Establishing a Joint Venture

Boffi, a renowned brand known for its luxurious kitchen and furniture, has been affected by changes in macro environmental conditions in many markets. Despite this, expanding into new countries is deemed beneficial, with Brazil and Sri Lanka being identified as potential locations. While Brazil's growing economy and IT infrastructure present opportunities, the high poverty rate could be a challenge. On the other hand, Sri Lanka's high literacy rate and economic growth are positives, although strict legal frameworks must be respected to avoid penalties. It is recommended that Boffi conducts market research before international expansion and selects suitable entry methods. The company must also comply with local laws and regulations.

Evaluating
Internationalization
strategy
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EXECUTIVE SUMMARY
International expansion has become very important for the growth and development of an
organization. In home countries there is limited opportunities for growth and development for
companies and this is one of the major reason why companies expands in other intentional
markets. Boffi is international brand in kitchen, bathroom and furniture which operates in many
countries of the world. At present the company is facing some issues and challenges in some
international markets and looking forwards to enter two new markets. This will result in
increasing the sales and profitability of the company. Further the company is required to become
aware about the micro and macro environmental factors exists in the new counties where it is
planning to operate. Along with this, Boffi is also required to use a suitable strategy for entering
the new county. Appropriate strategy will assist in findings customers at initial stage very easily.
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TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Summary of Environmental Audit ..................................................................................................3
internationalization .........................................................................................................................5
External analysis of Sri Lanka and Brazil ...................................................................................5
Motive for internationalization ...................................................................................................8
Evaluation of national competitive advantage.............................................................................8
Evaluation of entry modes...........................................................................................................8
Conclusion and recommendations...................................................................................................9
References......................................................................................................................................10
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INTRODUCTION
In modern era, every business try to expand internationally in order to increase its market
share and sales. Further at the time of developing international expansion strategy, organizations
are required to be very careful. Businesses are also required to evaluate their internationalization
strategy before implementing the same. This report is based on Boffi which is one of the most
renowned brand in kitchen, furniture and bathroom. The brand is well know because of its
innovative design and quality. This report demonstrate environmental audit the current markets
along with further international development and new host countries. In addition to this, it also
explains the macro and micro environment of two new countries.
SUMMARY OF ENVIRONMENTAL AUDIT
At present Boffi is operating in several market such as UK, USA, Italy, Switzerland,
Singapore, UAE etc. The environmental conditions varies from market to market and have a
direct impact on the operations and activities of Boffi. In countries such as Italy is going through
an economic down-town and this has affected the sales and profitability of the company (Boffi,
2015). For instance the recessions in Italy and the rate of unemployment has grown more than
11%. The growing terrorist activities has also emerged as one of the major social issues which
has affected the company. Therefore, it can be stated that the external environment of Italy for
business such as Boffi are not suitable (Morse and et. al., 2008). On the other side of this, the
stable government and reducing rate of unemployment are some positive sign in markets such as
USA. The rate of technological advancement is also very high as the online stores in America is
growing with a very good pace. Technological advancements are also helping the brand in
lowering down the cost of energy and production. After evaluation of Russian market, it has
been found that the present market conditions conditions cannot provide adequate opportunities
for growth and development to Boffi. The rate of crime and corruption is increasing day by day
and the rate of interest rates has also increased. The technological infrastructure of Russia is very
poor and in order to tackle the environmental problems, adequate resources are not available in
the country. One of the biggest opportunities in the above stated market for Boffi is the growing
furniture and Kitchen market in all three countries (Wild, Wild and Han, 2014). In addition to
this, irrespective of unstable environmental conditions, high demand of kitchen and furniture
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exist in these counties. On the other side of this, in last few years, the growth rate of kitchen and
furniture has been declined and it has become one of the major threat to the company. After
carrying out porter five force analysis of the brand, it has been found that in almost every country
where it operates the five forces are same (Tzeng, Chen and Pai, 2008). The threat to new entry
lies between low to medium. The bargaining power of suppliers is high and due to niche market
I.e is few customers, the bargaining power of customer is between low to medium. The threat to
substitute is low and competitive rivalry is very high. There are few competitors of Boffi but it
has very strong and direct competition from them.
