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Deciding the optimal expansion strategy for Foxy Originals is the issue at hand.
Kluger and Orol founded Foxy Originals in 1998, a jewelry company based in Toronto. Specializing in high fashion jewelry, Foxy quickly gained a strong reputation and saw rapid sales growth in Canada. However, as the Canadian market became saturated, Foxy recognized the need to expand into the larger U.S. market. With its massive population, America offered the potential for more customers, leading to increased sales and revenue.
Therefore, the main focus was on determining the best distribution strategies for Foxy, whether through trade shows, sales representatives, or a combination of both. U.S. trade shows provide a platform for connecting sellers and buyers, with the key advantage being the large volume of potential buyers. By attending 10 targeted trade shows, Kluger and Orol can increase brand visibility, build relationships with potential customers, and drive sales.
On the contrary, Foxy is concerned about the high cost and potential risks associated with their business.
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Kluger and Orol require five days of preparation for each show to ensure the best display effect, including the expensive booth layout. They could consider hiring sales forces as an alternative. Foxy's goal is not to be available on every street corner in the United States; they aim to enter key fashion centers like New York and Los Angeles. Sales forces can help achieve this by establishing relationships with local jewelry stores and retailers. Training sales representatives can aid in expanding the U.S. market, though finding suitable candidates is challenging.
Implementing both methods brings about a new challenge - territory ownership. For example, if Foxy attends a trade show in New York while simultaneously hiring New York-based sales representatives, they would have to pay commission fees on all sales, following industry norms.
The partners also contemplated attending trade shows in major fashion hubs and sending sales representatives to smaller cities; however, this would not help Foxy establish brand awareness in the United States, as these cities are not fashion-forward. Implementing distribution methods could have negative impacts if Foxy enters the U.S. market, affecting its design and logistics departments. While Foxy's jewelry designs have been approved by Canadians, uncertainty remains about how responsive American customers will be. If American customers prefer a different style, should Foxy cater to the U.S. market by changing its design style or hiring new designers? Additionally, logistics should be a priority for Foxy as delivering goods abroad is more complex. Finding a reliable delivery partner is crucial for ensuring timely delivery of goods.
The cost of each trade show, as demonstrated in Appendix A, is $9,433.33 on average. In the optimal situation, a trade show could yield a profit of $4,145.42 (Appendix B); however, there is also the possibility of losing money, with a potential loss of $-3,398.33. When considering a total of 10 potential trade shows, Foxy could see profits ranging from $-33,983.30 to $41,454.20, depending on the number of orders received at each show. With 10 shows scheduled throughout the year, the workload is relatively low but preparation is intricate. Kluger and Orol must make travel arrangements and set up booths, while also facing high levels of uncertainty. Factors such as delayed flights could jeopardize their efforts. While hiring them may be a wise decision, sales representatives will receive a 15% commission on all sales as compensation.
Hiring sales forces offers a low investment with high yield compared to trade shows. According to Appendix A, the cost of hiring one sales representative for a year is $6,380.00. In the low projection, each salesman may only sell 10 orders every month, resulting in a profit of $19,588.00 per year. If they are able to sell 15 orders per month, each salesman can make $32,572.00 annually. Additionally, hiring sales forces is a quicker option, allowing Kluger and Orol to focus more on running their business and designing jewelry rather than dealing with challenges they face in America.
Combining trade shows and hiring sales forces may seem like a great idea, but in reality, it is not. The fixed annual costs for this combination amount to $110,253.30 (Appendix B), which is almost 7 times higher than just hiring sales forces. These fixed costs do not depend on the business's level of production. If sales performance is poor, Foxy will suffer significant losses. Additionally, Foxy would have to compensate salesmen regardless of their actual sales due to spillovers. Thus, the main drawback of this option is its high cost and high risk compared to other alternatives.
As a consultant, I highly recommend that Foxy hire sales forces for their U.S. expansion. The costs and level of risk associated with hiring sales representatives are the lowest among other alternatives that were considered. Additionally, the rich experience and extensive network of sales representatives would be beneficial for Foxy's entry into the U.S. market. Analyzing the break-even point also shows that hiring sales forces has a relatively lower break-even point, indicating less complexity and lower risk in implementation. In summary, hiring sales representatives offers several advantages such as high return, high efficiency, and low investment. The only potential challenge lies in the selection process, which can be complex. A qualified salesman can boost sales, while an unsuitable one can inadvertently cause more trouble.
Kluger and Orol are posting job requirements that need to be identified. The HR department will then follow standard hiring procedures by posting the jobs on the company website and with employment agencies. Interviews with candidates will be scheduled and ranked by July 2004.
Training is provided to suitable sales representatives to make them familiar with Foxy’s jewelry. Before 2005, planning and controlling sales representatives carried out the expansion plan in the U.S. market, needing to provide timely feedback for Foxy to compare actual results with target performance. Since 2005, Foxy should hire sales forces and provide training to them by the end of 2004. As owners, Kluger and Orol should work with HR to draft the job requirements. Timely feedback is essential once they start implementing the plan, especially when encountering blocks from local businesses. Furthermore, by comparing actual results with target performance, Foxy can take actions to respond to unexpected changes.
Optimal Expansion Strategy for Foxy Originals: Analysis and Recommendation. (2016, May 23). Retrieved from https://studymoose.com/foxy-originals-expansion-into-the-u-s-market-essay
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