Timbuk2 Introduced in Argentina

3/9/09
John Johnson, Tessa Larson, Andrew Lowe and Jaclyn Magaghani

International Marketing Dr. Pallub Paul

Executive Summary Timbuk2 offers an environmentally-efficient-versatile bag for the outdoorsy person, the student, the businessman/women, and the traveler. Our clients are anyone with the above description that wants a bag that reflects who they are, in a way that is friendly towards the environment. Timbuk2 offers entirely customizable bags both online and in-store, and is based in San Francisco, CA. Across Argentina, there has been an explosion in the travel and tourism industry, especially over the last five years. Buenos Aires, the capital, is on the cutting edge of travel and retail. Our research has shown that it is home to over 15 million people, and has the largest transportation hubs within the country, the largest universities, and has vast opportunities in retail because of the variety of shopping malls and centers. Timbuk2 competes over a variety of different industries. The main industries of competition are the Textile Bag industry, the luggage industry, the backpack industry. While there are currently at least 3 major competitors in each of these industries, none are as customizable or environmentally conscious. Timbuk2s marketing strategy is to emphasize the quality, unique style, ecofriendliness, and attainability of our bags to the Argentinean consumer. Customers, for instance, will have a bag that is customizable to their tastes, environmentally friendly, and affordable. Based on the size of our market and our defined market area, our sales projections for the first year are $500,000. We already have our sights set on the city of Buenos Aires and their universities, major shopping centers, airports, and bus terminals, where travel stores and kiosks will be the primary point of sale methods used. Timbuk2 plans to aggressively build our client base through television, radio, newspaper, and print ads all over the city and because Argentina was the internet and e-commerce leader in the Spanish-speaking world in May 2007, we plan to greatly utilize the internet for our campaign. The quality and durability of Timbuk2 bags is sure to appeal to the active people of Argentina, especially throughout the city of Buenos Aires.

Table of Contents

Introduction San Francisco textile bag manufacturing company, Timbuk2, is looking to expand its business into Argentina. Argentinas urban culture and large population provide a sufficient market to support profitability for Timbuk2s expansion. The fast growing and stable company is prepared to enter the Argentina market with confidence for success in international sales. Company Background Timbuk2s origin starts back in New York City in the fifties when the first messenger bag was created for telephone linemen. Then in the seventies bike messengers began to use the bag while at the same time creating a unique subculture. The fad turned into a trend continuing into the eighties and also spread across the nation continuing to this day. Timbuk2 approached this style movement toward the end of the eighties and created a product that fit the need of bike messengers for a durable carrier as well as fashionable accessory to fit the urban hipster market. Timbuk2 defined itself with its distinctive logo, name, and three-panel design paired with the fact they are made right in San Francisco creating an exceptional product for a niche market that quickly expanded1. Most recently in 2005 the company employed approximately 60 workers gaining revenues of $15 million2. See Appendix A for timeline. In the past few years the company has continued to grow, penetrating new markets, products, and ideas. Current Business Idea/Concept Model Timbuk2 Designs is dedicated to creating returns for its investors as well as being a socially and ethically responsible corporation. Between 2000 and 2004 Timbuk2 experienced 158% growth allowing it to be named the 27th Fastest-Growing Private Company in the Bay Area according to San Francisco Business Times3. Timbuk2 expanded once again in 2006 to open its first retail outlet at its roots in San Francisco attempting to imitate Coach Inc.s success with retail stores2. 2005 marked a milestone for Timbuk2 Designs VMG Equity Partners acquired a majority stake in the messenger bag company. In this transaction Timbuk2 uniquely distributed the buyout profits of $1 million among 40 non-management employees showing Timbuk2s holistic approach to business4. Ethical business tactics continued when the company started its special collection of Pro-Planet bags that creates products are made from environmentally friendly material. In recent years Timbuk2 has started to outsource some manufacturing to China in order to maintain quality and low pricing for their customers1. In this transition the company has remained transparent in its processes to preserve trust and loyalty. Overall, Timbuk2 has shown how it is committed to its investors, employees, customers, and the environment. Marketing Plan Objectives
1 2

Timbuk2 Bags- Timbuk2. Timbuk2 Designs Inc. 31 Jan. 2009 <www.timbuk2.com>. Calvey, Mark. Timbuk2 opens its first retail outlet. San Francisco Business Times. (17 March 2006). 31 Jan 2009 <http://www.bizjournals.com/sanfrancisco/stories/2006/03/13/daily51.html>. 3 Timbuk2 Acquired by Private Equity Investors. Business Wire. (26 Oct. 2005). 31 Jan. 2009 <http://www.businesswire.com/news/google/20051026006257/en>. 4 New private equity firm bags Timbuk2. San Francisco Business Times. (4 Oct. 2005). 31 Jan. 2009 <http://www.bizjournals.com/sanfrancisco/stories/2005/10/03/daily12.html>.

