Harvard Case - Thu Trang
"Thu Trang" Harvard business case study is written by R. Edward Freeman, Bertrand Blazy. It deals with the challenges in the field of International Business. The case study is 2 page(s) long and it was first published on : Sep 6, 2002
At Fern Fort University, we recommend that Thu Trang prioritize a phased approach to international expansion, focusing on building a strong foundation in Vietnam before venturing into new markets. This strategy involves leveraging her existing manufacturing capabilities, exploring strategic partnerships, and implementing a robust marketing strategy tailored to the unique needs of each target market.
2. Background
Thu Trang, a Vietnamese entrepreneur, has built a successful business manufacturing and exporting high-quality, handcrafted wooden furniture. Her company, Trang Woodworks, has a strong reputation for quality and craftsmanship, but faces increasing competition in the domestic market. Thu Trang recognizes the need to expand internationally to secure long-term growth and profitability. She is considering expanding into new markets, particularly in the United States and Europe, where demand for high-quality, sustainable furniture is strong.
3. Analysis of the Case Study
This case study presents a classic scenario of a successful small-to-medium enterprise (SME) seeking to leverage its competitive advantage in the global marketplace. To analyze Thu Trang's situation, we can utilize the Porter's Five Forces framework to understand the competitive landscape:
- Threat of New Entrants: The furniture industry is relatively easy to enter, especially with the rise of online marketplaces and global sourcing. This poses a significant threat to Thu Trang's business.
- Bargaining Power of Buyers: Buyers in the furniture market have considerable power, especially in developed markets like the US and Europe. They have access to a wide range of choices and are price-sensitive.
- Bargaining Power of Suppliers: The bargaining power of suppliers is moderate. While Thu Trang relies on local suppliers for raw materials, she has established relationships with reputable suppliers, giving her some leverage.
- Threat of Substitute Products: The threat of substitutes is high. Consumers have many alternatives to wooden furniture, including plastic, metal, and recycled materials.
- Competitive Rivalry: Competition in the furniture industry is intense, particularly from large-scale manufacturers in China and Southeast Asia.
Key Challenges:
- Globalization: Navigating the complexities of international business, including trade regulations, cultural differences, and currency fluctuations.
- Internationalization: Developing a successful strategy for entering new markets, considering market research, product adaptation, and distribution channels.
- Emerging Markets: Understanding the unique characteristics of emerging markets, including infrastructure limitations, consumer preferences, and political instability.
- Competitive Strategy: Developing a competitive strategy that differentiates Trang Woodworks from its competitors, focusing on quality, craftsmanship, sustainability, and brand building.
- Risk Management: Identifying and mitigating risks associated with international expansion, including exchange rate fluctuations, political instability, and supply chain disruptions.
4. Recommendations
To achieve sustainable growth and profitability, Thu Trang should implement the following recommendations:
Phase 1: Strengthening the Vietnamese Market
- Enhance Manufacturing Processes: Invest in modernizing manufacturing processes to improve efficiency, reduce costs, and enhance product quality. This could involve implementing lean manufacturing principles, automating certain processes, and investing in new technology.
- Develop a Strong Brand: Invest in branding and marketing efforts to establish a strong brand identity in Vietnam. This could involve developing a website, social media presence, and participating in local trade shows.
- Explore Strategic Alliances: Partner with local retailers, designers, and architects to expand distribution channels and reach a wider customer base in Vietnam.
- Focus on Sustainability: Promote Trang Woodworks' commitment to sustainable practices, using certified wood and environmentally friendly manufacturing processes. This can attract environmentally conscious customers and differentiate the brand.
Phase 2: Gradual International Expansion
- Target Specific Markets: Begin with a targeted approach, focusing on countries with strong demand for high-quality, handcrafted furniture, such as Japan, Australia, or Canada. These markets may offer less competition and a higher price point compared to the US and Europe.
- Conduct Thorough Market Research: Conduct in-depth market research to understand the needs and preferences of consumers in target markets. This research should include cultural sensitivities, design trends, and pricing expectations.
- Develop a Global Marketing Strategy: Tailor marketing efforts to the specific needs of each target market. This could involve adapting product designs, language, and marketing materials.
- Explore Distribution Channels: Evaluate different distribution channels, including online marketplaces, wholesale partnerships, and retail partnerships, to ensure efficient and cost-effective product distribution.
- Manage Exchange Rate Risk: Implement strategies to mitigate exchange rate risk, such as hedging currency fluctuations or pricing products in local currencies.
- Build Strong Partnerships: Develop strategic alliances with local distributors, retailers, and designers to gain market access and build brand awareness.
- Prioritize Customer Service: Provide excellent customer service to build loyalty and reputation in new markets.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations focus on leveraging Trang Woodworks' core competencies in craftsmanship and quality while aligning with its mission to provide sustainable and beautiful furniture.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, by providing high-quality products and excellent service, and internal clients, by creating a sustainable and profitable business.
- Competitors: The recommendations aim to differentiate Trang Woodworks from its competitors by focusing on quality, sustainability, and brand building.
- Attractiveness ' Quantitative Measures if Applicable: While specific financial metrics are not provided in the case study, the recommendations aim to enhance profitability by improving efficiency, expanding distribution channels, and entering new markets with high growth potential.
- Assumptions: The recommendations assume that Thu Trang has access to the necessary resources, including capital, skilled labor, and marketing expertise, to implement the proposed strategies.
6. Conclusion
By implementing a phased approach to international expansion, focusing on building a strong foundation in Vietnam and then targeting specific markets with a tailored strategy, Thu Trang can achieve sustainable growth and profitability while maintaining the quality and craftsmanship that define Trang Woodworks.
7. Discussion
Alternatives:
- Rapid Expansion: A more aggressive approach to international expansion, entering multiple markets simultaneously. This strategy carries higher risk but could lead to faster growth.
- Joint Venture: Partnering with a foreign company to share resources, expertise, and risks in entering new markets. This could provide access to existing distribution networks and market knowledge.
Risks:
- Cultural Differences: Misunderstanding cultural nuances in target markets could lead to marketing blunders and customer dissatisfaction.
- Political Instability: Political instability in emerging markets could disrupt operations and create financial losses.
- Competition: Intense competition from established players in target markets could make it difficult to gain market share.
Key Assumptions:
- Market Demand: The recommendations assume that there is sufficient demand for high-quality, handcrafted furniture in target markets.
- Financial Resources: The recommendations assume that Thu Trang has access to the necessary financial resources to fund international expansion.
- Skilled Labor: The recommendations assume that Thu Trang can access skilled labor in target markets to support production and distribution.
8. Next Steps
- Conduct Market Research: Within the next three months, conduct in-depth market research in target markets to identify specific opportunities and challenges.
- Develop a Global Marketing Strategy: Within six months, develop a comprehensive global marketing strategy that includes branding, product positioning, and distribution channels.
- Identify Strategic Partners: Within nine months, identify and establish strategic partnerships with local distributors, retailers, and designers in target markets.
- Pilot Launch in Target Market: Within twelve months, pilot launch products in a single target market to test the market response and refine the strategy.
By following these steps, Thu Trang can navigate the complexities of international expansion and achieve sustainable growth for Trang Woodworks.
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Case Description
This case illustrates managerial dilemmas that might arise when a company's offices are located in different countries, with different cultural and social styles and practices. The case also highlights how one might deal with personnel issues when many factors--including leadership, employee well-being, and different cultural norms--all present problems.
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