The internationalization of the firm – An adapted case study By Tomato Silverberry Background and History Bouzoukis Design manufactures and sells teddy bears all over the world. It has five employees In Sweden, however, when the film needs more workers, then they are hired by the hour. Usually this occurs when the firm has special promotion tours or visits trade fairs. Globally, the firm employs more than a thousand people. The firm started its activities by selling office material to Cooperative F¶rebound, Booked and other big firms in Sweden.
The products the firm sold were diaries, pencils, pencil cases, notebooks, etc. Then the firm most of the products were designed by other designers but the firm also designed some products. Most of the products were bought from Salsa countries, such as Korea, Taiwan, and China. The current product was invented by a coincidence, the two flirts teddy bears were made for the Coo’s sons when they were born. The CEO says that she always wanted to sell this kind of products, but thought that the firm should stick to its known products and customers, instead of investing in high-risk projects.
She then made even prototype teddy bears. She went to Poland, bought material, and found a small factory that made the teddy bears professionally. The teddy bears were shown at the Former Trade Fair 8 In 1989, together with the firms’ office products. This Trade Fair gave a first indication that the product could become a best-seller. Instead of getting orders for its established products, everybody started to order teddy bears. The CEO means that this was quite a surprise, as these teddy bears that were like most of the teddy bears In the present collection, with an old look that resembles English teddy ears.
At that time, the teddy bears that were sold In Sweden were more elaborate, while her teddy bears had a rougher look, which made them unique In the market segment. The success at the Trade Fair made the firm return for the next one held six months later. The firm were still mainly known for their office products and the teddy bears were not a priority. However, during the first morning, the teddy bears alone paid the rent for the firm’s stand for the whole trade fair. Since the demand was so high, the CEO created thirty models for the next trade fair, and from that point the product angel has expanded and the office supplies were discarded.
The firm now divides the year into two seasons, for each of the seasons about hundred new models are presented. The products range from mini teddy bears, to huge teddy bears. Also some innovations have been made, figures for different occasions such as Christmas have successfully been Included in the product range. All the firm’s products, even ten smallest tea Dear (auto 2 CM Nell) can move all AT I in Stockholm, and it has two shows each year Internationalization TTS Limbs. Nine Area Yale Is The first country in which the firm sold teddy bears was Sweden.
About two years after introducing the teddy bears in Sweden, the teddy bears were so popular that the firm started to think about expanding to other markets. The first market that was chosen was Norway, the reason was that the CEO thought that Norway is a is very similar country to Sweden when it comes to taste, behavior etc. The firm therefore decided to go to a trade fair in Oslo. The reaction was similar to the one experienced in Sweden. The main problem, according to the CEO, was to show the customers what kind of product the firm was selling.
Although it shares some qualities that makes it possible to consider it a toy, it is more of a gift. Six months after the trade fair in Oslo, the firm went to a trade fair in Denmark and was well received there too. Shortly after people began to come from Finland to buy products, therefore the firm decided to find an agent for Finland. At this stage, the firm itself took care of the sales to the other Nordic countries. The firm consolidated itself on the Nordic markets, and kept selling only to the Nordic countries for about four years.
The next step in the internationalization process was a visit to the trade fair held in Frankfurt. These Trade Fairs are the world’s biggest for gift articles. Whereas trade fairs in the Nordic countries mostly generate visitors from that region, the trade fair of Frankfurt attracts people from the whole world. At this moment of time the firm was still operating with only one factory. At this time the firm began to be contacted by people that wanted to be agents for the teddy bears in different countries, the firm realized that it would have to increase its production and a second factory was set up from scratch.
The CEO thought it was important to be able to handle everything on her own, which limited the speed of the internationalization. The first country outside Scandinavia was Austria, which was followed by France. Shortly after the firm had been to the trade fair in Frankfurt, it withdrew from the trade fairs in Norway and Denmark. However to avoid losing market shares there the firm decided to have agents for these markets. The firm has now agents in all European countries and in most other countries of the world.
In some markets the firm does not involve agents as they believe they would try to sell too many products, given the Factories’ capacity. Some of the agents are more developed than others are but that the firm lactates that as time passes by all will be at the same level. One activity that all agents carry out is to show the products at their national trade fairs, the firm can thereby be present on all important events in the whole world. Some of the agents sell other products directly or indirectly related to the firms’ products.
