ASIA PACIFIC INSTITUTE OF INFORMATION TECHNOLOGY

IN COLLABORATION WITH STAFFORDSHIRE UNIVERSITY UK

BA (Hons) in International Business Management

Individual Assignment
MARKETING PLAN
Module Code & Title: BSB10186-3
Prepared By: Reshan Jayawardane [CB005529]
Date of Submission: 30/05/2016
Instructor: Dr. Bandara Wanninayake
Submitted in partial fulfillment for the
Degree of Bachelor of Arts (Hons) in International Business Management
Word Count:

Assessment Criteria

Allotted
Marks %

C1

Q1

30

C2

Q2

30

C3

Q3

40

C4

Presentation Format and Report Structure

10

Total Marks
Penalty for exceeding the word limit
Final Marks

1|Page

100

Earned
Marks %

Acknowledgment

First I would like to thank my lecturer Dr. Bandara for giving me the support and the courage to
do this assignment and to complete this assignment successfully without any doubts.
On behalf of that I would like to take this opportunity to thank my friends for giving me
maximum support and for encouraging me to work on this assignment when I faced many
difficulties.
Finally, I would like to thank my parents for guiding me and for giving their encouragement to
fulfil my dreams and their support for this report to do my best in this.

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Table of Contents
1

Introduction..............................................................................................................................4
1.1

What is International Marketing?.....................................................................................4

1.2

Company Background.......................................................................................................4

1.3

Harrel and Kiefer Model...................................................................................................9

Key Internationalization Drivers............................................................................................11

2.1

Market Drivers................................................................................................................12

2.1.1

Cost drivers..............................................................................................................13

2.1.2

Competitive Drivers.................................................................................................13

2.1.3

Government drivers.................................................................................................13

2.1.4

Configuration and Coordination..............................................................................13

2.2

PESTEL Analysis............................................................................................................14

2.3

Cage framework..............................................................................................................16

2.4

Market Entry strategies to China....................................................................................18

Market Development Planning..............................................................................................20

3.1

Segmentation, Targeting and Positioning........................................................................20

3.1.1

Market segmentation...............................................................................................20

Segmentation Base.........................................................................................................................21
3.1.2

Market Targeting......................................................................................................22

3.1.3

Market Positioning...................................................................................................24

3.2

Marketing Mix................................................................................................................24

3.2.1

Product.....................................................................................................................25

3.2.2

Price.........................................................................................................................28

3.2.3

Place.........................................................................................................................32

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3.2.4
3.3

Promotion................................................................................................................33

Conclusion......................................................................................................................34

Advertisement........................................................................................................................35

Reference...............................................................................................................................35

Tables
Table 1: 12Cs frame work for China and Australia..................................................................9
Table 2: Country attractiveness of china and Australia...........................................................14
Table 3: Country compatibility for China and Australia.........................................................14
Table 4: PESTLE analysis for China.........................................................................................19
Table 5: Cage Framework for China.........................................................................................21
Table 6: Market Entry Strategies...............................................................................................24
Table 7: Maket Segmentation for China....................................................................................26
Table 8: Marketing Target..........................................................................................................27
Table 9: Product for China.........................................................................................................30
Table 10: product levels...............................................................................................................32
Table 11: Output of extra production........................................................................................34
Table 12: Extra Fixed Costs........................................................................................................34
Table 13: Extra variable cost per unit........................................................................................34
Table 14:Place Strategies.............................................................................................................37

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Figures
Figure 1:Harrel & Kiefer (1993) model.....................................................................................14
Figure 2: Internationalization drivers.......................................................................................15
Figure 3: Configuration & Coordination..................................................................................17
Figure 4: Cage Framework.........................................................................................................19
Figure 5: Market Entry...............................................................................................................21
Figure 6: Market Segmentation..................................................................................................24
Figure 7: Market Targeting........................................................................................................25
Figure 8: positioning map...........................................................................................................27
Figure 9:Marketing mix..............................................................................................................28
Figure 10:Product levels..............................................................................................................30
Figure 11:Channel of distribution..............................................................................................35

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1 Introduction
1.1 What is International Marketing?
International

marketing

consists

of

operating business operations across a

number of foreign markets. It involves
the firm in coordinating marketing
strategies
establishing

across

the

globe

manufacturing

and

facilities

around the world by simply signing a

distribution agreement with a foreign agent (Doole & Lowe, 2008).

