Foxy Originals - Expansion Into the U.S. Market

Topics: Variable cost, Marketing, Costs Pages: 7 (1733 words) Published: November 30, 2011
Foxy Originals
1. Discuss the pros and cons to launching the Foxy brand in the United States.

To determine the pros and cons, we conducted a SWOT analysis:

S(trengths) – Foxy Originals has saturated the Canadian market, which presents an opportunity for growth. The two owners have extensive experience in designing jewelry, having done so since they were in high school. They’re good at what they do and have had time to perfect their trade. They also have a firm grasp of who their target market is, so they are able to offer “fresh, fun, and funky” products at a reasonable price. With such a specific product (rather than just general jewelry), it creates a niche market that will generate loyal customers.

W(eaknesses) – Although saturating the Canadian market presents an opportunity for growth, it also puts a burden on the company because they have no choice but to expand, which can cost a lot of time and money. They must take time away from the company to conduct market research and decide where to launch their products. They have to decide on retail outlets, price points, and they have to compile an estimate of the financial information, including exporting costs, transportation, etc.

O(pportunities) – Jewelry designed for a specific type of woman can definitely create a niche market since the jewelry industry in the United States is so huge. It sets them apart from most U.S. sellers and makes their product truly unique. Setting it at a lower price point also makes it more attractive to initial buyers, which when they establish brand loyalty, they can raise their price to gain more revenue in the long-run and make up for the high initial cost of exporting. Also, given that they offer their jewelry to mostly college-aged women, they can implement a more specific marketing initiative, which could include hiring sales reps on the thousands of college campuses throughout the U.S., creating significant awareness.

T(hreats) – The U.S. market is a difficult one in which to introduce a new product because there are so many large corporations already established. It would be difficult to get such a small company noticed among big-budget advertising that many U.S. firms use. This imposes a huge risk in that if they’re unsuccessful in separating their product from the rest, they’ll have lost a large amount of money invested and incur a considerable opportunity cost. Considering that they offer such a specific product, it’s going to be difficult to create the niche market that they’re going for. They’ll have to use smaller advertising outlets, which could reach less people. Last, if the launch into the U.S. is successful, demand may exceed their supply, which would force them to have to build a distribution facility in the United States in order to increase production capacity. This imposes a significant short-run cost, which may hurt the company until they can steadily maintain sales.

2. Assess each distribution strategy from a qualitative point of view.

Breakdown of revenues, costs and profits per order
Necklace|  |  | |
Units| 25 | |  |
Price/Unit| $17.00 | |  |
Revenue| | $425.00 |  |
Manufacturing| $8.05 | | $201.25 |
Profit|  |  | $223.75 |
Earrings|  |  |  |
Units| 12 | |  |
Price/Unit| $12.00 | |  |
Revenue| | $144.00 |  |
Manufacturing| $5.50 | | $66.00 |
Shipping| $15.00 | | $15.00 |
Profit|  |  | $63.00 |
Total Profit Per Order|  | $286.75 |

Cost of attending trade shows
Potential Tradeshows| 10|
Entry| $3,000 |
Booth ($4,000/30 Tradeshows)| $133 |
Shipping| $1,500 |
Travel| $2,000 |
Merchandise| $2,800 |
Cost per tradeshow| $9,433 |
Cost per Year (10 Tradeshows)| $94,333 |

Cost of hiring sales representatives
Commission| 15%|
Rental Space/Year| $9,600.00 |
Sample Boards| $11,600.00 |
Catalogs| $2,400.00 |...
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