Timbuk2 is a San-Francisco based company that makes rugged bags of all shapes and sizes. The company started in 1989 when the fashion of messenger bags grew in the 80s. Timbuk2 worked to create a bag that could be used functionally by the true bicycle messengers but also fashionable enough for urban hipsters. From their trademark messenger bag they have expanded to laptop cases, backpacks, totes and now travel bags. They also were the first to create customized messenger bags so their unique customer base could fit the bag to their individual taste. Timbuk2 bags are extremely versatile combining fashion with solid quality and can be used at work downtown, for class, or up in the mountains. The company has expanded into a product line that is eco-friendly called Pro-Planet that uses a variety of environmentally safe fabric. Timbuk2 recently created a new product line to include travel luggage with a variety of bags for every travelers needs. The company also offers a corporate sales program where a business can design a bag including their logo with bulk discounts1. The Timbuk2 marketing plans primary objective is to inform the target market about the features of our superior product and its advantages over the competition, leading to establish competitive lead in the market and $500,000 in revenue in the first year. This a reasonable estimate considering the $15 million revenue figure attained in 20052. While keeping our commitment to environmental practices and high standards that are used in every factory including our factory in China. The company will focus its marketing techniques where there is the largest amount of potential customers. With a primarily urban product, it will be introduced to the large cities of Buenos Aires, Cordoba, La Plata, Mar del Plata, Mendoza, Rosario. Economic, Cultural, Social, Political & Legal Environments Economic From an economic standpoint, Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. 5 They have suffered more in the 20th century economically than over the past 100 years. Even still, their exports far exceed their imports; exports being 73 billion and their imports being 59.9 billion. Major partners for both include the US, China, Brazil, Chile, and Germany. Compared to the US, the GDP is obviously much lower but economically Argentina is expected to turn around and do better in the years to come. As the economy sorts itself out we feel that a sturdy, reliable product like Timbuk2 bags will sell very well, seeing as it is useful and affordable as well. Cultural/Social In Argentina, the people are primarily of European decent. This, along with the type of Spanish spoken is something that makes them very different from other Spanishspeaking countries. Family life and family values are extremely important to the people of Argentina and this includes the extended family. These family relationships routinely affect business, the home, and their social lives. Religion in Argentina is considered a free choice, and over the past 10-15 years other world religions have begun to thrive there. Socially the people of this country are very blunt and direct. They manage to be warm and passionate, while still being straightforward in their opinions, or from a marketing standpoint, their needs and wants. Things like this that are known about the
5

"Argentina." The World Factbook. 24 Feb. 2009. Central Intelligence Agency. 2 Feb. 2009 <https://www.cia.gov/library/publications/the-world-factbook/geos/ar.html#Econ>.

people of this country will help us bring Timbuk2 bags there because they seem to be as unique as the people. They are customizable and eccentric, while being sturdy and a good product. We feel that the two compliment each other. Due to the close relationships with their family members, we assume that the people will do whatever it takes to keep in close contact with extended family, travel included. This is where the large variety of bags will come in handy.6 Political & Legal Environment The Argentinean Political system mirrors that of The United States political system very closely. The federal government is split up into three branches, Executive, Legislative and Judicial. The legislative branch takes the form of a bicameral congress, made up with a Senate, and a Chamber of Deputies, similar to the US House of Representatives. The Judicial Branch is comprised of a Supreme Court, as well as federal and provincial trial courts. The political system also closely mimics the US system as it operates under a two party system, the Justicialist (Peronist), and the Argentina Radical Civic Union (UCR).7 The US and Argentina have been partners in trade for years, and have enjoyed the benefits of the US-Argentina Bilateral Investment Treaty since 1994 providing all US companies with national treatment. The US exported over $6 billion dollars worth of goods to Argentina last year, and as a member of MERCOSUR or common market of the south, all imported goods are taxed with a common external tariff ranging from zero to 20 percent, with most goods averaging 14 percent.8 Argentina is also a member of the World Trade Organization, making the transition from the US that much easier. One of the only restrictions on foreign products is that all tags, and labels must be in Spanish as well as in metric units, with the exception of foreign words or phrases of common usage in trade. As far as the implications for Timbik2, there is very little difference in the political and legal environments of the two countries. Laws are passed the same; the court system works the same; and the government is run the same. Fortunately for Timbuk2 the biggest difference between the two countries is the language. Market Analysis & Consumer/Business Behavior In 2010, Argentinas population by is expected to be around 1.7 billon, the ages of this group are between 10-34 years old9 (Appendix B). This is useful in seeing that the general ages for business/pleasure travel, are within these age groups. The market potential for these travelers makes Argentina a great country to introduce a Timbuk2s traveler bag. In June 2007, the U.S. and Argentina modernized a bilateral civil aviation agreement to update safety and security safeguards and allow a significant increase in flight frequencies between the two countries, which hold excellent potential for increased tourism and business travel7. The Argentinean people are both receptive and interested in American culture and society, and are buying the latest and greatest products that come from the West. According to the World Travel and Tourism Council, in Argentina, in
6

Argentina - Language, Culture, Customs and Business Etiquette." Kwintessential Cross Culture Solutions. 2 Feb. 2009 <http://www.kwintessential.co.uk/resources/global-etiquette/argentina.html>. 7 Argentina. Dec. 2008. US Department of State. 4 Feb. 2009 <http://www.state.gov/r/pa/ei/bgn/26516.htm>. 8 US Commercial Services in Argentina. Argentina Country Commercial Guide 2008 Doing Business in Argentina. 2008. U.S. Commercial Service. 5 Feb. 2009 <http://www.comerciousa.org/argentina/en/Content_Pages/CCGSummary.asp#MarketOverview>. 9 "NationMaster - Argentine Population pyramids." NationMaster - World Statistics, Country Comparisons. NationMaster. 17 Feb. 2009 <http://www.nationmaster.com/country/ar-argentina/Age-_distribution>.