1.2 Company Background

Lanka Cane Furniture (LCF) was established in
1972 and one of the leading rattan/wicker
furniture designer and manufacturer in Sri
Lanka. The company offer a wide range of
handcrafted rattan furniture which is durable
for indoor and outdoor settings, living rooms,
lobby areas, common areas and much more.
LCF also repair any broken cane furniture
using the best technology that they have.

The company focus on two countries which will be introduced in an overseas market by
following Market development Strategy (a firm is expanding into new markets using its
existing products) using the Ansoffs Matrix model. Ansoffs Matrix is a marketing planning tool
which use to determine its products and market growth (quickmba, 2016).

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Source: edrawsoft
Using Market development strategy, new markets for the product will be a good strategy for
firms if their core competencies are related more to the specific product than to its experience
with a specific market segment (quickmba, 2016).
The two countries were evaluated using 12Cs in terms of market size, growth, level of
consumption, GDP, etc.

China

Australia

Factors

Country

GDP (purchasing power parity)

$19.51 trillion in 2015

Inflation rate was 1.5% in 2015
Imports was $1.596 trillion in

2015
Long term orientation with a
score of 87

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GDP (purchasing power parity)

$1.489 trillion in 2015

Inflation rate was 1.9% in 2015
Imports was $208.4 billion in

2015
Long term orientation with a
score of 21

Culture

Concentration

Individualism with a score of 20

Power distance with a score of

80
The total population of 1374.6

million in 2015
56.6% of the population is urban

in 2016
The median age is 37.3 years
Altogether there are 3,000
television stations across the

Communication

Individualism with a score of 90

Power distance with a score of

36
The total population of 23.8

million in 2015
89.3% of the population is urban

in 2016
The median age is 37.6 years
There are 104 television stations
In 2000, 48 daily newspapers
were published.

world
In 2005, more than 1000 kind of
daily newspapers were
published.

Currency

Exchange control mechanism

Stability

Disposable personal income has

Capacity

Channels of

Contractual

increased to 31195 in 2015 from

increased to 281245 in 2015

28844 in 2014.
There are 507 airports in total

from 280915 in 2014.

There are 480 airports in total

and ranked as 14 in the world in

and ranked as 16 in the world in

2013
There are 2,030 merchant

2013.
There are 41 merchant marines

marines in total and ranked as 3rd

distribution

Disposable personal income has

in total and ranked as 75 in the

in the world (2010)

7 major seaports are available
Business practices

world (2010)
12 major seaports are available
Legal obligations

Import tariff rates from 2011-

Import tariff rates from 2011-

2015 is 7.2%
According to Ministry of

2015 is 2.8%
There are 4 types of

obligation

Caveats
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Commerce classification system

import/exports licences under the

which determines the type of

Act such as controlled

license is required. (there are 3

substances licences, Essential

Consumption

categories: permitted, restricted

uses licences, Used substance

and prohibited goods).

licences and Ozone depleting

Consumption for furniture has

substances
Due to consumer concern about

grown doubling from $5.8

high household debt, demand for

billion in 1995 to $9.2 billion in

furniture has remained weak.

2000.

Production quality is the biggest

Production quality is the biggest

strength
Competition for cane furniture

strength where many retailers in

the U.S. sell furniture produced

Choice

will be high which is already

in China.
Competition for cane furniture

there in the market.

will be high which is already

Commitment

there in the market.

China has worlds most

Access to market

extensive system of subsidies

which blocks the access for
foreign products to Chinese
market.
Table 1: 12Cs frame work for China and Australia
Source: heritage (2012), chinacheckup (2014), sqlss (2014), Fortunehub (2015), Cia.gov (2016),
geert hofstede (2016), trading economics (2016), worldometers.info (2016), pressreference
(2016), china.org.cn (2016), oecd-ilibrary (2016), data worldbank (2016), nvironment.gov
(2016), The booming furniture industry in China (2016), statista (2016), ibisworld (2016),
geohive (2016).

