Foxy originals answers PDF

Preview

Summary

Foxy originals case study...

Description

Foxy Originals Case Analysis

M.DaSilva, D.Reynolds, D.Obaji, S.Kaur, T.Oosterhof, A.Hanna 5781679, 5780085, 5762471, 5869227, 5816335, 5807276 March 13, 2016 MGMT 1P96 S2 Submitted to: Mr. Robertson

2

Executive Summary Foxy Originals is a Canada-based jewelry company, owned by Jen Kluger and Suzie Orol, that provides high-quality and low-prices to young women aged 18-30 years. Their products correspond to the latest trends which has brought significant financial success to the company. There is a potential issue in becoming over-saturated in the Canadian market so the owners plan on expanding to the U.S. using various distribution strategies. The major strength of Foxy Originals is that the owners are always up to date with the latest trends in jewelry, which helps them to meet the demands of customers. Their weaknesses include inexperience in international markets, lack of marketing experience, and unfamiliarity with U.S. trends. The opportunities of Foxy Originals include getting exposure to a wider sales market in several U.S. cities. Some of the threats the company might be likely to face are the competitors, the difference in American demand, and securing a position in the market. Where Canadians are loyal to local brands, Americans prefer latest trends regardless of the origin of the brand. The main issue for Foxy Originals is the progressing saturation in the Canadian jewelry market. They must overcome their weaknesses in order to become successful in expanding to the American market. To ensure that the company reaches their goal of an increase of $100 000 in sales, Orol and Krugel must decide whether to attend trade shows or hire sales representatives. The owners have from June 2004 to January 2005 to take action in doing what is best for the financial success of Foxy Originals. The alternatives presented are to take advantage of trade shows, hiring sales representatives, or to do both. The criteria by which these alternatives will be measured are whether or not they will help Foxy Originals reach the U.S. market quickest, with the least complexity, and allow for an increase in profits by $100 000. Hiring sales representatives is the best option for Foxy Originals to sell their jewelry because it yields a higher profit than what trade shows would bring in. Sales representatives will show professionalism and will use their personable expertise to persuade customers to buy Foxy Originals jewelry. The financial success of Foxy Originals in the U.S. is ultimately dependent on the reactions and interests of American consumers. Within the next 6 months, Orol and Krugel must take the correct steps in designing new products and hiring/training sales representatives in order to meet the demands of American consumers with the existing styles and trends. Sales representatives will be sent to fashion-conscious cities such as New York, Los Angeles, Chicago, and Dallas in an attempt to persuade customers to purchase their low-priced and high-quality products. If American consumers in this area do not take interest in the jewelry presented to them, the contingency plan would be to travel to less fashion-conscious cities in the U.S. who may be more open-minded to their products.

3

Overview Foxy Originals [FO], a jewelry company with 250 boutiques in Canada, was founded in 1998 by Jen Kluger and Suzie Orol. FO offers high-quality necklaces, earrings, bracelets, and rings for women 18 to 30 years of age who are aware of price and style. FO’s sense of exclusivity acts as a competitive advantage. They are unique from competitors because their products correspond with frequently changing trends which has allowed FO to become financially successful; sales escalated by 400% (Appendix 1) in their first three years of operations and have continued to do so. Despite their success and popularity, there is a possibility that FO will become over-saturated in the Canadian market. In order to avoid this, Kluger and Orol plan to expand their business to the United States and must adjust their distribution strategies in order to reach them; they are deciding whether to attend U.S. trade shows or whether to hire sales representatives. SWOTT Analysis Foxy Originals has many strengths which assist in the operations of the competitive market. Jen Kluger and Suzie Orol both earned business degrees at Western University, and both have experience in the jewelry industry. Orol’s family owned a medal manufacturing company that specialized in making jewelry and Kluger has been making/selling jewelry since she was fifteen years old. The owners of Foxy Originals are always up to date with the latest trends in jewelry, which helps them to meet the demands of customers. Additionally, the reasonable price strategy of high-quality jewelry at low prices has led to rapid growth of Foxy Originals and expansion into 250 boutiques across Canada. Although they have many strengths, Foxy Originals is experiencing some weaknesses as well. The company is inexperienced in international markets, specifically in the United States. For the reason that they plan to expand to the U.S. with their products, international experience would be

