the position of Las Mobillis furniture is Australian industry. It has been positioned as expensive and high quality furniture.
Global marketing strategies are also designed to decide the right product offering, control, production, supply chain and promotional strategies for the Italian furniture. The marketing plan has been identified as useful for the Italian furniture industry for exporting furniture to Australia and other countries.  
 

INTRODUCTION

Italy is famous for its world class furniture manufacturing and export. Italian furniture is mainly popular for its high quality furnishings, quality planning, unique designs and product aesthetics. Italy is one of the trend setters in the furniture industry all over the world.
High quality manufacturing of furniture in Italy can be attributed to skilled workmanship, a successful manufacturing model, continuous innovation in terms of technology and creativity. The factors that are important for the success of a furniture industry are present in the Italian industry (J, 2000).
Italy is one of the major exporters of furniture, and it has the highest number of furniture stores in the world. 67,000 people have employment in the Italian furniture industry, comprising of approximately 22,000 outlets all over the country. The value of Italian retail market is as high as 11.3 billion. Italian market is known for its specialization in furniture, but it is not very well organized.
Italy exports its furniture to many countries in the world. This report will focus on export of Italian furniture to Australia. Australian furniture industry still has the capacity to absorb furniture exported by other countries. The Australian economy is growing, and it is increasing the purchasing power of people. The increased purchasing power is affecting all industries, including the Australian furniture industry. People are now spending more on the decor of their houses and buying more furniture (A, 2011).
The company chosen for exporting furniture to Australia is Las Mobili. Las Mobili excels at manufacturing office furniture and furniture for professional use. The first part of the report covered the economic analysis of Australia to determine the potential of export. It also discussed the company chosen for exporting furniture from Italy to Australia. The current report will discuss different strategies for entering the chosen market.
The strategies discussed in this report will cover everything related to entry modes, targeting, marketing and sales etc. The report can be used as a guide for Italian companies to plan export of furniture in Australia (Horlor, 2011 pp. 4-16).

BACKGROUND OF COMPANY

Las Mobili is one of the top furniture manufacturing companies in Italy. It was founded in 1976 by Glulio Pedicone and it shortly gained popularity as the biggest manufacturers of office furniture in Italy. Las Mobili was found with the aim to provide ideal working conditions to office workers by providing innovative furniture for offices. Las Mobilis furniture promises to provide creative and innovative furniture which would not only make the office look beautiful, but also increase the motivation level of employees. Las Mobilis’ headquarters is situated in central Italy, near the Adriaric coast. The company has spread itself around Italy with 12 facilities and a total area of 250,000 m2. The company employees 350 people and it reaches out to 76 countries through its brand. Las Monilis believes keeps pace with the latest technology and it has the ability to produce 10,000 pieces of furniture every day (LAS Mobili Office Furniture, 2012).  
Las Mobili delivers 1200 pieces of furniture every month. It has been certified with UNI EN ISO 9001: 2008 and it has gained the trust of its customers since its inception. The company has maintained good management, and it has also kept itself abreast with the international laws. Las Mobili complied with the international as well as environmental laws, which resulted into several awards and important certificates granted by the authorities. Forest Stewardship Council was one of the authorities granting awards to the company. It also received acknowledgement for work in the area of ethics and social regulations (L, 2002).