2007, travel and tourism industry is expected to post US $26.6 billion of economic activity, growing to US $46.1 billion over the next ten years. Meaning that for Argentina alone, the travel and tourism activity is expected to grow by 4.4% per annum in real terms between 2008 and 20177. The Argentinean Council of Tourism states that, Argentinean tourism, especially in Spain, is another travel and tourism market that is also rapidly expanding. The number of Argentineans that traveled to Spain increased by 25% in 2007 compared to 2006, this is reportedly because Argentinean people greatly value their Spanish roots and are starting to travel, more often, to places that reflect where they came from. After looking at these facts, we believe that this means they will be traveling more often within the country of Argentina in the coming years as well. Another popular target market for Timbik2 bags is college students. The Fulbright scholarship program has more than tripled the annual number of U.S. and Argentine academic grantees since 1994, and the U.S. Embassy is actively working to increase other education exchanges7. An increase in cooperation between Argentina and the US academically will not only up the retail businesses between the two countries but will also encourage education exchanges between the two. The more college students in Argentina, the better the retail market of Timbuk2 bags will do. On top of this, Argentinas Gross National Disposable Income grew from $423,314 to $640,499 from 2004 to 2006, and is still on the rise. Economically, the country is on a comeback. These numbers show that Argentineans will have the money to fund all of this new travel, they will be able to afford going to college, and they will also be able to purchase the Timbuk2 bags they will need for business, travel, school, and pleasure7. Industry Analysis and Competition Industry Analysis Timbuk2 is technically considered to be a part of the Textile Bags industry with a SIC of 2393 and NAICS of 314911. This industry consisted of 261 mills with totaling 6,730 employees in 2004. In 2005 the shipment values for the entire industry were $649 million, severely lower than the $907 million of 1999. The highest concentration of firms is in California, which is where Timbuk2 is located. The industry however distorted because most of the firms created textile bags for industrial purposes and sell B-to-B, some with sales over 100 million dollars.10 Timbuk2 can also be considered to be a part of the luggage industry, which in 2000 had a $1.1 billion supply of products including travel, sports and day bags that account for 30.4% of the industry. Here the two largest foreign exports are to Canada and Japan totaling 41.9% of total luggage exports. Within domestic markets the main factors affecting sales are household incomes and the aging baby-boomers. A new target is towards college graduates as professionals, both of which fit into the Timbuk2 demographic. The industry predicted to increase at a 7% compound annual rate in terms of product supply.11 Because both of these industries are so large and relatively fragmented Timbuk2 has an extremely small market share of below 1%. Competition

10

"Textile Bags." Encyclopedia of American Industries. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2009. http://0-galenet.galegroup.com.bianca.penlib.du.edu/servlet/BCRC 11 Mayer, Donna, pub. Market Profile: Luggage. New York: Kalorama Information, LLC, 2000.

The three main domestic direct competitors are Manhattan Portage Bags, BaileyWorks Bags, and Chrome Bags. All of these companies were founded in the late eighties, early nineties and are based in large costal cities. They also focus on selling a durable messenger bag product.12/13/14 Timbuk2s competitive advantage is the fashion aspect of their bags with customizable options. Another set of competitors are other backpack brands like Jansport and Eastpak. Both companies have expanded into mens and womens apparel outside of backpacks. Eastpak represents 6% of the backpack market.14 Both of these competitors are owned by the same parent company VF Corporation that also owns well-known brands Wranglers, Lee, and North Face.15 Luggage competitors are also in the same category especially since Timbuk2 has diversified into a small line of luggage. The largest company in this industry is Samsonite with $1.09 billion 2006 sales.16 Other leaders are Atlantic Luggage Co., Tumi Luggage, Inc. and Brown-Forman Corp. There are number of luxury luggage leaders but are outside of TImbuk2s target market. One main competitor is Eagle Creek who focuses on adventurous travelers with a diverse product line.14 The main international competitor is a company called Vaja based in Argentina and sells leather bags. Vaja was created about 10 years after Timbuk2 but is approximately the same size. Vaja focuses on creating bags made of genuine Argentinian leather, which is a commodity not only within the country but internationally.17 Timbuk2 can capitalize on this by creating durable, recyclable bag at an affordable price. Mode of Entry From US Perspective Timbuk2 has manufacturing facilities in San Francisco, China, Vietnam and the Philippines. However, these manufacturing facilities were not constructed in order to enter each foreign countys respective market. The rising cost of labor in the United States forced Timbuk2 to move the majority of their manufacturing abroad. Timbuk2s customers have expressed negative feedback regarding the outsourcing of labor and the import status of its product. Nevertheless, the company must structure its manufacturing this way to survive in the industry. The company encourages concerned customers to purchase custom or made-to-order bags that are still manufactured in the San Francisco facility. From Argentina Perspective Constructing a new foreign manufacturing facility is not congruent with the companys philosophy and the cost to construct and operate a facility is significant in Argentina. There is a relatively high cost of non-wage labor that would make profitability