After considering all the factors discussed under the 12Cs framework, country wise China is in
the top level compared with Australia due to high purchasing power parity and imports and low
inflation. According to culture, Chinas long term orientation is higher than Australia as they
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encourage thrift and efforts in modern education as a way to prepare for the future. In Australia
individualism is higher than China where all the Australian people does their work individually
whereas Chinese people does their work together as a group. When considering the factor of
concentration, China ranked as number one for total population in the world (geohive, 2015)
however urban population in Australia is higher than china, where Australia ranked as 2 nd
developed country in the world (Kanapi, 2015). With regarding to communication factor, number
of television stations and publishing daily newspapers in China is higher than Australia which
shows Chinese people use media than Australian people. Capacity wise Chinas disposable
personal income is higher than Australia which shows that Chinese people have more money to
purchase goods than Australian people. According to channels of distribution, total number of
airports and from ranking china is leading compared to Australia. Also china ranked 3 rd in the
world having a massive total number of merchant marines compared to Australia. However,
number of seaports in Australia is higher than China. This shows china can import and export
their products in massive quantities. When it comes to caveats, import tariff rate in china is
higher than Australia.
After considering these factors, the author has used Harrell and Kiefer model to differentiate the
two countries and select the suitable country to enter to the market.

1.3 Harrell and Kiefer Model

Furthermore, Business portfolio Matrix which was developed by Harrell and Kiefer will be used
to categorize the attractiveness of the two countries based on the companys compatibility with
each other. This device is useful for companies operating in a portfolio of markets to prioritize
market opportunity. The matrix divided in to three categories,
Primary markets These markets indicate the best opportunities for long-term
strategic development (Doole & Lowe, 1999).
Secondary markets These are the markets where opportunities are identified but
economic or political risk is perceived as being too high to make long-term
irrevocable commitments (Doole & Lowe, 1999).

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 Tertiary markets Business can be done in these markets, but it is generally

opportunistic and incremental based on low risk and low investment strategies
(Lewis & Housden, 1998).

The above rating scare is given from 1 5, This tool is useful to determine the suitable country
for the market expansion based on country attractiveness and country compatibility.

Country Attractiveness
China

Australia

Factor

Rank

Weightage Weighted

Market Growth

0.5

Value
1.3

0.4

Value
1.5

Commercial

0.3

1.2

0.3

0.3

Infrastructure
Economic

0.4

1.2

0.2

0.5

Freedom
Country Risk

0.1

0.6

0.1

0.2

Total

Rank

Weightage Weighted

4.3

2.5

Table 2: Country attractiveness of china and Australia

Source: Authors work

Country Compatibility
Factor
Rank

China
Weightage

Weighted
Value

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Rank

Australia
Weightage

Weighted
Value

Market Share
Marketing

5
5

0.5
0.6

1.9
1.7

4
3

0.6
0.5

1.1
0.8

Ability
Product &

0.4

0.6

0.1

0.5

Positioning Fit
Quality of

0.2

1.2

0.3

0.5

Distribution and
Service
Total

5.4
Table 3: Country compatibility for China and Australia

2.9

Source: Authors work

Using the scores which are given above, the author has positioned the two countries in the
Harrell and Kiefer model.

Figure 1:Harrel & Kiefer (1993) model

After considering the two countries based on the factors, it shows that the Chinese market has a
potential with regard to Australia. However, cane furniture is already there in the Chinese market
which leads to high competition and it will be an opportunity and challenging for Lanka Cane
Furniture to expand their business in the Chinese market.

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2 Key Internationalization Drivers

Market Drivers

International Strategies
Cost Drivers

Government Drivers

Competitive Drivers

Figure 2: Internationalization drivers

Source: Authors work based on lecture slides

2.1 Market Drivers

Today China and Sri Lanka has a positive relationship with each countries. Many trade
agreements have been set between these two countries. Because of target customer needs and
above stated reasons the company decided to expand in to China. Target customer needs are the
key market drivers. Since china is a country which sticks to its traditional norms and china has
become one of the best tourist destinations. As a result of that, the hotel industry is also
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developing. Considering all those facts there is a huge demand for Cane based furniture products
from households and hotel industry.

2.1.1

Cost drivers
When it comes to deciding to expand business into another country the most common
Cost driver is based on economies of scale. When furniture is produced to export to
China the total production will increase, then the production cost will decrease because
when purchasing raw materials in bulk suppliers will give discounts. This will lead to
decrease the production cost. Furthermore, the cost of surviving in the industry will
increase in the short run when entering the Chinese market due to advertising and to
promote into the market.

