This report provides information for a company that intends to go global regarding the matter of products, country of expansion, target segment of the market, and marketing mix strategy.

As for the social and cultural values, the people of United Kingdom are very much open in acceptance. They are not that choosy and superstitious about the product that they purchase and only tend to question the quality of the product, which will not be a problem as the Jepara Furniture is a product, which has high standard of quality. There are also categories of people who appreciate antiques, as it is not just something you purchase on a daily basis.

Another reason why we chose the United Kingdom is the fact that it consists of so many ports and harbors. They also have enormously huge amount of airports which totals to more than 300. The United Kingdom imports approximately 42,000 kilotonnes of goods through a number of air and seaports each year. With reference to Department of Traffic Statistics, as of 2001 the United Kingdom recorded 40,300 kilotonnes of sea freight. Southampton, which is situated in South England, accounted for 16 percent of the United Kingdom traffic, equivalent to 740,000 units per annum whereas Thames port in South East England accounted for 7.5 percent of the United Kingdom traffic.

        

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MARKET SEGMENTATION AND TARGET MARKET

Market segmentation is a process of dividing the total market for a good or service into several smaller, internally homogeneous groups. Basically there are four bases for segmenting consumer markets, demographic segmentation, geographic segmentation, psychographic segmentation and behavioural segmentation.

 

Demographic (Income) segmentation and psychographic (lifestyle) segmentation have been used to segment the total market of London, in order for the company to sell furniture from Jepara successfully.

By using these two bases of segmentation, the company’s target market has been decided to be ‘baby boomers’/ Third Agers/ Grey power.

Third Agers are another group termed and identified by the marketing industry. They are people in their 50’s retired from a profession, and have a high disposable income with time on the hand. Many of these third-Agers are adventurous and experimenters, as they have spent their past lives working hard and they seek enjoyment from their remaining years, and have the income to spend on luxury items. In the United Kingdom there are 9 million third-agers and it is certainly a large proportion of population to grow. They have high levels of income, savings, home ownership and expenditure. With reference to Family Expenditure Survey, Third Agers have an average of £457 weekly gross income or disposable income of £372. In addition to that, baby boomers are more likely to have savings than the general population; about 21 percent of them have more than £20,000 savings.

It is believed that older people hold values that are deep-rooted in the past but Third Agers show a great difference, they hold values that are more in- line with the average. They value natural products; they are aesthetic and pleasure-seeking.  Therefore they would be the group of customers that value handmade wooden furniture from Jepara, Indonesia.

Nowadays, most of the baby boomers spend more time on the internet than the younger generation. It is found out that the most popular way for Third Agers to find their purchase items is web search (44%); others include traditional media (22%), word of mouth (16%) and web advertising (16%). It was found out that Third Agers spend average 29 hours per week watching television programmes.

A research on consumer buying habits revealed that there was a preference for traditional over contemporary upholstery. About 62 percent of the consumers prefer traditional upholstery. For Third Agers, 85 percent of them being surveyed said that they prefer traditional furniture. Besides that, they were willing to spend average £1,296 on furniture. This particular group of customers has been classified by furniture retailers, as people who can spend out of their current account without noticing.

Another research performed in 2002 by NOP World showed that 31 percent of the respondents said that buying British furniture was not important to them; imports were of better value than British goods. 

It is important for our group to be aware that CM (Cabinet Maker) readers are the key decision makers of the furniture industry; CM has an ABC audited total circulation of 4, 444 readers. CM helps to target the right audience, thus the right market. CM is the only weekly title for the United Kingdom furniture industry.

 

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MARKETING MIX STRATEGIES

PRODUCT

Under this section, product positioning, country-of-origin attitudes, and product modification will be discussed.

Positioning

The basic idea of positioning is that your product occupies a place in the mind of the people in your target market. Focusing on the fundamental product attributes of appearance, quality, price, features and company reputation is vitally important, for they ultimately instill a positive desire for the product within its principal target markets.

The wooden furniture in Jepara is famous throughout Indonesia. It specializes in the production of a wide range of traditional and, increasingly, modern products. The natural carving skills have been inherited for generations that make the craftsmanship of the city incomparable to other places in the world. The highly skilled woodcarvers use the same carving objects as the Balinese woodcarvers. However, Jepara’s woodcarvers tend to be influenced by strong Islam/Muslim folklore in their traditional version of the furniture, such as human or animal representation. Furthermore, the woodcarvers use other ornaments such as stylized leaves and flowers for the modern version of the furniture. In addition, the timber used is of high quality, which can be turned into finished furniture by either manually (using hand) or machines. The finished furniture has a clean smooth surface with good nailing and screwing properties. Moreover, it is painted and polished well with good coating.