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Original New York Messenger Bags. Manhattan Portage Company. 15 Feb. 2009 <http://www.manhattanportage.com>. 13 Messenger bags and more, made in the USA. BaileyWorks. 15 Feb. 2009. <www.baileyworks.com/>. 14 chromebagsstore.com. Chrome Bags. 15 Feb. 2009. <www.chromebagssore.com>. 15 Colbert, Catherine, comp. "V.F. Corporation." 2009. Hoovers. Penrose Library, Denver. 15 Feb. 2009 <http://0premium.hoovers.com.bianca.penlib.du.edu/subscribe/co/factsheet.xhtml?ID=rrhktfftycctfx>. 16 "Luggage." Encyclopedia of American Industries. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2009. http://0-galenet.galegroup.com.bianca.penlib.du.edu/servlet/BCRC 17 Julie. "Gadgeteer Spotlight on John Hindlay of Vaja." The Gadgeteer 6 Nov. 2007. 15 Feb. 2009 <http://thegadgeteer.com/2007/11/06/gadgeteer_spotlight_on_john_hindaly_of_vaja/>.

difficult. Non-wage labor cost is about 26% of the salary. While in US and Chile, nonwage labor cost only account for 8% and 3% of the salary respectively18. These external factors lead compiled with those of the home country lead to the exporting mode of entry to best serve Timbuk2s purpose for its expansion to Argentina. Trialand Importador is a South American import and export firm that will provide assistance transporting the product from various manufacturing facilities worldwide. The company carries a prestigious brand of service from pre to post entry. The company is currently being importing products from Jansport, Oakley, Adidas, Tumi, and many other foreign brands. The internet is already being utilized to distribute products around the world. However, the additional shipping costs are pushed to the customer increasing the price by approximately 30%. The customer may be willing to pay a premium for a custom made bag, but less keen to pay that much more for a standard bag. According to a local survey company called Tendencias Digitales, Argentina was the internet and e-commerce leader in the Spanish-speaking world in May 200719. With 49.2% usage, it has the second highest internet usage in South America. The continually growing e-commerce market will allow customers to take full advantage of the products versatility. Travel stores and kiosks will be the primary point of sale methods used in a variety of urban communities, mass transit stations, and universities. The urban cities of Buenos Aires, Cordoba, La Plata, Mar del Plata, and Rosario will provide the most appropriate market for the urban-based product. The primary commercial airport is located in Buenos Aires making it the most suitable location to emphasize the travel product line. The Argentinean universities will also provide a suitable market for the companys products. The University of Buenos Aires, National University of La Plata, National University of Cordoba, National University of Sur, and the National University of Litoral are the major universities in the country. Segmentation, Targeting and Positioning Segmentation Timbuk2 provides a high variety of products for all ages and different purposes. Argentinas 40 million people provide large potential markets for entry of a new product. Through market segmentation, the company will be able to identify consumer groups who are likely to purchase the product. The first primary segment of the population is comprised of children between the ages of 5 and 14. Law requires that children between these ages attend school, which attributes to its 95% literacy rate20. This results in a reliable demand for general school supplies and backpacks. While attendance drops significantly during secondary education, high school is still affordable and available24. Therefore, the segment could be extended to includes ages up to 17, but the numbers are less significant.

18

Doing Business in Argentina Doing Business. 2009. The World Bank Group. 6 Feb. 2009. <http://www.doingbusiness.org/ExploreEconomies/?economyid=9>. 19 Argentina: Overview of e-commerce. Economist Intelligence Unit (EIU). 1 August 2007. 4 Feb. 2009. <http://www.ebusinessforum.com/index.asp?layout=rich_story&doc_id=11158&country_id=AR &title=Argentina%3A+Overview+of+e-commerce&channelid=4&categoryid=27&country=Argentina>. 20 Education in Argentina. Embassy of Argentina in Australia. 4 Feb. 2009. <http://www.argentina.org.au/education.htm>.

The second segment is the 3.2% of the population attending university programs24. The free public universities provide a large market that is relatively simple to enter and establish a marketing platform. There is a large amount of relatively cheap marketing space opportunity at university campuses; making it a good entry point. There are 70 universities covering a variety of geographic areas24. These include public, private and national institutions in rural and urban areas. Students of this age are more fashion conscience and aware of international fashion. The hip urban American style can be seen and used to market the companys products. Urban commuters between the ages of 18 and 34 make up the third and most appropriate segment for marketing the product. This is the most promising segment due to the companys primary focus on the same segment in the home country. Timubk2 products are specifically designed to survive tough urban travel, which serves this segments needs. Urban travelers commute by using the bus systems, roads, bikes, and trains showing the vast transportation infrastructure described earlier. A commuter traveling from one mode of transportation to another especially needs an indestructible bag. The fourth segment characterizes the national and international travelers in Argentina. The countrys infrastructure provides quality of transportation for many types of travel. It has the largest railway system in South America and four major airports connecting the provinces.21 With the decrease in the price of oil and the government takeover of one its airlines, the decreasing cost of tickets will encourage future travel. These indicators create a need for quick-security baggage that is made of material reliable in various kinds of weather and climates. The fifth segment is the environmentally conscious consumers. The environmental product movement is very prominent and provides a niche to market our product. The companys products are made with green materials and waste materials are properly recycled. Environmental fashion products have been very successful in resent years22. This growing segment values environmentally friendly products from companies with a commitment to social responsibility. Targeting: In targeting Timbuk2 bags to the Argentinean people we want to utilize concentrated global marketing, defining a narrow market niche giving the company global depth. Focusing on Argentinas largest city, Buenos Aires, Timbuk2 will be able to reach the majority of our target market. Within Buenos Aires, Timbuk2 will focus on major airports, bus stations, and universities. While the first market segment we looked at focusing on children between five and 14 is quite large, it is the primary market segment of our largest competitor in Argentina, Jan Sport. We want to focus our attention on the second, third and fourth market segments, the university students, commuters, and international travelers respectively. The University segments accounts for 3.2% of the total population, or roughly 1.3 million students. While there are 70 plus universities across the country, the University of Buenos Aires with over 300,000 students is one of Timbuk2s primary targets.23 The commuter segment, which is the
21