2.1.2

Competitive Drivers
This is important to identify infant companies involved in production of cane furniture
when expanding it to the Chinese market. It will be helpful if the company invest and
focus in infant companies to cut extra cost of transport and can be act as an independent
company in China without depend on Sri Lanka production.

2.1.3

Government drivers
These are mostly set of regulations and rules which is set by the government of a country.
As a result, this will affect the country to do business successfully specially when
expanding and conducting business activities into the country. There are few tariffs,
barriers and bans are taken by the Chinese government for their own safety and to
improve their country. permitted, restricted and prohibited goods are examples taken by
the Chinese government.

2.1.4

Configuration and Coordination

The drivers which were mentioned above gives a clear idea whether the company should
internationalize or not in order to choose an entry mode.
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Configuration - is where a company configures its internal value-adding, upstream and

downstream activities. A company is choose to concentrate its activities to export and market its
products and services in a range of foreign countries. Also a company may decide to disperse its
value-adding activities to several countries.
Coordination This may allow a firm respond to shifting comparative advantage, where
movements in exchange rates and factor costs are significant and hard to forecast.

Figure 3: Configuration & Coordination

Source: Authors work based on lecture slides

2.2 PESTEL Analysis

A PESTEL analysis is used for China to identify the external factors that influence the business
activities when expanding the business production and market channel. The impact is rated as
positive and negative based on how these factors going to affect the launching of new product in
the Chinese market.
Factors
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Description

Impact

 Tariff rate in 2011 was 7.80% which was

Political

Economical

high
Political stability index (-2.5 weak; 2.5
strong) for 2014 was -0.46 which was

Positive

stable.
GDP growth in 2014 was 7.3%
GDP in china was worth 10.35 billion US

Positive

dollars in 2014.
Current interest rate PBC (peoples bank of
China) is 4.34%
Unemployment was 4.7% in 2014
8% of the population currently shops

Social

Negative

Positive
Positive
Positive
Positive

online due to change in consumer shopping

habits

Positive

Chinas furniture industry is winning the

worlds attention with its fast development
Technological

over the recent two decades.

Total spending on research and
development was one trillion yuan in 2012.
Revenue for the IT services industry has
been increasing at a rate of 7.6% over the

Environmental

Positive
Positive
Positive

last five years.

A total of 6.8085 million hectares of crops

Negative

were affected by drought and flooding.

Huai river is lower than in the south due to

Negative

air pollution as a result life expectancy is

75.3 according to 2013 UN figures.
Getting government approval takes time, as
Legal

the legal work takes time when launching a

Negative

new product to the market.

Table 4: PESTLE analysis for China
Source: chinabusinessreview (2011), indexmundi (2016), data.worldbank (2016),
tradingeconomics (2016), global-rates (2016), statista (2016), fbsg.forestry.oregonstate (n.d.),
journalistsresource (2015), ibisworld (2015), dnaindia (2015), cfr (2016).
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2.3 Cage framework

Figure 4: Cage Framework

Source: onlinemarketingmoment.wordpress

The CAGE framework identifies the cultural, economic, geographic and administrative
differences of China when compared to Sri Lanka. This framework provides a broader sight on
distance and offers a different perspective on the geographic location with the risks and
opportunities which are associated with the global arbitrage.
Factors
Cultural Distance

China
Languages: Mandarin
Religions: Buddhism, Taoism, Confucianism, Islam and Christianity.

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Economic Distance

Geographic Distance

Exchange rate: 1.00 CNY = 22.4040 LKR

Size of the country: 9,596,960 sq km

Climate: Has a variety of rainfall zones and temperature including mainland
monsoon areas. Most areas become hot and rainy in summer and in winter it
becomes cold and dry.

Administrative Distance

National Currency: Renminbi

Trade Blocs: A FTA between ASEAN and china came into effect on new
years day, creating the worlds third largest free trade bloc behind the EU
and the NAFTA.

Table 5: Cage Framework for China

Source: blog.ciltsl(2013), xe (2016), wsws (2010), travelchinaguide (2016), worldtravelguid
(2016)

2.4 Market Entry strategies to China

There are different ways in which a company can enter a foreign market. Therefore, different
market entry methods could be used when entering to a new market. There are benefits and
drawbacks with each of these markets entry method and it is critical in the process of decision
making to include the firms assessment of the cost and risk associated with each method and the
level of involvement which is allowed by the government. However, there is no perfect market

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entry strategy and different firms adopt different market entry methods to enter the same market
or by the same firm in different markets (Doole & Lowe, 1999).
The following diagram shows the market entry strategies available to enter the market in China.