BACKGOUND OF THE CHOSEN COUNTRY

Australia is one of the most developed and modern economies of the world. The Australian economy is growing rapidly, and the growth is affecting the industries in a profound manner. People have better purchasing power than before, and they are now spending more on their luxuries. Indicators such as GDP growth rate, CPI and inflation rate show that the economy is in a healthy position and so it paints a favorable picture for investors (A N. , 2010).
Australia emerged from the financial crisis better than the rest of the world economies. IMF declared that Australia dealt enviably with the financial crisis. It avoided the global recession with the help of strong macroeconomic policies, a sound banking system, good exchange rates and healthy demand from Asia. Australia met extraordinary demand for coal and iron with good efficiency. Australians national income has also been improved along with GDP of the country.
Furniture industry is mainly concerned with those consumers who have a high purchasing power. Las mobilis manufacture office furniture for luxury offices. Australian economy offers a good opportunity to exporters because economic growth is enabling more development in the business sector. Larger and better offices prefer unique furniture for their offices to give it a lush look (International Tropical Timber Organization, 2005 pp. 6-12).
Australia is a monarchy, which means that it has sufficient control over the imports and exports of the country. Exports and imports are heavily regulated by the Australian government. Italy is not growing at a pace to match Australians. Italy has a sound furniture industry, but its economy does not make a favorable consumer market.
Corporate culture is Australia can be defined as democratic. There is an informal communication in organizations which allows all members to participate fully. Employees can reach out to executives easily. Team work is highly encouraged and appreciated in corporations. Managers put faith in individual employees to carry out the designated tasks successfully. Individualism is high in Australia, but interdependence plays a major role in corporations (Y, 2008).
Australia is a masculine society, and it encourages dominance. Competition is also high in the Australian society, and people are success oriented. Masculinity also encourages reward for winners and conflicts are usually taken care of at the individual level.
Australian culture is highly influenced by the western culture. Christianity is the prevalent religion in that area and people are highly interested in sports such as rugby. Some of the prominent characteristics of the Australian society are informality and humor. The themes of the Australian culture have been highlighted by the works of art.

ENTRY MODES

There are two different types of market entry modes for exporting. The choice is made according to the prior experience and market conditions.

Direct Entry Mode

Direct exporting can be defined as exporting through intermediaries in the foreign market. A company chooses direct entry mode when it wishes to export directly to customers and intermediaries in the foreign market. Direct exporting requires more experience, expertise, financial resources and management as compared to indirect exporting. The company has more control over export activities in direct entry mode than indirect entry mode. The exporters represent themselves in foreign markets with the help of overseas agents. Agents are responsible to developing sales orders, assemble payments, prepare required documents and make sure that the goods are cleared through customs. Overseas agents don’t take title to the goods, but they charge a specific commission for their services. They are also responsible for purchasing goods and selling them at a mark up.  Overseas agents sometimes work by equipping themselves to be able to stock, service and install the goods. Agents often have a specialization with respect to the industry they work in. Developed markets have more specialized overseas agents than developing markets. Developing countries have agents who work in all areas (R, 2006).

Indirect Entry Mode

Indirect exporting is done by granting all responsibilities to a partner in the manufacturer’s home country. The partner takes responsibility for all activities related to export of products. Indirect entry mode is used by most exporters, and it is considered as the most effective way to export. Exporting agents can be individuals or firm who specialize in on the part of the world. The agents are familiar with the foreign market and use their specialization to assist exporters in sales and handling of goods. Indirect entry mode is preferable for exporters who do not have any prior experience of the selected foreign market. Agents also deal with the language and cultural barriers posed by the foreign market. The agents have hands on knowledge about how business is done in the selected country (X, 2009).  

Entry Mode for Export of Furniture in Australia

Italy should choose Indirect Entry Mode for the following reasons:
  • Italy and Australia have drastically different geographical locations. The shortest distance from Australia to Italy is as long as 8946 miles. Distance is not an incentive for Italy to do direct exporting. Sales and handling should be granted to agents instead to have better results.
  • Italy has no prior experience in exporting furniture to Australia. Italy is one of the world’s largest exporters of furniture and there was an upsurge in furniture export, in 2011. Italy is not familiar with the way business is done in Australia, and it will also have to face language and cultural barriers. Overseas agents know better how to deal with the culture of their specific country and Italy should hand over the responsibilities to them.
  • Indirect exporting will enable the Italian exporters to reduce risks of failure by granting responsibility for all the export related activities to overseas agent. Indirect exporting reduces the degree of control over export activities, but it is the best entry mode because it has a low risk. It is especially favorable for Italian exporters because they are unfamiliar with the Australian market (UNIVERSITI PUTRA MALAYSIA, 2000 p. 7).
  • Italy has a good reputation in furniture export. It is known all over the world for its high quality furniture. Italy recovered from recession and financial crisis, but not as rapidly as Australia. Oil and mining industry were the two rapidly recovering industries in Italy. 2011 showed significant improvement in the furniture industry, but it is still performing lower than its potential. Italy has a competitive advantage because of its popularity for good quality, but indirect exporting is a better option.
  • Italy can represent itself in the Australian market, reduce risks and learn about the market at the same time. If first export project becomes successful, Italy can move on to direct exporting to have more control over export activities (M, 2002).