Argentina Transportation. 2007 Encyclopedia of Nations. 6 Feb. 2009. <http://www.nationsencyclopedia.com/Americas/Argentina-TRANSPORTATION.html>. 22 Impact of fashion on Argentinas Economy. Wikia Education. 5 Feb. 2009. <http://internationalbusiness.wikia.com/wiki/Impact_of_Fashion_on_Argentina's_Economy>. 23 University of Buenos Aires. 2009. UBA. 9 Feb. 2009. <http://www.uba.ar/ingles/index02.php>.

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largest of our segments is spread out across the city of Buenos Aires, and will play a key role in getting the Timbuk2 name out to the Argentinean people. The final segment that Timbuk2 will focus on is the international travelers specifically those who travel through the Buenos Aires' international airport Ezeiza, and the Retiro bus terminal. Approximately 10 million people pass through Buenos Aires each year by bus and train, providing Timbuk2 huge exposure to the local and international market24 (Appendix C). Timbuk2 also saw potential in the young elementary students, and green friendly crowd, but in an effort to utilize concentrated global marketing to narrow in on a more specific segment, the first and fifth market segment we looked at will not be the focus. Positioning: Utilizing foreign consumer culture positioning we will associate our brand with the hipster movement in the US, playing off the wide use of the bags by bike messengers. The university student segment will be most receptive to this style of positioning since students are highly impressionable, and many want the individuality available with a Timbuk2 bag, not to mentions the tendency to emulate American cultures and styles. The true customizable bags, and high quality will set Timbuk2 bags apart from other brands such as Jan Sport, Timbuk2s largest competitor in Argentina. Besides Jan Sport, the other main competition is leather bag manufactures, which will have little to no effect on Timbuk2, since both target completely different demographics. While trying to position Timbuk2 differently from Jan Sport, the focus has to be put on how much customization is available with the bags, and how little is available with the competitors. Emphasis has to also be put on how much longer a Timbuk2 bag will last the consumer, since quality is one Timbuk2 biggest advantages. Marketing 4 Ps Product Timuk2s original and main product is its messenger bag that is made of extremely strong nylon. The bags can be used for travel, business, or everyday errands with compartments for numerous items including computers, cell phones and iPods. Their bags combine the durable quality that makes them last with fashionable colors and patterns. The superior manufacturing techniques along with excellent materials creates a bag that is extremely long lasting. Because of this Timbuk2 offers a lifetime warranty for any defects in manufacturing. The outside of the bag consists of three nylon panels that can be designed to order and the entire bag is ergonomically designed. The bags can be created out of many materials, the most popular being the nylon but also including several specialty and environmentally friendly fabrics. Putting the two unique characteristics of design and durability together allow Timuk2 to market to a wide target segment1. Once the Timbuk2 brand has been established the company can choose to expand the product line offered to Argentina. Price The past 15 years have seen Argentina's income distribution worsen, with the gap between rich and poor growing significantly25. This gap widened during the 2001

24 25

OpenFlights: Airport and airline data. Feb. 2009. OpenFlights.org. 10 Feb. 2009. <http://openflights.org/data.html>. Kennedy. Patrick. "Argentina's dual reality," CBC News. 19 Jul 2004. 4 Mar 2009 <http://www.cbc.ca/news/viewpoint/vp_kennedy/20040719.html>.