4

an asset to determining their potential success. Foxy Originals also lack the marketing prowess to reach the people of the United State through the promoting and advertising of their products. Unfortunately, their unfamiliarity with trends in the U.S. lso acts as a weakness for Foxy Originals due to the different trends in the United States in comparison to Canada (ie. Canada is interested in classic jewelry which is not as popular in the U.S.). Foxy Originals have a number of opportunities. By expanding their business to fashion-forward U.S. cities such as New York, Los Angeles, Chicago, or Dallas, the company will acquire a wider sales market, with the assumption that the U.S. population of women between ages 18 to 30 is greater than the entire Canadian population. Exposure to this larger market will allow for Foxy Originals to receive more demand for their products, and will allow for them to maintain their reputation in being up-to-date with the latest trends. If their expansion to U.S. is successful, the company will have an opportunity to later expand into other countries to further develop the business. Despite the opportunities that Foxy Originals has regarding expansion, there are potential threats for the company as well. Expanding to the U.S. would mean that the company would be competing with the established brands in their country. For the reason that Foxy Originals does not have experience in their jewelry market, the demand for their unique designs and low-prices may not be as significant as it has been in Canada. Foxy Originals may also have to face more expensive marketing and manufacturing costs to meet the demand of American consumers which will make it challenging for them to establish a sense of security in the U.S. jewelry industry. There are differences in the purchasing habits of Canadian versus American consumers. Where Canadians provide support and loyalty to local brands and companies, Americans prefer latest

5

trends regardless of the origin of the brand. Foxy Originals is known for their classic jewelry, but there is evidence to prove that over 50% of their designs do not appeal to the preferences of women in the United States. Problem Identification As a result of the over-saturation in the Canadian market, Foxy Originals must choose the most reasonable method in reaching out to the U.S. market. They must overcome their inexperience in international markets, their lack of marketing prowess, as well as their unfamiliarity with U.S. trends in order to succeed in doing so. The timeframe in planning this is important for the reason that Foxy Originals wants to enter the U.S. market by January 2005. Given that Kluger and Orol are discussing these changes in June 2004, this gives them six months to develop a solid plan for the successful expansion into the United States. Alternatives The potential alternatives to Foxy Original’s expansion are attending trade shows, hiring sales representatives, or to do both. Choosing trade shows to expose Foxy Originals into the United States will allow for an increase popularity in the jewelry industry; approximately 10 trade shows would be attended in the year 2005. Another method of marketing Foxy Originals is through hiring 4 sales representatives which would assist in gaining customer loyalty and popularity in the United States. Hiring sales representatives targets smaller businesses and acts as a more personal approach in comparison to trade shows. Although trade shows would gain attention from larger corporations they may not establish a long-lasting partnership. If both approaches are used, then both markets would be reached but it would be incredibly costly. Decision Criteria

6

The criteria by which a decision will be made will be whether or not the alternative helps Foxy Originals enter the U.S. market the quickest, with the least complexity, and result in an increase in profit by $100,000. Analysis of Alternatives Alternatives

Trade Shows

Sales Representatives

Both

U.S. Market the Fastest

Yes

No

Yes

Complexity (least)

No

Yes

No

Increase Profits by $100,000

No

Yes

No

Participating in trade shows throughout the United States will allow the firm to enter the American market at an extremely fast pace. As a result of entering into 10 trade shows, Foxy Originals will have the opportunity to introduce its products to a potential 7.5 million people, (75000 people/show). Despite this alternative allowing Foxy Originals to reach out to this many people, the process of participating in trade shows is very complex in regards to the planning and designing that is involved. Another prevalent downside to trade shows is that Foxy Originals’ profits will not increase by $100,000, but rather, a mere $43,300 (Appendix 1). The hiring of four sales representatives will assist the firm tremendously in its efforts to increase profits by $100 000 in the next year. In terms of Foxy Originals’ financials, the firm will see a profit of $100,100 by the end of fiscal year, accomplishing the criteria of an increase in profits by $100, 000 ( Appendix 1). Hiring sales representatives to assist in U.S. expansion is convenient in terms complexity because of the minimal preparation that is involved in training experienced sales representatives in selling their products. However, this alternative will not accomplish the criteria of rapidly entering the American market due to the fact that only 4 sales representatives are being hired. Regardless of placing the representatives in strategic fashion hubs throughout the U.S., the lack of personnel on the ground will limit the speed of expansion.

7

The hiring of sales representatives as well as attending trade shows will go a long way in entering the American market at a very rapid pace. The combination of hiring sales representatives in addition to attending trade shows will bolster their market share. Although this will allow for an exponential growth in market share, the steps that must be taken in order to successfully apply both measures is incredibly complex and time consuming. Additionally, this alternative will not satisfy the criteria of increasing profits by $100,000. This is due the assumption that Foxy Originals lacks the necessary funds required to finance such an expensive endeavour. Implementing this alternative would have a total cost of approximately $350,000. Recommendation Hiring sales representatives to sell jewelry to the U.S. market will yield more profits for Foxy Originals compared to attending trade shows. Sales representatives will build long-term relationships with the customers who are interested in Foxy Originals’ products. Since sales representatives earn commission on sales, they will put more effort in persuading customers to buy their jewelry. The main stakeholder group is the U.S. because it is unknown whether or not they will take interest in their products. In the best case scenario, sales representatives will assist in wide exposure of jewelry and ultimately bring an increase to sales and revenues. In the worst case scenario, the sales representatives will not sell a lot of jewelry and will not succeed in increasing profits and revenues. However, the financial analysis indicates that sales representatives will assist in generating enough revenue to reach the $100 000 increase in profits by the end of 2005. Action Plan

Step 1: Design

When

What

How

Who

Where

How Much

June, 2004

The purpose of this is to

Research current

American

AMI

$2000

8

ensure success In the American market.

jewelry trends in the States and make jewelry to follow those trends.

