Furniture A/S: Internationalisering via relationer

Joel Cim Holden

Student thesis: Diploma thesis

Abstract

Furniture A/S is an anonymised Danish company in the home furnishing business. They sell furniture, kitchen utilities and other home items in more than 80 countries all over the world, and have setup a production line with a local partner in China. Like many other successful companies, they seek to expand their market, and have long wanted to penetrate the American market, as they consider it very attractive due to its size. The size among other factors, has been the cause for prior attempts to create a market for themselves in America failing. One big obstacle is the company’s logistics, where 95 % of all products are shipped to a warehouse in Denmark, regardless of the end destination. A new attempt to win the American market will therefore have to be accompanied by production close to market. The management and owners have pointed out Mexico as a host for production, and narrowed down the American market to California. Labour in Mexico is cheap and the distance to California is short. California has been picked due to low customs fee on furniture. The management team now wishes to know if California is a suitable market for the company’s products now and in the future, and if there are great risks in pursuing the plan to produce in Mexico.
First, this thesis describes the company and analyses its position to take on California and a new production line in Mexico. The company is very successful on currents markets, and has already set up production in a foreign country through local partnership, which runs smoothly. Its core strength is the collaboration between different departments of the company, design, production and sales. Furthermore, the company has a great record of accomplishment on its products, which makes it possible to attract design talents. On the other hand, the company has a very limited management team, with the owners being dual CEO’s and a lack of a board. The company has grown in size, and being involved in every activity in the company is not sustainable for the two CEO’s. Logistics is another weakness, as 95 % of all products are shipped to Denmark regardless of their end destination.
The analysis of California shows a massive economy in controlled growth. The population is young, educated and growing in numbers. There are housing issues, and new homes are constantly being build, which of course creates a demand for furniture. The economy is thriving, and people are getting still better educated, which increases buying power. There are factors that show a demand for Nordic design, and the market is considered very attractive for Furniture A/S now and in the future.
Mexico has seen high growth over the last decades, but is faced with a need to shift to Intensive Growth. Little has been done to increase the standard of education and equality between sexes, and the population is divided financially, especially between the more wealthy north and the south. Organised crime and corruption are also issues that plague the country, and elections are accompanied by murders of politicians and journalists. The democracy is relatively young, and even though great reforms have been passed, it is uncertain if the government will succeed with plans to better the educational system and create space for innovation, as its power has recently been shook due to a late and weak response to the Covid-19 pandemic. Although the relationship with the US has been suffering over the last years, a new trade agreement is in place, and there is no reason to believe that the stability it has created will diminish in the near future.
Strategic considerations has resulted in a recommendation to follow through with the plan to pursue California as a market and Mexico as host for production. In order to secure effective knowledge sharing across borders, it is recommended to establish own sales and service functions locally. In order to reduce risks and to focus on value adding activities, it is recommended that the company copy the action from China, and find several partners in Mexico to secure production.

EducationsGraduate Diploma in International Business, (Diploma Programme) Final Thesis
LanguageDanish
Publication date2020
Number of pages88