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economic crisis and 20.6% of the population is now below the poverty line26. However, the majority of the population considers itself in the middle class27. Regardless of the income distribution, there is a sufficient amount of potential customers with the ability to pay a reasonable price. Timbuk2 will use a price strategy to complete its goal to achieve a competitive position in the Argentinean market and earn $500,000 in revenue in the first year. It is important to identify the all factors that may cause the final selling price of the product to rise. The price must be adjusted to account for tariffs, exchange rate fluctuation, and shipping costs. Due to the peso's devaluation, imports have become almost three times more expensive since 200229. Typically, the US dollar is stronger against the Argentinean Peso; meaning products will be more expensive for Argentine consumers. The current exchange rate is $3.5675 USD for $1 ARS28 (Appendix D). Product prices may also need to be altered due to uncertain global economic conditions. Comparing two online stores carrying competitor Jansports messenger bags, the Argentinean and United States stores sold the same messenger bag at the same price after considering shipping costs and current exchange rate29,30. Timbuk2 will use a slightly higher market price strategy to compete with the prices already in place in the market while covering the uncertain import costs. The cost of the typical messenger bag in the United States is $120(USD). The price in Argentina will be approximately $440 ARS, which is only a 2.7% markup. This price makes the product available to a majority of Argentina while accounting for the increasing cost of international distribution. Place The largest city in Argentina is the capital, Buenos Aires. We plan to use just this city to begin selling and marketing our product in Argentina. Greater Buenos Aires is home to 15,473,670 people. Ministro Pistarini Airport in Ezeiza (part of Buenos Aires) is the most important airport in all of Argentina. Currently this airport alone handles up to five million passengers each year. This equates to more than 70 percent of the country's international air traffic, making the Ezeiza Airport a particularly noteworthy transport hub within Latin America. This is why we are choosing this particular airport to implement a large part of our marketing strategy. In addition to this airport, another major transport hub is the Retiro Bus Terminal, so we will also be implementing other forms of promotions here as well31. We plan on having a kiosk at all six of Buenos Airess major malls. These malls are Paseo Alcorta, Galerias Pacifico, El Solar De La Abadia Shopping, Alto Palermo Shopping, Shopping Abasto, and Patio Bullrich. This will cover a large part of our target market. In having a place in all six malls, we will not only be
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Explore the incredible portenas offices of Google. Perfil. 5 Dec. 2008. 10 Feb. 2009. <http://www.perfil.com/contenidos/2008/05/12/noticia_0058.html>. 27 Sticco, Daniel. "Middle-Class Argentina." 2 Mar 2009 <http://sysurl.systranet.com/? 2Fsearch%3B%2Fsnetcom/web&systranuid=aHR0cC13d3cucmVkdGVsZXdvcmsuY29tL1BvcFVQX0ltcHJpbWVOb 3RhLmFzcC9lc19lbg==&systranbanner=1>. 28 Bloomberg.com: World Currencies. Bloomberg.com. 2009 Bloomberg. 16 Feb. 2009. <http://www.bloomberg.com/markets/currencies/americas_currencies.html>. 29 Apple Center en Argentina: Linea completa de productos Apple. MacStation. 2009. 16 Feb. 2009. <http://www.macstation.com.ar/store/index.php?seccion=producto&code=1251>. 30 JanSport Firefly Laptop Messenger. BagKing.com. 2009. BagKing. 16 Feb. 2009. <http://www.bagking.com/Merchant2/merchant.mvc?Screen=PROD&Product_Code=TND6&qts=JanSport&qtk=TND 6-2CM>. 31 Ezeiza Airport (EZE) Information: Airport in Buenos Aires Area, Argentina. 13 Feb. 2009. Airports Guides. 23 Feb. 2009 <http://www.buenos-aires-eze.airports-guides.com>.

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focusing on the general public, but the elite, very wealthy populations as well. We feel that having a kiosk in the Patio Bullrich shopping center, the smallest, most fashionable mall in Buenos Aires, we will market our product to a smaller segment, but one that is more than willing to buy Timbuk2 bags32. The last place that we plan to exhibit our promotional items is the University of Buenos Aires. Being the largest university in the country, it houses the most college students, whom we believe will be a huge market for our bags. Promotion To let consumers know about Timbuk2 being sold in Argentina, advertising in local outdoors, or bike magazines would expose the Timbuk2 product to a large portion of our target market especially the commuter segment, who might use their bag for other activities such as hiking, biking, and camping. The best method would be a full-page print add depicting bike messenger with a Timbuk2 bag on. The other market we want to capture is the urban sector, specifically university students and business commuters. This will be best accomplished by advertising on movie poster size billboards at bus stops, bus stations, universities, and airports. These posters can be put up around the city, and will be an inexpensive way of promoting Timbuk2. Putting posters on the windows of bus stops will expose the products to any commuter traveling those roads. Another promotion strategy that will help get the Timbuk2 name out there is to set up kiosks at malls, bus stations, and airports specifically in Buenos Aires. These kiosks will also offer customers a chance to custom order a bag, with samples of different colors and materials to choose from. Financial Analysis: Sales Forecast and Estimates of Marketing Cost Timbuk2s financial information was not available for this report. Therefore, industry averages are applied to Timbuk2s $15 million revenue for 20052. Timbuk2 has experience significant growth during the last five years by increasing product lines and reducing costs through outsourcing manufacturing. International expansion will cause an increase in general selling and administrative costs, advertising costs, and other expenses. When competitor Jansport expanded internationally, the companys revenues increased by 20% for that quarter33. Given Timbuk2s more limited resources, when compared to Jansport, it is reasonable to assume that revenues will increase by 15%. The initial cost of marketing will be considerably high to create high exposure for the introduction of the brand. Print advertising is the most widely used and effective tool in Argentina. The majority of local newspapers provide weekly full page black and white advertising space for $12,000 to $13,000 USD after VAT taxes34 (Appendix E). The cost of banner, television, and radio advertising is also relatively high in Argentina35. The company will dedicate a 60% of its international expansion budget to its marketing campaign.
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OH !BUENOS AIRES ARGENTINA Shopping guide/ MALLS, STORES /clothes, leather goods. 2008. Oh! Buenos Aires. 23 Feb. 2009. <http://ohbuenosaires.com/english/buenosairesshopping.htm>. 33 "The North Face, Jansport and Vans Help Drive VF Corp's Earnings." AllBusiness.com. 2006. All Business 4 Mar 2009 <http://www.allbusiness.com/retail-trade/miscellaneous-retail-miscellaneous/4465647-1.html>. 34 A Brief History of the Herald. Buenos Aires Herald. 2009. 5 Mar. 2009. <http://www.buenosairesherald.com/advertising/advertising_offline.jsp#rates>. 35 Argentina. FAS Online. 29 Aug. 2005. FAS. 5 Mar. 2009. <http://www.fas.usda.gov/cmp/comstudy/1998/comp98-ar.html>.