Figure 5: Market Entry

Source: Doole and Lowe (1999)

Market Entry
Strategies

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Explanation

Benefits (+) and drawbacks (-)

Franchising

Franchising is a system where semi-

Minimizes risk and

independent franchisees pay royalties

investment (+)
Opportunity to build greater

and fees to a parent company in return

for the right to become recognized
with its trademark and to sell its
products or services.

benefits. (+)
Difficult to manage the local

Joint venture is common where a

resources (-)
Less investment required (+)
Combines resources of two

partnership between home and host

Joint ventures

country firms is formed to share the

ownership of a company.

The process of exporting is to sell

goods and services produced in one
Exports

market coverage (+)

Marketing and management

country to other countries, which

divides into two types as direct (firms
directly involved in marketing its

companies (+)
Overcomes ownership
cultural distance and
restrictions (+)
Difficult to manage (-)
Maximizes scale; uses
existing facilities (+)
Speed of entry (+)
Trade barriers and tariffs add
to costs (-)

products in foreign markets) and

indirect (exports that are not handle by
the producer or manufacture directly)
An established international
Piggyback operation

Carries a wider product range

distribution network of one

and so to present a more

manufacturer use to carry the products

attractive sales package to

of a second manufacturer.

potential buyers (+)

Terms and conditions of the
marketing arrangements are
often poorly need to be
though out as the company
might become locked into an
arrangement that is
unsatisfactory to them. (-)

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Table 6: Market Entry Strategies

Source: Doole & Lowe (1999), quickmba (2016), yourarticlelibrary (2013), toknowpress (2013)

3 Market Development Planning

a marketing strategy consists of specific strategies for target markets, positioning, the marketing
mix and marketing expenditure levels (Kotler, 2011). This helps the company to increase
demand and to create value for their products.

3.1 Segmentation, Targeting and Positioning

STP is a three stage marketing strategy which is used to help companies to serve all their
customers effectively.

3.1.1

Market segmentation

Market segmentation is the key of robust marketing strategy development ... it involves more
than simply grouping customers into segments ... identifying segments, targeting, positioning and
developing a differential advantage over rivals is the foundation of marketing strategy (Dibb,
2000). The segmentation process is as follows,

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Figure
6:

Market Segmentation
Source: segmentationstudyguide

The main segmentation variables consist of geographic, demographic, psychographic and

behavioral factors. The table below shows the market segmentation for Lanka Cane Furniture.
Segmentation

Households

Base

Geographic

Demographics

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Hotels

Office Premises

Country: China

Country: China

Country: China

Regions: Urban/ Suburban/

Regions: Urban/

Regions: Urban/

Rural

Suburban

Suburban

Age: 23 - 65

Age: 30 65

Age: 25 - 65

Gender: Male and Female

Gender: Male and Female

Gender: Male and Female

Income: Average

Income: Very high

Income: Medium

Behavioral

When: For housing

When: For outdoor

When: For office use

purpose

Where: Shopping malls,

Where: Shopping malls,

Where: Shopping malls,

Departmental stores

Departmental stores

Departmental stores

Frequency of use: rarely

Frequency of use:

Frequency of use: rarely

Psychographic /

infrequent

Lifestyle: families and

Lifestyle: Businessmans

Lifestyle: Businessmans

individuals

and Entrepreneurs

and Entrepreneurs

personal
Characteristics
Table 7: Maket Segmentation for China
Source: Authors work based on Clarke & Wilson, 2009

After evaluating the segments based on the characteristics, the target market will be chosen.

3.1.2

Market Targeting

Target market is the process of evaluating, deciding and selecting which segments to follow
(Cant, Strydom and Jooste, 2009). Lanka Cane Furniture has to decide which segment they are
going to provide to. The following strategies could be used to select the target market.

