Answered: Integrating PETSEL insights , write a…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Integrating PETSEL insights , write a pargraph on the summary of facts of the Poland situation, summarizing Poland's furniture market, e-commerce trends, environmental factors and Poland's GDP and consumer spending habits.

Transcribed Image Text:Poland Report Country Background Poland's population is 38.2 million. Its GDP is $545 billion, and its per capita income of $14,340.7 Consumers in Poland are culturally a blend of eastern and western Europe. Market Background The Polish furniture market is $3.2 billion and has consistently grown at least 5% annually over the past several years. Nine companies in Poland hold at least 3% market share. The largest brand is IKEA, which has been grown rapidly there for the past three years,8 sold just under $700 million in Poland in 2014, and has a market share of 22%. Channels of Distribution More than 70% of Polish consumers shop for furniture across multiple stores, looking for the best combination of price and style. Polish consumers purchase over 80% of their furniture in retail stores. E-commerce in Poland accounts for about 9% of category sales. Single-brand retail stores account for 30% of retail sales. The other 70% of furniture is sold at multibrand retailers. Consumer Insights Both durability and aesthetics are important to Polish consumers. Interior design is a growing phenomenon in Poland, so trendy products are valued. The most successful companies release new styles of furnishings quickly. However, many companies produce trendy products that have lower price points, but these products are not very durable. Forecasts 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. Forta Private-Label Entry. In comparison, forecasts suggest that Forta could build a .5% market share in year one, an additional 1% in year two, and an additional 2.5% in year three, totaling a 4% market share as a private-label entry. The large private-label forecasts are due to Forta's ability to underprice competition to gain a foothold, which in turn is due in large part to lower labor costs and excess capacity. As a private label, Forta would need to pass through 30% of revenues to the retailer and 25% to the consumer-facing brand. The retailer would charge an average price of $110. Forta would need to spend $5 million for marketing and $6 million in design and production improvements.

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