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Implementation & Control There is a lot that goes into taking Timbuk2 products to Argentina both before and after the products are on the shelf. Before the fist bag is ever shipped off there has to be strong promotional strategy in place, and the decision has to be made where and how the products will be sold. Once the products are on the shelf, ensuring the continued success of the both the product and the brand needs to become the focus of the company. Timbuk2s promotional strategy will rely heavily on print ads. Full-page ads will be taken out in outdoor and biking magazines, while poster size ads will be put up at bus stops, train stations, airports and universities. Another promotional strategy that will be utilized is the use of kiosks at malls around Buenos Aires including, Paseo Alcorta, Galerias Pacifico, El Solar De La Abadia Shopping, Alto Palermo Shopping, Shopping Abasto, and Patio Bullrich. These kiosks will also be how Timbuk2 plans on selling the messenger bags in Argentina. Kiosks will also be set up at Ministro Pistarini Airport in Ezeiza, the Retiro Bus Terminal, and the University of Buenos Aires. Customers will also be able to custom order their bags online at home, or at the kiosks around Buenos Aires. Within a year of entering the market Timbuk2 hopes to see a 15% jump in revenue. Customer surveys should be distributed to bag owners periodically every year to ensure satisfaction of the products and services. These surveys can also provide Timbuk2 with insight into possible ways to improve their Argentina division. Assuming success of the product, Timbuk2 will look to expand to the next largest market, Crdoba, using the same marketing techniques used in bringing the product to Buenos Aires. Conclusion Timbuk2s overall success in the United States is grounds to expand into Argentina. After thorough research about the countrys economic, social, political and legal environments, and conducting a market analysis, Argentina has the greatest potential for success in being the first country to implement this product into South America. After looking at competition in the area, we have found that the industries Timbuk2 belongs to have had success within the country, and therefore plan to see a large increase in profits from our expansion into Argentina. We will start our segmentation, targeting, and positioning in the city of Buenos Aires and plan to expand within the country over five years, and hope to be in other countries in South America at the end of five years. The people of Argentina are ready for a product that is high quality, customizable and environmentally friendly, and we feel that Timbuk2 will enjoy great success in Argentina and other potential South American markets. Timing Bibliography A Brief History of the Herald. Buenos Aires Herald. 2009. 5 Mar. 2009. <http://www.buenosairesherald.com/advertising/advertising_offline.jsp#rates>. Apple Center en Argentina: Linea completa de productos Apple. MacStation. 2009. 16 Feb. 2009. <http://www.macstation.com.ar/store/index.php?seccion=producto&code=1251>.

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Argentina. Dec. 2008. US Department of State. 4 Feb. 2009 <http://www.state.gov/r/pa/ei/bgn/26516.htm>. Argentina. FAS Online. 29 Aug. 2005. FAS. 5 Mar. 2009. <http://www.fas.usda.gov/cmp/com-study/1998/comp98-ar.html>. "Argentina." The World Factbook. 24 Feb. 2009. Central Intelligence Agency. 2 Feb. 2009 <https://www.cia.gov/library/publications/the-worldfactbook/geos/ar.html#Econ>. Argentina Finance : Europa World Online. Europa World Online. 2009. Routledge Taylor & Francis Group. 17 Feb. 2009 <http://www.europaworld.com/pub/entry/ar.ss.39>. Argentina - Language, Culture, Customs and Business Etiquette." Kwintessential Cross Culture Solutions. 2 Feb. 2009 <http://www.kwintessential.co.uk/resources/global-etiquette/argentina.html>. Argentina: Overview of e-commerce. Economist Intelligence Unit (EIU). 1 August 2007. 4 Feb. 2009. <http://www.ebusinessforum.com/index.asp?layout=rich_story&doc_id=11158& country_id=AR&title=Argentina%3A+Overview+of+ecommerce&channelid=4&categoryid=27&country=Argentina>. Argentina Transportation. 2007 Encyclopedia of Nations. 6 Feb. 2009. <http://www.nationsencyclopedia.com/Americas/ArgentinaTRANSPORTATION.html>. Argentina TRAVEL & TOURISM NAVIGATING THE PATH AHEAD. World Travel & Tourism Council. 2007. 17 Feb. 2009 <http://www.wttc.org/bin/pdf/temp/argentina.html>. Bloomberg.com: World Currencies. Bloomberg.com. 2009 Bloomberg. 16 Feb. 2009. <http://www.bloomberg.com/markets/currencies/americas_currencies.html>. Calvey, Mark. Timbuk2 opens its first retail outlet. San Francisco Business Times. (17 March 2006). 31 Jan 2009 <http://www.bizjournals.com/sanfrancisco/stories/2006/03/13/daily51.html>. chromebagsstore.com. Chrome Bags. 15 Feb. 2009. <www.chromebagssore.com>. Colbert, Catherine, comp. "V.F. Corporation." 2009. Hoovers. Penrose Library, Denver. 15 Feb. 2009 <http://0premium.hoovers.com.bianca.penlib.du.edu/subscribe/co/factsheet.xhtml?ID=rrhk tfftycctfx>.

