Forta was the leading firm in the Romanian furniture market, but its growth had slowed since 2010 as IKEA and other foreign furniture companies increased their penetration into the Romanian market. To capture biggest pie back, the company made a big move in 2013 and acquired Abilit. As IKEA entered and captured a significant percentage of market, like most of firms, the Forta executives start getting interested in entering the foreign markets to grow bigger and make more profit. Romania was the second largest manufacturer of furniture in eastern Europe, behind Russia, with over $1.2 billion in retail revenue in 2014. Romanian consumers were price sensitive. If a brand could meet the desired price point, customers focused on durability, as longer-lasting furniture would allow them to spend less in the long run. ConAsumers with disposable income valued craftsmanship and would spend more for high-quality furniture. Brands regarded as high quality enjoyed significant brand loyalty. A company that won a Romanian consumer's initial business had a 75% chance of retaining that customer over the next 20 years. Younger Romanian consumers differed from their older counterparts because they focused less on durability and more on comfort and aesthetics. They wanted products that looked and felt new and up to date. This generation viewed national borders as more permeable. They were more likely to have visited or studied in other countries, and they did not have as much loyalty to Romanian brands. Forta would commit significant resources to an expansion plan for creating long- term growth. With this goal in mind, they had to decide what opportunities were the most promising and likely to be successful. Forta had two primary options. One involved expanding into Romania's eastern European neighbor, Bulgaria, where it was already selling some furniture without making a concerted effort to build market share. The other option was to expand into Poland, where customers had shown an interest in Forta's furniture. Doing so would facilitate Forta's eventual expansion into western Europe, particularly into France, Germany, and the United Kingdom. Because consumers in these countries were wealthier, and the markets were large enough to support a small presence by Forta, this expansion was essential for Forta to grow significantly. However, entering western Europe would be a challenge for which Forta was not yet ready. Building a brand in western Europe would be expensive, and mistakes would be costly. Given the less favorable impressions of Romanian furniture in western European countries, it was also likely that in the short run, consumers in these countries might not be willing to pay enough to make entering there profitable for Forta. If a venture into western Europe failed, it might not get a second chance. Poland offered a good intermediate step for this long-term plan while Forta learned both the varied needs of different countries and the logistics required to meet those needs. Forta Branded Entry. In the Polish market, forecasts suggest that Forta could build a .5% market share in year one, an additional .5% in year two, and an additional 1.5% in year three, totaling a 2.5% market share as a branded entry. Retailer margins are 30%. To reach this level of market penetration, Forta would need to spend $20 million for marketing and another $6 million in design and production improvements. It is estimated that a Forta product would have a retail price of $110. While in the Bulgarian
Forta was the leading firm in the Romanian furniture market, but its growth had slowed since 2010 as IKEA and other foreign furniture companies increased their penetration into the Romanian market. To capture biggest pie back, the company made a big move in 2013 and acquired Abilit. As IKEA entered and captured a significant percentage of market, like most of firms, the Forta executives start getting interested in entering the foreign markets to grow bigger and make more profit. Romania was the second largest manufacturer of furniture in eastern Europe, behind Russia, with over $1.2 billion in retail revenue in 2014. Romanian consumers were price sensitive. If a brand could meet the desired price point, customers focused on durability, as longer-lasting furniture would allow them to spend less in the long run. ConAsumers with disposable income valued craftsmanship and would spend more for high-quality furniture. Brands regarded as high quality enjoyed significant brand loyalty. A company that won a Romanian consumer's initial business had a 75% chance of retaining that customer over the next 20 years. Younger Romanian consumers differed from their older counterparts because they focused less on durability and more on comfort and aesthetics. They wanted products that looked and felt new and up to date. This generation viewed national borders as more permeable. They were more likely to have visited or studied in other countries, and they did not have as much loyalty to Romanian brands. Forta would commit significant resources to an expansion plan for creating long- term growth. With this goal in mind, they had to decide what opportunities were the most promising and likely to be successful. Forta had two primary options. One involved expanding into Romania's eastern European neighbor, Bulgaria, where it was already selling some furniture without making a concerted effort to build market share. The other option was to expand into Poland, where customers had shown an interest in Forta's furniture. Doing so would facilitate Forta's eventual expansion into western Europe, particularly into France, Germany, and the United Kingdom. Because consumers in these countries were wealthier, and the markets were large enough to support a small presence by Forta, this expansion was essential for Forta to grow significantly. However, entering western Europe would be a challenge for which Forta was not yet ready. Building a brand in western Europe would be expensive, and mistakes would be costly. Given the less favorable impressions of Romanian furniture in western European countries, it was also likely that in the short run, consumers in these countries might not be willing to pay enough to make entering there profitable for Forta. If a venture into western Europe failed, it might not get a second chance. Poland offered a good intermediate step for this long-term plan while Forta learned both the varied needs of different countries and the logistics required to meet those needs. Forta Branded Entry. In the Polish market, forecasts suggest that Forta could build a .5% market share in year one, an additional .5% in year two, and an additional 1.5% in year three, totaling a 2.5% market share as a branded entry. Retailer margins are 30%. To reach this level of market penetration, Forta would need to spend $20 million for marketing and another $6 million in design and production improvements. It is estimated that a Forta product would have a retail price of $110. While in the Bulgarian
Chapter18: Management Of Technology And Innovation
Section18.5: Management Entrepreneurship Skills For Technology And Innovation
Problem 1CC: In the beginning, Acer was very entrepreneurial. However, the firm realized that if it was to...
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