Figure 7: Market Targeting

Source: Authors work based on Clarke & Wilson, 2009
The table below illustrates the segments compared against each other to find out the highest
weightage.
Factor
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Market
Weightage

Customer Profile
Households
Hotels

Office Premises

Market

Size

Growth Rate
Expected

7.6
7.6

8
8

7
8

8
7

Profitability
Competitors
New entrants

7.3
8

8
8

7
8

7
8

to market
Substitutes

7.3

products
Power of

buyers
Power of

6.6

suppliers
Company goals
Competitive

7.6
8

8
8

8
8

7
8

74

71

Attractivenes
s

Competition

Company
Objectives

advantage
Total

81
Table 8: Marketing Target

Source: Autors work based on Clarke & Wilson, 2009

Based on the results of the above table, Households has the highest score and therefore, Lanka
Cane Furniture will be focused on this segment.
3.1.3

Market Positioning

After the segmentation and targeting is complete, the product needs to be positioned. According
to Pride & Ferrell (2008), Product positioning is maintaining and creating a certain concept of a
product in customers minds. According to Lanka Can Furniture, their positioning statement is
We want to be the best furniture dealers. Therefore, LCF would be positioning its cane
furniture based on the price and quality, where high prices would be set for the high quality
furniture. The following figure shows the market positioning of LCFs furniture.

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Figure 8: positioning map

Source: Authors work

3.2 Marketing Mix

The marketing mix is a set of variables that companies can implement to influence the response
of the buyers. To create the highest level of customer satisfaction and to meet the organizational
objectives businesses attempt to build up on these variables (Kotler, 2008).

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Figure 9:Marketing mix

Source: marketing91

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3.2.1

Product
Kotler (2011) defines product as,
anything that can be offered to a
market for acquisition, attention,
use or consumption that might
fulfill

expectations

requirements.
Furniture

is

Lanka
recognized

and
cane
as

shopping products as it is usually

purchased by consumers for personal consumption. Further these products can be divided into
different types based on how customers go and purchase them. The following table below shows
how Lanka cane Furniture can be categorized further,

Marketing Consideration
Customer buying behaviour

High customer involvement

Less frequent purchase
Takes time to locate the product
Relatively High

Price distribution

Promotion

Mass promotion by the producer

Table 9: Product for China

Source: Authors work
There are 5 product levels developed to meet the requirements of the consumers based on the
extent how customers are attached to the product.

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Figure 10:Product levels

Source: marketingdiarysanchita.wordpress

Product levels
Core product

Description
This is used to fulfill customer requirements
E.g: for sitting purpose, to fill the empty

Basic product

space
The basic product given by LCF to their

Expected product

customers is cane/ wicker furniture

The characteristics that customers usually
expect and agree when they buy a product
E.g: quality, design, comfortability,

Augmented product

affordability
Additional features, attributes and benefits
that serve to differentiate the product from it
competitors
E.g: Customer service, money back gurantee,
discounts, free home delivery within the
department location

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Potential product

This includes the transformations and

augmentations a product might have to
undergo in the future

Table 10: product levels

Source: Authors work based on cgma

3.2.2

Price

Price is one of the vital elements of the marketing mix as decisions are made regarding the
revenue which will received from the customers for their products. According to Kotler (2011),
price is the amount for a product and service and also the sum of values that customers using or
exchange for the benefits of having the product or service. There are several factors affecting the
pricing when setting up a price in an international market such as company level, country
environment and market related factors. Lanka Cane Furniture should focus on these factors
when setting up their prices for the cane furniture that theyre going to launch.

Factors
Company level factors Marketing objectives

Description
To improve the awareness of
the product through different
channels of media by 2016.
Introduce special offers and
discounts for the consumers
who are buying furniture in

Business objectives

bulk by 2016.
To increase sales and profits 20%
by 2019.
To capture a market share of 15%

by 2020.
Product positioning - Making Chinese people aware of
Brand
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the product and the brand

Eg: billboards, TV advertisements,

Delivery cost

social media (Facebook)

This may vary depending on the
location

Country environment

Exchange rate
Inflation
Government
regulations

1CNY = RS. 22.40

Inflation rate for 2016 is 2.65%
China trades with many countries
in the world. However, they have
different policies for different
countries.

Market

Related Brand loyalty

factors

Lanka Cane craft is a recognized

brand in Sri Lanka. However, they
should create the same loyalty in

Customer
expectations

China as well.
Customers seek for popularity of
the product. Therefore, when
demand of their product increase
the motivation level of the
customer will also increase.

