March 30, 2011
David-Bond and The Latin American Sweater Market Case Study
1. As a company, David Bond has an array of competitive strengths that contribute to the success of his major sweater exporting. The first of much competitive strength would have to be the ability to operate his specialized weaving machinery 24 hours a day, 7 days a week, and 365 days a year. This ability is very unique and is due to Mr. Davila-Bond’s well use of the available technology. This technology gave him the ability to invest in this well designed weaving machinery, which in return to increases its production by 20 percent. The increase of its total of units sold because they can produce more for the market and supply its demand for the company’s product. Technology continued to play a very important role in this company’s competitive strength with the use of supersoft technology. Supersoft is a low cost and low maintenance technology that still gives the sweaters produced the softness and feel that gave the sweaters its high quality feel. The company produced high quality yarn which they would import the final woven product that could be used by other firms. The ability to give customers the added satisfaction that these sweaters did not require dry cleaning like most competitors gave them an instant competitive advantage. This saves their customers money and gives them ability to safely wash the sweaters in the company of their own home by use of a washing machine. The company anticipated they would see an instant profit growth. Unfortunately this did not happen as instantly as they had hoped but in the long run the profits did reach their expected numbers. This use of technology and well advised investment’s would give any company a competitive strength in any foreign country and is not just limited this Latin American market. This company also implemented a minimum wage policy that would also benefit a company in any market. By paying its employees a wage that was above the local average the company had high productivity rates and a very high employee moral within the company. It’s a rule of thumb that if your employees are happy then your company, in a production sense, is happy. This use of high wage was a smart business decision that most companies to not make. This company was able to make this decision due to their owner-management company structure. Family owned businesses you will find have relatively simple business strategies and makes it easier to make decision such as minimum wage without the added pressure of stockholders to board chairman. 2. A) There are many advantages as well as disadvantages in focusing on and expanding further into their existing home country of Ecuador. The advantages could include the fact that the company has successfully achieved a highly respected brand image due to their high quality of the sweaters. This brand image along give them reason to continue their penetration into Ecuador’s market. Ecuador’s overall sales within the market are not where most companies would want it in order to be successful but this company has strong revenue pull from the market with 50% of their revenues coming from Ecuador.
With these advantages there are also disadvantages in focusing on and expanding further into their existing home country of Ecuador. These disadvantages can include an increase competition within the country may continue to cause the company’s sales to decline and loss in market share. Along with this competition threat, the economic situation or conditions within the country is relatively poor. B) There are advantages as well as disadvantages in expanding into other Latin American countries. These advantages can include the Latin American countries economic conditions are showing considerable improves. This increased growth can mean lower competition and increase in disposable income within the urban areas within these countries. Another advantage is that trade agreements provide an incentive to expand within other Latin countries however this wouldn’t ensure that the company’s profits would increase
Disadvantages in expanding into other Latin American countries can include being able to have a considerable market share. The countries are relatively small and may not give enough business for the company to be profitable.
C). There are advantages as well as disadvantages in expanding into Mexico. The advantages can include the fact that Mexico has the largest trading nation in Latin America and the eighth in the world. Also Mexico has over 100 million consumers and the largest GDP within that region which would encourage foreign investment.
Disadvantages in expanding into Mexico can include the fact that Mexico has a piracy problem and there are no restrictions to capital for foreign investors these rates may deter the company from entering into Mexico.
D) There are advantages as well as disadvantages in expanding into the United States or maybe into Europe. The advantages can include the fact that the U.S. in 2002 was the leading market of for export and import goods
Disadvantages in expanding into the United States or maybe into Europe can include the marketing cost within the U.S. is considerably higher than within other countries 3. There are an assortment of marketing tools and marketing data would a company would need to accurately make this decision. First off the company could employ a marketing company within Mexico to provide them with the ability to produce purchasing habits within the country. This would provide the company with enough analysis in deciding where to sell their product. Regardless the company would need to obtain a significant amount of data about the market, political issues and risks in order to insure they can maintain their well know brand name. 4. I would recommend the company should remain within the market in Ecuador and continue investing in new methods to increase revenues. A brand name is one of the most important aspects of marketing. With that said it has been seen before by other companies that the strength of a brand name or image does not always transfer into other countries i.e. IKEA. The competitive advantages they have achieved within Ecuador will remain beneficial to the company for years to come without much threat from other competition. I think the risk of competitors in other countries such as the U.S. or Europe would be too high for the company to make a significant market penetration they would need to be successful. The only country I would give any consideration for investment would be Mexico due to the similarities in the market they are already in. Overall I like believe if it isn’t broke don’t fix it and I would continue their already successful market penetration in Ecuador.