For example in France the agent is a firm that sells furniture, and the products are sold in the furniture shops. One of the countries that has been difficult to penetrate is Spain, the reason according to the CEO is that the market makes it necessary to use different design, Ana Deterrent materials. Plan Is also one AT ten newest countries In wanly ten Tell has an agent. The firm has been present on the Italian market for some years now, and the CEO concludes that Italy has been another market that is hard to manage, but when it is well managed sales are high.
In general, she believes that the Central European countries are easier to manage and create fewer problems. Manufacturing The first factory the firm used was situated in Poland, but it did not work out well. Subsequent attempts to find a good factory were done in various countries in Asia and finding the present factories took a few years. The firm uses two manufacturing plants in China in Shanghai and Shinning, and these plants are totally dedicated to Bouzoukis design. According to the CEO, the firm controls all activities in the factories.
The firm at the moment does not own these factories but no other firm can use these manufacturing facilities without permission from Bouzoukis design. One of the factories was in existence before Bouzoukis got involved and was adapted to the needs of the firm. The other was created with the CEO and a person who was interested in starting up a factory. Bouzoukis invested risk capital and structured the organization to fit its needs. When the factory was able to survive by itself, the firm took back its capital.
The CEO said was that she did not have enough time to manage the factory but with the present organization, Bouzoukis organizes how the work should be carried out and the owner of the factory is responsible for carrying out the work according to these instructions. The factories are located in a zone where there are many good, skilled workers. It is difficult, she claims to find workers that are skilful but not children in China. However the CEO argues that even firms that are relatively small should take their responsibility and not hire children for their cuisines.
Although cheap and skilled workers are attractive, another factor that also influenced the decision to manufacture in China was that the materials used for the teddy bears are also bought there. Bouzoukis also hires manufacturing time in a third factory when its own capacity is insufficient. This third factory is also located in Shinning, and the firm has cooperated with the factory for five years. Price setting and profits The CEO meets the owner of the factories and they calculate how much material will be used, what the material costs, and how much time it will take to make one teddy ear.
Some models require input, if the teddy bear has wires and special materials, then this is usually reflected in the production costs. Further, consideration is taken so that the factory will be able to pay its employees, taxes, and other expenses. From this basic calculation a factory price is set, which also includes a profit margin for the factory owner. The factory price represent the minimum acceptable price for the factory, given the material and work processes. The firm then considers its transportation costs, the cost of having the products in stock, handling costs, and the allergies of the employees of the firm.
If the price seems reasonable, they decide upon the factory price and proceed with the production. If, however, the price is too high Ana ten Tell does not want to put pressure on ten Doctor to lower Its studies, together with the factory owners, see if it is possible to change some materials or modify the model so that it will be easier to produce. The CEO means that one of the greatest advantages of the relationship is that it knows the costs of every step in the production, and that it can control it with great precision to fit its needs.
Generally, the firm tries to make a profit of 60% of the total price, but in many cases it has to settle for less since the local demand conditions makes it necessary to have a lower price. The agents earn 30% of the price given by the firm, which makes it necessary sometimes to accept a profit margin of 10%. The price setting process is, according to the CEO, crucial to the firm’s success. The firm is able to provide all people from the factory to the seller to make profit, without asking too high a price of the end consumer. The pricing in the different countries depends partly on the gent.
In the first year an agent has a trial contract and can do whatever he wants to do when it comes to pricing. If this does not work well, the firm will not sign a new contract with the agent. The firm however recommends its agents to not add more than 10-30 %. The prices are generally a little bit lower in the countries that are handled by agents, that is, all countries except Germany and Sweden. The firm does not decide what price to use in different countries because they do not know the specific conditions of all of the countries and they think that the agent will do his very est., since his profit depends on his efforts.
The CEO argues that the same product can have very different prices, not only depending of the price level of the country, but also of consumer tastes. A teddy bear that is very popular in one country will have a different price in a country where it is not popular. The CEO further argues that the differences in taste are very important to take into consideration, because some of the teddy bears that are popular in France, Spain, and Italy are almost impossible to sell in the Nordic countries.