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Doing Business in Argentina Doing Business. 2009. The World Bank Group. 6 Feb. 2009. <http://www.doingbusiness.org/ExploreEconomies/?economyid=9>. Education in Argentina. Embassy of Argentina in Australia. 4 Feb. 2009. <http://www.argentina.org.au/education.htm>. Explore the incredible portenas offices of Google. Perfil. 5 Dec. 2008. 10 Feb. 2009. <http://www.perfil.com/contenidos/2008/05/12/noticia_0058.html>. Ezeiza Airport (EZE) Information: Airport in Buenos Aires Area, Argentina. 13 Feb. 2009. Airports Guides. 23 Feb. 2009 <http://www.buenos-aires-eze.airportsguides.com>. Impact of fashion on Argentinas Economy. Wikia Education. 5 Feb. 2009. <http://internationalbusiness.wikia.com/wiki/Impact_of_Fashion_on_Argentina's _Economy>. JanSport Firefly Laptop Messenger. BagKing.com. 2009. BagKing. 16 Feb. 2009. <http://www.bagking.com/Merchant2/merchant.mvc?Screen=PROD&Product_C ode=TND6&qts=JanSport&qtk=TND6-2CM>. Julie. "Gadgeteer Spotlight on John Hindlay of Vaja." The Gadgeteer 6 Nov. 2007. 15 Feb. 2009 <http://thegadgeteer.com/2007/11/06/gadgeteer_spotlight_on_john_hindaly_of_vaja/>. Kennedy. Patrick. "Argentina's dual reality," CBC News. 19 Jul 2004. 4 Mar 2009 <http://www.cbc.ca/news/viewpoint/vp_kennedy/20040719.html>. "Luggage." Encyclopedia of American Industries. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2009. http://0-galenet.galegroup.com.bianca.penlib.du.edu/servlet/BCRC Mayer, Donna, pub. Market Profile: Luggage. New York: Kalorama Information, LLC, 2000. Messenger bags and more, made in the USA. BaileyWorks. 15 Feb. 2009. <www.baileyworks.com/>. "NationMaster - Argentine Population pyramids." NationMaster - World Statistics, Country Comparisons. NationMaster. 17 Feb. 2009 <http://www.nationmaster.com/country/ar-argentina/Age-_distribution>. New private equity firm bags Timbuk2. San Francisco Business Times. (4 Oct. 2005). 31 Jan. 2009 <http://www.bizjournals.com/sanfrancisco/stories/2005/10/03/daily12.html>.

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OH !BUENOS AIRES ARGENTINA Shopping guide/ MALLS, STORES /clothes, leather goods. 2008. Oh! Buenos Aires. 23 Feb. 2009. <http://ohbuenosaires.com/english/buenosairesshopping.htm>. OpenFlights: Airport and airline data. Feb. 2009. OpenFlights.org. 10 Feb. 2009. <http://openflights.org/data.html>. Original New York Messenger Bags. Manhattan Portage Company. 15 Feb. 2009 <http://www.manhattanportage.com>. "The North Face, Jansport and Vans Help Drive VF Corp's Earnings." AllBusiness.com. 2006. All Business 4 Mar 2009 <http://www.allbusiness.com/retailtrade/miscellaneous-retail-miscellaneous/4465647-1.html>. Sticco, Daniel. "Middle-Class Argentina." 2 Mar 2009 <http://sysurl.systranet.com/? 2Fsearch%3B%2Fsnetcom/web&systranuid=aHR0cC13d3cucmVkdGVsZXdvcm suY29tL1BvcFVQX0ltcHJpbWVOb3RhLmFzcC9lc19lbg==&systranbanner=1>. "Textile Bags." Encyclopedia of American Industries. Gale, 2008. Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group. 2009. http://0-galenet.galegroup.com.bianca.penlib.du.edu/servlet/BCRC Timbuk2 Acquired by Private Equity Investors. Business Wire. (26 Oct. 2005). 31 Jan. 2009 <http://www.businesswire.com/news/google/20051026006257/en>. Timbuk2 Bags- Timbuk2. Timbuk2 Designs Inc. 31 Jan. 2009 <www.timbuk2.com>. US Commercial Services in Argentina. Argentina Country Commercial Guide 2008 Doing Business in Argentina. 2008. U.S. Commercial Service. 5 Feb. 2009 <http://www.comerciousa.org/argentina/en/Content_Pages/CCGSummary.asp#M arketOverview>. University of Buenos Aires. 2009. UBA. 9 Feb. 2009. <http://www.uba.ar/ingles/index02.php>.

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Appendices Appendix A

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Appendix B

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Appendix C OpenFlights Airport Database

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Appendix D

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Appendix E

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