The product positioning that the company focuses on is the symbolic position, which is self-image enhancement, ego identification, belongingness and social meaningfullness, and affective fulfillment. In addition, the company can position its products by price and quality. Jepara furniture’s high prices are associated with its high quality, as mentioned earlier, because it is a unique hand-made furniture.

Country of Origin Attitude 

British may like the idea of tradition, but they are too individualistic to follow the same traditional habits. British houses have a reputation for being the coldest in Europe. About three-quarters of the houses have central heating now.

As the British idea of home is a mental concept as much as a physical reality, so is their idea of domestic comfort. The important thing is to feel cosy — that is, to create an atmosphere, which seems warm even if it is not warm.  British would rather buy several items of cheap, mass-produced furniture, with chairs and sofas covered in synthetic material, than one piece of more beautiful and more physically comfortable item. The same is true with regard to ornaments. They believe that to create the atmosphere of being cosy they have to fill the room up. Hence, the furniture they like tends to have more interesting carving and pictures on it.

Tradition is part of cosiness, and this can be suggested by being surrounded by old items of furniture. In addition, if they cannot have furniture which is old, they can always have other things that suggest age. The open fire is an example. In Britain, many people find it as very desirable to create the feeling of having a ‘real fire’. It is the perfect traditional symbol of warmth because it was used by most people in the past to keep them warm.

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Modification

Most of the products do not need to be modified, especially concerning the design that was unique and have special value on it. However, the most possible problems when trying to export wooden furniture to U.K., which has four seasons, are shrinkage, bows and cracks on finished furniture.

Most of the water in the wood after being sawn was removed. Some is left, as there are two types of water in wood, bound and unbound.  The unbound water is removed in the drying process.  This represents approximately 85 – 95 percent of most woods’ moisture content.  The remaining 5 – 15 percent of the moisture, or bound water, is left in the wood permanently.  This bound water is trapped inside the cell walls and is necessary to maintain proper cell structure. All wood has a certain amount of water (moisture) in it. When the humidity is high, wood will swell, causing sticking doors and drawers, cracks and possible damage to the finished furniture.  In addition, the opposite of this process can take place when heater is turned on in the wintertime.  The heater dries the air and when the relative humidity in a house drops, the air will begin to absorb moisture from the objects throughout the house.  Subsequently, excessive dryness may occur which can cause loss of the necessary bound water inside cell walls.  This will force cells to collapse, which causes shrinkage and cracks to the finished furniture.

To avoid this problem, the company should use a good beeswax base polish with the proper oils without any silicones.  The beeswax will offer protection and beautify the finished furniture while the oil will provide the moisture barrier needed to block any water transfer. Furniture should also be protected against extreme heat, cold or moisture.

The other possible way to overcome this problem is to contact the customer regularly and ask them to maintain constant humidity and temperature. Temperature should be between 68 and 72 degrees Fahrenheit, and 45 to 55 percent humidity. An annual wax is the cornerstone of any furniture maintenance program. Applying a good paste wax each year will provide a protective layer to the furniture. The layer of wax will act as a buffer throughout the coming year so that the minor scratches and dents will not penetrate deep inside the furniture.

DISTRIBUTION

The manufacturer of this product adopts demand-pull distribution strategy, since it only produces when there is a demand from customers. It identifies its customer’s requirements first and then designs the product based on those requirements.

Marketing Channels

The marketing channels for this product are zero-level (direct-marketing) channel where the manufacturer sells directly to the final customer through online ordering system, and one-level channel which contains one selling intermediary (retailers). Selective distribution that involves the use of few retailers who are willing to carry the product is chosen.

Furthermore, a contractual vertical marketing system which consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies and/or sales impact than they could achieve alone can be created. For this product, the manufacturer signs a contract with a reliable shipping company such as Maersk shipping company and a few retailers such as specialty furniture stores in London.

Physical Distribution

Physical distribution (also known as Supply chain management or Market Logistics) involves planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer requirements at a profit. 

Some issues to be discussed regarding physical distribution are order processing, warehousing, inventory, packing, and transportation.