Marketing Inc. (AMI)

headquarters, Los Angeles, California, U.S.

August, 2004

The purpose of this is to ensure that sales reps display the required enthusiasm for promoting Foxy jewelry.

Advertise position using newspapers and interview candidates based on resume submissions.

Jen Kluger & Suzie Orol

Toronto, Ontario, Canada

$500

August, 2004

Without properly trained/productknowledgeable sales reps, profits will not increase.

Fly successful candidates to Toronto to train with Kluger and Orol.

Sales Representatives

Foxy Originals headquarters in Toronto, Ontario.

$2000

December, 2004

Based on U.S. trends, new jewelry must be distributed to customers that meet their demands.

Send materials to sales representatives (in each U.S. city)

FedEx Ship Centre

Locations of sales reps

$1000

January, 2005

Completes American expansion.

Have one sales rep in each of the cities: New York, Los Angeles, Chicago, Dallas

Sales representatives

New York, Los Angeles, Chicago, Dallas

$2000

and make jewelry for U.S. market.

Step 2: Hiring qualified candidates.

Step 3: Training

Step 4: Distribution of promotional material/new jewelry

Step 5: Operations in U.S. commence

Step one, which entails designing and manufacturing jewelry suitable for the U.S. market is the critical step in this recommendation. Foxy Originals specializes in making classic jewelry which is not as popular in the U.S. as it is in Canada. In order for the firm’s expansion into the American market to be successful, new designs must capture the latest trends that appeal to the tastes of American consumers. By not researching the interests of American consumers, Foxy Originals runs the risk of introducing non-appealing merchandise to them which would halt the expansion and taint the Foxy Originals brand in the American market. If hiring sales representatives in New York, Los Angeles, Chicago, and Dallas does not accumulate the desired increase in profit, then Foxy Originals’ contingency plan would be to send sales representatives to less-trendy cities such as Jacksonville, Philadelphia, or Boston that may be more open to Foxy Originals’ styles.

9

Appendix 1 Company Growth Doubles every year 1998 100% 1999 200% 2000 400% Trade Shows Cost of each Trade Show: Registration: $3,000 Booth: $4,000/30= 133.33 Booth Shipping: $1,500 Travel expenses: $2,000 Materials: $2,800 Total: $9,433.33 (for one show) Total for 10 Shows: $9,433.33*10 = $94,333.33 Expected Revenue: (avg. # orders)*(selling prices for products)*(# shows) + re-orders (2 per customer) ((32)*((25 necklaces*$17)(12 earrings*$12))*(10)) + ((16)*((25 necklaces*$17)(12 earrings*$12)*(10))2 (32*569*10) + (16*10*569)2 = $182,080 + $182,080(assume half this numbers because trade shows happen all year round and not all at beginning of the year) = $182,080 + $91,040 = $273,120 Product Costs: (avg. # orders)*(costs of each product + shipping)*(# shows) + re-order costs ((32)*((25 necklaces*8.05)(12 earrings*$5.50)+15)*(10)) + ((16)*((25 necklaces*8.05) (12 earrings*$5.50)+15)*(10)) (32*282.25*10) + (16*282.25*10)2 = $90,320 + $90,320(assume half this number) = $90,320 + $45,160 = $135,480 Trade Show Profit: Revenue – product costs – show costs $273,120 - $135,480 - $94,333.33 = $43,306.67 Sales Representatives Expected Revenue: (# months)*(avg. # orders)*(selling prices for products)*(# reps.) (12)*(13)*((25 necklaces*$17)(12 earrings*$12))*(4) 12*13*569*4 = $355,056 Product Costs: (# months)*(avg. # orders)*(costs of each product + shipping)*(# reps.) (12)*(13)*((25 necklaces*8.05)(12 earrings*$5.50)+15)*(4) 12*13*282.25*4 = $176,124

10

Cost of each Sales Representative: Commission: $355,056*0.15 = $53,258.40/4 = $13,314.60 Showrooms: $200 a month*12 months = $2400 Sample Boards: $2900 Materials: $600 Bookkeeping: (48 hours*40 hours) / 4 sales reps = $480 Total: $19,694.60 Cost of four reps: $19,694.60*4 = $78,778.40 Sales Representative Profits: Revenue - product costs - sales rep costs $355,056 - $176,124 - $78,778.40 = $100,153.60 Both (Trade Shows and Sales Representatives) Cost of attending 10 trade shows and hiring 4 sales reps: $94,333.30 + $78,778.40 = $173,111.70 Profit from both: $100,153.60 + $43,306.67 = $143,460.27...