The CEO has acquired very specific knowledge regarding consumer taste over the ears. In the beginning the firm did not know what the different markets demanded, although some basic assumptions were made. Nowadays the firms design its products specifically for a given market, even though the product can be sold in other markets too. The adaptations that have to be done are not only related to design, but also to choice of material. The firm has deliberately tried to avoid getting to know more about the markets in which it is present if every thing has functioned well.
If there are problems selling in a country, then the firm tries to find out why and hen learns quickly about the specific conditions that prevail. The CEO is pleased with the firms’ agents. Some of them have managed to win various awards as best company of the year. This is one of the arguments that she uses to explain that if the agents work efficiently, then there is no need to use important time to learn more about a specific market. Selling structure I née Tell NAS opiate a selling structure Tanat, according to ten CEO, Is not very common for firms in the industry.
While all competitors have sellers that go to the different shops and sell the products, Bouzoukis design lets the clients contact the rim. This system is adopted in the entire world, the agents do not visit any particular shop. The reasons for this, according to the CEO, are several; the firm prefers to show as many products as possible to its clients, and she means that this would not be possible if the firm used sellers. However, another interesting reason is that the firm has never had problems of finding buyers for its products, which has made it unnecessary to adopt a big seller organization.
The agents are strongly supported by the firm, the CEO makes several trips each year to visit the different agents. The firm tries to transmit a consistent image in all markets, and to be able to do that the firm needs to show the agents the values that the firm represents. Therefore, the CEO visits various trade fairs and gives suggestions to the agents on how to present the products, and to whom the agents can sell the products. The firm does not allow the agents to sell to toy stores, nor to chains that sell cheap products.
The idea behind this is that the buyer should not be able to find the product almost anywhere, therefore the firm priorities gift shops, furniture chains and other types of firms that are more specialized. The CEO means that the firm can choose from a variety of agents for every market and that it only chooses to cooperate with big firms that have the necessary knowledge and capacity to be able to distribute its products. Except the very first steps of internationalization when the firm deliberately chose where to sell its products, the subsequent steps were less systematic.
The CEO argues that the order in which it entered into different countries was partly been decided by when an agent has showed an interest in selling the product. Most contacts with agents were established at trade fairs. During a normal trade fair, various agents that come and want to sell the firms’ products in different countries. The firm is generally interested in knowing what the agent has done before then discussed the feasibility of selling the products in the given country with the agent.
If Bouzoukis Design believe the agent to be a good prospect, a trial contract that lasts for about one year is agreed upon. At the end of the trial period the firm looks at the achievements of the agent and if they believe that the agent has done well, a new contract is signed, otherwise the firm chooses another agent for the country. The firm has one store in Frankfurt that is dedicated to Bouzoukis design, although the firm does not own it. This store was the first of its kind, and it was followed this year by Bouzoukis Gallery, a store in Krakow (Poland).
The firm does not have any store of its own in Sweden, but it is possible that it will open a store in Gallerias, Stockholm. The main reason that the firm has not opened its own store in Sweden is that the CEO it believes it would be necessary to use time to control everything, but the same responsibility to control does not exist for the stores outside Sweden because it is impossible to visit other stores on a regular basis and maintain good operations at home. Loyal ten Tell anneals ten swells Ana ten German market Itself; Wendell ten Tell uses agents for the rest of the world.
The firm has signed a contract with DHAL, who for 25 Euro, delivers its packages to all of its providers. According to the CEO, this kind of contracts is one of the main reasons why the firm prefers to handle the distribution by itself to Germany. The firm has more than thousand clients today from all around the world, and the CEO does not know in which year it started to sell to a specific country. The reason is that, from selling to a very limited number of countries, this number was rapidly increased without any kind of underlying logic.
In the USA, the firm sells directly to a few firms; the reason not to go through an agent is to avoid growing too big. The same thinking applies to the Australian market, if an agent were used, the firm would have to open a third factory, which according to the CEO, is not possible today because of her limited time. Bouzoukis has rapidly developed into a successful international SEEM. Its business model shows how domestic firms can move rapidly into the international arena.