Order processing

Customers can either order directly through e-mail or fax, or order through the retailers in London. However, in order for the order to be processed, 50 percent down payment must be made through Telegraphic Transfer (T/T) or Irrevocable Letter of Credit (L/C) at sight. Customers are responsible for all delivery fees and charges.

Standard production will take about 4 weeks to complete, and standard delivery time will take about 4 – 8 weeks to reach London. However, due to the fact that the product is hand-made, delays might occur. The manufacturer will notify customers/retailers once the ordered product is ready and shipped.

Warehousing

The manufacturer has its own warehouses in Jepara to store its finished products before they are shipped to London. However, when the products reach London, they will be stored at the shipping company’s warehouses before they are sent to final customers/retailers.

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Inventory

The manufacturer adopts just-in-time production method since it will maintain limited pieces of furniture in its warehouses but still meet customer-order-fulfillment standards.

Packing

The container available for this product is either 1 x 20 ft or 1 x 40 ft container with LCL (Less Container Loading) or FCL (Full Container Loading).

The packing process is conducted by professional workers to assure buyers to repurchase the products. To anticipate evaporation during the shipment, the top and base part of the container are covered with special paper, which has a function of absorbing water, even dew, to maintain dryness of the product. The special paper is also placed under the door of the container to anticipate animals or water to enter.

Transportation

The transportation method used is water transportation since the product is considered as heavy and big bulk. Hence, using water transportation is more efficient and less expensive. In order to cut cost more, the manufacturer will enter a contract with a shipping company (such as Maersk, as mentioned above) for its service for a specific time at a specific rate.

PRICING

Objectives

Since the company has just started to export to U.K., the pricing objective that should be chosen is profit oriented, which aims to achieve a target return (in the short run) and to maximize profits (in the long run). Although initially in the short run the company will not make very high profits or even make losses by setting the prices that are competitive and not too expensive, eventually it may capture a large number of customers and the possibilities of repeat purchases from this large group, which will allow the company to maximize its profits in the long run.

Strategies

The strategy that should be pursued is market skimming whereby the company charges premium prices (but still competitive enough) for its products. Market skimming should be used because the product is of very high quality, special, valuable and unique as most of the production processes are done manually by hands. Furthermore, the product is targeted to those high income people of the age 50 and above who value this kind of product as antique. According to a survey done by the Cabinet Maker, a leading U.K. furniture magazine, these people are willing to spend £1, 296 only on furniture alone. In addition, the demand for this product is quite high since the British prefer traditional unique rather than modern contemporary furniture no matter whether it is local production or imported product.

Prices of the range of products that are exported to U.K are as follows.

• Beds , approximately £ 200- £ 500
• Bookcases, approximately £300 - £500
• Coffee table, approximately £100 - £ 300
• Cabinets, approximately £ 100 - £ 250
• Dining table, approximately £250- £ 750
• Dining chair, approximately £ 100 - £ 350 per chair
• Mirror, approximately £ 45 - £ 80
• Wardrobes, approximately £ 200 - £ 900

Environmental Influences

Some external environments that influence pricing decisions are shown below.

Competitors

Although the products that will be exported to U.K. are very unique, yet competitors still exist. Examples of some of the competitors are IKEA, Craftzona and Balmain & Balmain. The prices that IKEA set for the furniture are lower. Moreover, the design of the products follows the trend so that the youngsters prefer their products. Craftzona is also a manufacturer and exporter of wooden furniture and handcraft from Indonesia. Craftzona supplies its products from its own factory, and also from its business partners in Yogyakarta, Solo, Bandung and Bali. Finally, Balmain & Balmain is a U.K. company that was established in 1987. Since it has been established so long ago, it has now gained a good reputation and a big percentage of customer loyalty.

Tariffs and Taxes

Indonesia and the U.K. signed an agreement about double taxation on 5 April 1993 for the avoidance of double taxation and the prevention of fiscal evasion with respect to income and capital gains. The agreement applies to those who are residents of one or both of the contracting states. Customs duties are based on CIF (cost, insurance, and freight) value or weight or volume, and in general are imposed on rates between 40 and 100 percent for consumer goods. Value Added and Luxury Sales Tax (VAT) is imposed at 10 percent of CIF value of importers. Certain items bear an additional luxury sales tax ranging from 10-35 percent.