3.2.2.1 Actual Price calculations for Lanka Cane Furniture overseas expansion project

Items
Wicker double beds (Black)
Wicker double beds (Red)
Wicker single beds (Brown)
Wicker king size beds (Green)

Extra units produced

350
150
800
200

Table 11: Output of extra production

Source: Authors work

Extra Fixed costs

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Fixed cost
Depreciation
Salaries for labors
Rent on additional plant
Purchase machinery
Delivery and warehouse cost
Technical service staff
Bank charges
Total Fixed cost

Amount (USD)
15,000
25,000
40,000
50,000
3,000
20,000
7,000
160,000

Table 12: Extra Fixed Costs

Variable Costs
Variable costs
Materials
Maintenance cost
Power and utilities
Direct labor
Direct production
Total Variable cost per unit

Amount per unit (USD)

10
15
5
10
15
65
Source: Authors work

Table 13: Extra variable cost per unit

Source: Authors work

Fixed cost per unit = Total Fixed cost

No: of units produced

160,000

= 106.666

1500

Total costs per unit = Fixed cost per unit + Variable cost per unit = 106.6666 + 65 =
171.666666.

Lanka Cane Furniture expects to adapt a full cost pricing method, with 20% of profit mark-up

Therefore,
Selling price per unit = Total cost per unit + (Total cost per unit x 20%)
= 171.66666 + (171.66666 x 20%) = 205.9
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= $206 (1 decimal point)

Total Price paid by the client (without tariffs)

Double bed cost of each wicker

= $ 206

Freight charges (for each unit of per bed) = $ 70

Insurance per package of double bed (15%) = $ 30
Cost, Insurance & Freight Value (CIF)

3.2.3

= $306

Place

The main objective of choosing the right place is to reach the target market. Since the product is
new to the Chinese market, Lanka Cane furniture wouldnt know how the consumers will react
when they launch their product to the market. When it comes to making decisions about
marketing mix it arrives how the product will be distributed to customers. Place/Location is
essential for Lanka Cane furniture for them to deliver their products to their customers on time.
By having an agent in China will be an advantage for Lanka Cane furniture to decide where to
locate the business in china. For Lanka Cane Furniture the selective distribution would be
initially used for the distribution of cane furniture.

3.2.3.1 Channel of distribution

This refers to the path where products of the company deliver from the place of production or
manufacture to the final users. The following shows how Lanka Cane Furniture do their channel
of distribution.
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Figure 11:Channel of

distribution
Source: Authors work

3.2.3.2 Place strategies

Location

Distribution Channel
Value Creation Chain

Home country
Factories to manufacture the

Host country
Centralize locations

product (Stores)

(Shopping malls,

Departments )
Agents
Directly
Having a quality management Employee training
Table 14:Place Strategies
Source: Authors work

3.2.4

Promotion

This is an important element for the companies to reach their target audience to make them
aware the value of the product introduced in the market. The following shows how Lanka Cane
Furniture can use promotional tool to promote their cane furnitures and to make the customers
aware of their new product in china.
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3.2.4.1 Advertisement

Television advertisement, Social media (Facebook, twitter etc), Radio advertisement

Large billboards to be display in selected areas.

Newspaper advertisements

3.2.4.2 Sales promotions

Lanka Cane can sell their furniture at a reasonable price and during seasonal days Lanka
Cane can give offers, discounts for their furniture. (such as buy one and get one free)

With every dinning set get a free small Cane table for free.

3.2.4.3 Celebrity Endorsement

Currently it has been a hit in Sri Lanka for getting Angelo Mathews for many products
available in Sri Lanka, likewise china can come up with their own celebrities to promote
Lanka Cane furniture.

3.2.4.4 Direct Marketing

Lanka Cane Furniture uses mobile marketing to encourage their customers to visit their
products in Sri Lanka (to know information about the product, to know where they can
purchase the product, to know any offers are there for the given products, to get the
location for the nearest shop to buy the product.... etc) by an application.

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4 Conclusion
A business can open up new paths to grow in term of increased profitability and sales through
internationalization. Therefore, this report has focused on the key areas where a business has to
take, how to overcome risks and challenges when it possibly arises during the expansion.
Therefore, as per the conclusion if a business analyses its external environment and identifies the
risk factors then it will be prepared with most appropriate strategies in order to make that
business successful.

5 Advertisement

35 | P a g e

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