COMPETITIVE STRATEGY

We will use the Porters Generic Competitive Strategies framework for identifying the right competitive strategy for Las Mobilis Italian furniture in Australia.

Porters Generic Competitive Strategies

Porters generic competitive strategies model is used to determine a company’s position in the industry. We will use this framework to determine the right position for Las Mobilis furniture in Australian furniture industry. A firm can have a competitive advantage by pursuing low cost or differentiation strategy. Porters generic competitive strategies model generates three strategies for competitive advantage by combining the two strategies with the firm’s scope of activities (Porter's Generic Competitive Strategies (ways of competing), 2011).

 
Cost Leadership:  A firm pursues low cost leadership by being the lowest cost producer in the industry. Low cost may be achieved by pursuing economies of scale, innovative technology, cheap raw material etc. A low cost firm exploits all the opportunities to lower down costs. If a firm achieves low cost performance it can hope for better sustainability.

Differentiation: A firm can also achieve competitive advantage by offering something unique to its customers. A firm can be unique by offering something which is valued by customers and is not offered by a competitor. A firm can position its product according to some unique and valuable features valued by the customer. A premium price is usually charged by the company for the extra value.

Focus:  Firms follow focus strategy to cater to limited customers. Focus strategy is pursued by identifying a niche and serving it by customizing products according to their individual needs. Focus strategy can be further classified into Cost Focus and Differentiation Focus. Cost focus is pursued by seeking a cost advantage in a particular customer segment. Differentiation focus is pursued by differentiating the target customer segment (D, 2008).

Competitive Strategy for Las Mobillis

Las Mobillis should follow differentiation strategy for the following reasons:
  • Australia has a sufficiently flourishing furniture industry. The healthy position of the economy is favorable for exports, but it will still not absorb more furniture if it is not unique. Las Mobillis is known for its unique designs, and promise to make working place a better place. It should pursue that vision and position itself in such a manner that it would be welcomed by the Australian industry.
  • Differentiation will also allow Las Mobillis to charge a premium price to Australian customers. It can maintain good profitability by positioning itself as a unique product and charging a higher price.
  • Las Mobillis can also differentiate itself by allowing some amount of customization in furniture. We are striving to make good profits out of this export and maximum uniqueness should be provided to customers to be able to charge higher prices (G, 2005).

GENERIC MARKETING STRATEGIES

Marketing Mix Strategies

Product

Product is the most important element of the marketing mix. An effective marketing mix strategy cannot be developed unless a strong understanding of product is achieved. The export product chosen in this case is office furniture.  Analysis of Australian market has shown that there is more potential in the Australian furniture industry than Italian industry. The growth of the economy is giving rise to more businesses and offices. There is also an increasing trend towards well furnished offices for increasing motivation of employees. Las Mobillis specializes in unique office furniture for enhancing the work environment. Las Mobillis manufactures office furniture of all types, including partitions for cabins. We will allow customization of products to suit individual office needs.

Packaging

Furniture will be exported from Italy to Australia by sea to keep the costs low. The journey from Italy to Australia is a long one and furniture is often of a delicate nature. The packaging has to protect the product from damage during journey. Corrugated sheets and wooden boxes should be used to pack the furniture for keeping it safe from damage. The wood used in the boxes will be cheap and low quality.

Price

We are using differentiation strategy for Las Mobillis furniture. We will position our product uniquely, and a premium price will be charged for its novelty. Italy is known for its high quality furniture, and Las Mobillis delivers unique office furniture. We are also offering customization to our customers. A relatively high price will be charged for our furniture because we are offering more than contemporary furniture providers. We will also position our product as luxurious and high quality furniture so a high price is justified. Premium pricing strategy will be used to charge a high price to customers. Premium pricing will be done to create a perception of high quality in the minds of consumers. The high price will be used to build a reputation of reliable, luxury, desirable and high quality product.