Currency Fluctuations

Since the price of products is fixed and quoted in U.K currency (₤), any appreciation or depreciation of the value of currency in the country of production will lead to gains or losses for the company. Thus, the company must accept that currency fluctuations may unfavourably impact operating margins, and that they must double their efforts to reduce costs without the expense of quality. In the short run, lower margins will enable the company to hold prices in target markets, and in the longer run, driving down costs enables them to improve operating margins.

PROMOTION

Communication Objectives

There are already quite a number of competitors for this product in U.K market. However, the company’s product has just been introduced to U.K. market, hence the best communication objectives are to create brand awareness or recognition, and knowledge about the product.

Communication Message

Ideally, the message should gain attention, hold interest, arouse desire, and elicit action (AIDA model). In conveying the message, the company can use rational appeals, emotional appeals, or combination of both. If they are using rational appeals, they should demonstrate the product’s quality, economy, value, or performance. If they are using emotional appeals, they should stir up positive emotions that will motivate purchase. For example, to create the emotion that the product is traditionally unique from Indonesia, the retail outlets can use certain displays that reflect the traditional aspect of the product. The retail outlets can play some Indonesian traditional songs or music as well to create the feeling that it is really traditional and affect customers’ mood.

Communication Channels

There are two types of communication channels, which are personal and non- personal communication channels. Personal communication channels that can be used are advocate channels (or company salespeople contacting buyers/retailers) and social channels (which consist of neighbours, friends, family members, etc). Non- personal channels include media (such as magazines), atmospheres (which are environments that create or reinforce buyer’s learnings toward product purchase) and events (such as trade shows, fairs, and exhibition).

For this product, personal communication channels, especially social channels (or also known as mouth-to-mouth communication), play the greatest role in establishing the reputation of the product/brand and persuading others to purchase.

Promotional Mix and Media Preferences

The promotional tools that should be used are advertising, sales promotion, personal selling, and direct marketing.

Advertising

The preferred media for advertising is magazine. The chosen magazine is the Cabinet Maker, the only weekly magazine for the U.K. furniture industry. The Cabinet Maker has an average pass on readership of 5*, which means that potentially 22,220 furniture professionals (which include retailers and end buyers) will see the promotions. The Cabinet Maker is the perfect way to source retailers, raise company profiles, promote the company at trade shows, launch new products, keep in touch with customers, and update customers and the company’s competitive edge, since it offers a package of advertisements in the magazine together with the inclusion of the company on every trade show, fair, or exhibition that it holds.

Sales Promotion

Sales promotion can be used to increase sales by giving some price reductions during certain occasion, for example, during trade shows, fairs, or exhibitions. However, the effects of sales promotions are usually short-run, and not effective in building long-run brand preference.

Personal Selling

Personal selling takes place when the company sends a representative to retailers to convince them to carry their products. Personal selling permits all kinds of relationships to spring up, ranging from selling relationship to deep personal friendship. Effective sales representatives will normally keep their retailers’ interests at heart to create long-run relationships.

Direct Marketing

Examples of direct marketing are direct mail, telemarketing and electronic marketing. The company might contact potential retailers/buyers by sending catalogues, telephone, or e-mail. Some customers might also want to order online via the company’s website without having to go to retail outlets. However, a survey by the Cabinet Maker shows that only 5 percent of participants in the survey favoured buying furniture from a mail order or other catalogue, and just 1 percent from websites which implies that the Internet may be a powerful tool, but it clearly does not prove to be superior than furniture stores. People want the full shopping experience, but they use catalogues and the Internet to see what is available. Customers will say they have seen certain product or model in a catalogue, but they like to come in and touch it and sit on it. Or they will probably bring a picture in from a catalogue and ask for something similar to the picture.

Other Issues

Another important issue regarding promotion is that retailers should provide quality services. The customers want to know whether the person from whom they are going to buy is reliable, whether he will be responsible if something goes wrong, and whether they can trust him to handle their beautiful piece of furniture well. Therefore, the retailers and the company itself should keep an eye on orders, follow up on sales and make sure that customers are happy with the furniture, for example, by tracking the product a week after it is delivered.

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CONCLUSION

The marketing environment always presents a never-ending series of opportunities and threats. Many opportunities are found by identifying the trends and analysis of the market. For a company which enters the global field, the external factors that comprise of social, political, legal, economic, technology, and cultural factors, need to be monitored closely and rapidly.