Promotion

Promotion plays an important role in the positioning of the product. We are charging a high price for our product, and that price will be justified by promoting our product as high quality and luxurious product. There is a drastic cultural difference between Italy and Australia. The advertising campaigns will have to be designed according to the culture of Australia. Language will have to be accommodated, and cultural aspects will have to be taken care of. There are several things in a culture that are considered as offensive. Sufficient research will have to be conducted to find out what needs to be done to target the customers in the right way.
We are not targeting end consumers for our product. Business customers are better addressed through personal selling. Personal selling allows proper briefing to the customer. A representative can go to represent Las Mobillis to companies in Australia. Personal seller can explain all the features of the product and also answer anything asked by the customer. Personal selling allows two way interactions which is good for B2B.

MARKET SEGMENTATION AND TARGETING

We will segment our market according to the level of development in cities of Australia. Sydney, Newcastle and Wollongong are the three largest cities in New South Wales. They are big in terms of population and development. Sydney is the number one, and it is known all over the world for its development. Developed cities are a preference for our target segment because we are exporting high quality, expensive furniture. Las Mobillis furniture is manufactured for large and luxurious offices. Sydney is a developed city, and it has businesses operating in large offices. The demand for high quality furniture is expected to be high in cities with a greater number of larger offices. Demand for a particular product gives rise to the greater number of seller of that product. There are a greater number of furniture shops in bigger cities of Australia. We will target cities like Sydney, Wollongong and Newcastle for Las Mobillis furniture export (R M. , 2010).

POSITIONING

Las Mobillis

 
Positioning is the unique place which a brand has in the minds of the consumer. A positioning map is used to demonstrate the perception of consumers along different dimensions. The two dimensions used for demonstrating positioning of Las Mobillis in the Australian market are price and quality. We will position Las Mobillis furniture as high quality and expensive through pricing, promotion and other marketing strategies. This positioning has been demonstrated in the above diagram by placing it at the far end of x axis and upper end of y axis.
 

GLOBAL MARKETING STRATEGIES

Product Offering in International Market

Designing a product offering is necessary for a new business. Italy is exporting its furniture to Australia for the first time. It is important to position its product offering to be able to do business successfully. Good business in Australia can also lead to further business opportunities in other parts of the world. Furniture industry in the world in going through a boom and Italy should take advantage of this opportunity by offering a high quality product in the market. The recommended product offering is high quality and expensive furniture for high class luxurious offices.

Control

Las Mobillis is exporting its furniture through indirect mode and all the major responsibilities will be delegated to the overseas agents. The control over the quality and success of the product will still remain with Las Mobillis. The company should maintain control over the quality of the product through frequent checks and feedback.

Production

Production of the furniture will remain with the Italian company. Production responsibility cannot be delegated to any other party. Consistent quality can be maintained only through Italian manufacturing. Production capacity can be increased in Italy if the international demand for Italian furniture increases.

Supply Management

The company is exporting furniture through indirect modes. The company will handle delivery of products only till the point where it becomes the responsibility of overseas agents. Cargos should be used to deliver furniture to ships and sea should be the medium to deliver furniture to Australia. Adequate forecasting should be done to take care of volatile demand.

Promotional Strategies

Personal selling should be used in all parts of the world because export of furniture will be concerned with B2B exchange. The best promotional strategy for all B2B transactions is personal selling because it allows two way interactions. A complete understanding of the product can be easily achieved through personal selling.

CONCLUSION

Furniture export is booming all over the world. People is now more concerned about furnishing their offices in the best way to leave a better impression on their clients. Italy is one of the largest manufacturers and exporters of furniture. The Italian economy is facing slow growth whereas Australia is growing rapidly. The Italian industry is saturated, but the Australian furniture industry has the potential to absorb new varieties of furniture. Australia is a new destination for Italian furniture export, and it is a challenge for exporters because there is a drastic difference in culture of both countries. There is a need for adequate research to make export of Italian furniture successful in Australia.

The research was aimed at formulating a complete marketing plan for export of furniture from Italy to Australia. Australia was identified as a potential market for Italian furniture because of its economic growth. Italy is known all over the world for its high quality furniture. The cities chosen for export of Italian furniture are Sydney, Wollongong and Newcastle. The Italian furniture is positioned in Australia as high quality and expensive office furniture. Indirect mode is identified as the appropriate channel for export of Italian furniture in Australia.

We aim to provide an effective marketing plan to Italian furniture exporters. This marketing plan can be used for other neighboring countries of Australia or countries sharing similar culture.

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