The analysis of S.L.E.P.T + C factors of U.K. found that the political factor is not a threat in handcraft furniture industry. However, the company needs to take special consideration when dealing with the legal factor, particularly the quarantine and custom duty aspects. Social and cultural factors create an opportunity for the company, since people of U.K. are more open and willing to accept new and unique things. Furthermore, U.K.’s economy is strong. It is one of the top trading country and financial center. Hence, people in U.K. can be classified as having high purchasing power. Again, this represents an opportunity for the company. On the other hand, technology factor can be a threat for the company since the handcraft furniture that it produces will have to compete with other furniture products that are manufactured by using sophisticated technology.

The recommended market segment for the company is the Baby Boomers/Third Agers/Grey power. This market segment comprises of the people in their 50’s, retired from their professions, and have a high disposable income with time on the hand. They have high levels of income, savings, home ownership and expenditure. And most important thing, they like the natural products.

The company could hence position its product by using the symbolic positioning. It can position its products by price and quality as well. In addition, most of the products do not need to be modified, taking into consideration that the design is unique with special value in it. To distribute the products, the company can use direct marketing channel in which customers can either order directly through e-mail or fax, or order through the retailers in London. For pricing the product, the company can use market skimming strategy with profit-oriented objective. And finally, to promote the product, the best communication objectives are to create brand awareness or recognition, and knowledge about the product. In conveying the message, the company can use rational appeals, emotional appeals, or combination of both through the use of both personal and non-personal communication channels. The most appropriate communication tools for this are advertising, sales promotion, personal selling, and direct marketing.

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BIBLIOGRAPHY

Baker, D.  2002, Checking Products at Point of Import in United Kingdom, TACIS project Assistance  to the Ministry of Economic Development and Trade Russian Federation.

Cravens, D.W. 2000, Strategic Marketing, 6th edn., Irwin Mc-Graw Hill, USA

Czinkota, M.R. et. al. 2002, International Business, 6th edn., Harcourt College Publishers, USA.

Hawkins D.I., 2002, Consumer Behaviour, 3rd edn, Mc Graw Hill, Australia.

Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. 2001, Strategic Management – Competitiveness and Globalization, 4th edn., South-Western College Publishing, USA.

Hooley, G.J. & Saunders, J. 1993, Competitive Positioning – The key to market success, Prentice Hall, U.K.

Johnson, J.C. et. al. 1998, Contemporary Logistics, 7th edn., Prentice Hall, USA.

Jugenheimer, D.W. 1991, Basic Advertising, South-Western Publishing Co, Cincinnati, Ohio.

Keegan, W.J., Global Marketing Management, 7th edn., Prentice Hall, USA.

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Kotler, P. et. al. 1999, Marketing Management – An Asian Perspective, 2nd edn, Prentice Hall, Singapore.

McAuley, A. 2001, International Marketing – Consuming globally, Thinking locally, John Wiley & Sons Ltd, Chichester, England.

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2000, Consumer Lifestyles in United Kingdom, Euromonitor

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‘Cabinet Maker Media Pack’,

‘Choice of Products – or choice displays’,  Cabinet Maker, 27 December 2002, http://www.cm1st.com/themagazine.htm

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APPENDIX 1 APPENDIX 2

PICTURE OF SOME OF THE PRODUCTS

1. Bench

1. Folding Bench Theater

2. Bench ANSA

1.3. Bench Art Deco

2. Bedside

1. Night Stand Java

2. Bedside Cecco Modified

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2. Bed

1. Andalusia Rattan

2. Empress with drawer

3. Cabinet

4.1.Library Mochus

        

4.2. Bookshelf Opium

4. Coffee Table

5.1.Coffee Table 60 Rope Leg

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5.2.Coffee Table Jodang 4D

 

5. Chair

1. Bandung Chair with Rattan

2. Armchair Soho with Ottoman

3. Armchair Bonti

4. Folding Lazy Chair

6. Table

1. Dining Table Tulip

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2. Dining Table Rectangular Goa

7. Sofa

1. Sofa Telephon Padi

2. Sofa Bonti 2.5 Seater

3. Sofa Caridad Medium

8. Buffet

1. Cabinet Consol Stereo Wooden Door

2. Buffet Wajid 3 Door

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9. Accessories

1. Set of Flower Box

2. Picnic Tray

3. Standard Troly

4. Chusion Box

10. Home Decoration

1. Tray

        

2. Letter Box

        

Source:

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