Detailed SWOT analysis discussion Strengths- One of the major strength of Boffi is that its strong presence in different
international markets. The presence has resulted in increasing the brand image of the
company and has also helped in increasing the market share. Another strength of Boffi is
its innovations and creative designs for bathroom, Kitchen and furniture. The
collaboration with various international designers has also strengthen the power and
performance of the brand. Weakness- The company do not carry out appropriate research before entering any new
markets. This sometimes results in failure of new venture and great loss of human and
financial resources (Cateora, 2008). It has become one of the major weakness of the
brand. In addition to this, Boffi also operates in high niche market which means that there
are only few customers. It has resulted in creating obstacles in growth and success of the
brand. Opportunities- Boffi has an opportunity to expand its operations in some new and
potential market of the world. One thing which will be required to be considered is that
before entering new market, Boffi is required to carry out adequate market research. The
growing market of kitchen and furniture is also very good opportunity for the brand. Threats- The biggest threat which has been faced by the company is regarding
competition. The industry in which Boffi operates have few competitors. The threat is
that the competitions is direct and strong (Thompson and et. al., 2008). Two main
competitor of Boffi are Scavolini and Bulthaup. On the other hand, the growing terrorist
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activities in existing market such as USA and France has also emerged as a threat to the
brand.
Further international development
The company has great opportunities to develop new international market. From the
given case scenario it has been analysed that the company has always performed really well in all
those new markets where it has expanded its operations. After carrying out environmental audit,
it has been found that the in some couturiers, Boffi's sales and profitability is getting affected by
unstable environmental conditions (Doole and Lowe, 2008). Thus, it can be concludes that the
brand is required to enter new market which have growing economy and stable environmental
conditions. The rationale behind this is that, further international development will help in
increasing the market share. Along with this, it will also support in maintaining the sales and
profitability of the company.
New host counties
The new host countries for Boffi can be Sri Lanka and Brazil. From the provided case
scenario, it has been observed that the company is already performing well in markets
international markets. The market of Brazil is very big and potential, which highlights enormous
opportunities for growth and development for the company. On the other side of this, the
growing economy of Sri Lanka means that the income and standard of living of people is
increasing. This will help the company to establish itself easily in the market and get adequate
customers in initial stage.
Market entry modes
In order to enter Sri lankan market, the company can use the strategy of franchise. For
Brazilian market, the strategy of joint venture will be more suitable.
INTERNATIONALIZATION
External analysis of Sri Lanka and Brazil
Macro environment in Sri Lanka Political factors -There is semi presidential system which exist in Sri Lanka and in the
last few years the country has gone through various kind of political changes. The power
has been concentrated in few hands and sometimes the interference of government also
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has an impact on businesses. Boffi will be required to take of the political rules and trade
related regulations while operating in Sri Lanka. Economic factors- It can be also stated that with the economy of almost $80 billion
(2015), the economy of Sri Lanka has been grown quite significantly in the last few years
(Sri Lanka, 2015). The main economic sector of the country includes tourism, apparels,
rice production and Textile. This indicates that there are many opportunities for growth
and development for Boffi in Sri Lanka. Social factors- The growing population and income level of people living in country can
be very beneficial for Boffi. The literacy rate is very high which means that the demand
of kitchen and furniture is also good. Technological factors- In terms of technology, it can be stated that in last few years the
country has grown really well. Further high rate of technological advancements will help
Boffi to operate in cost effective manner. Legal factors- The legal mix of Sri Lanka is very complex and consist of several laws.
The company will be required to follow these laws regarding employment and trade
(Ruzzier, Hisrich and Antoncic, 2006). Environmental factors- Sri Lanka's government has always been in the favor of
protecting its environment. At the time of operating in the country, Boffi is required to
strictly follow the rules and regulations regarding environment.
Micro environment (Swot analysis of Sri Lanka)
Strengths
 Low cost of labor helps in lowering
down the cost of operations
 Monetary assistance is also provided to
businesses by the government
Weakness
 Power is concentrated in few hands
which is not beneficial of businesses
 Laws and regulations are very complex
Opportunities
 Growing demand of furniture
 Market is very potential
Threats
 Increasing level of competition
 Limited foreign investments are
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allowed
Macro environment in Brazil Political factors- The government of Brazil is very stable and there is no political
instability in the country. One of the major issues which can be faced by Boffi while
entering Brazil is regarding corruption as even a small business is required to make
payment to government representatives and authorities. Economic factors- The growth rate of Brazil is high and the gap between rich and poor is
also lowering down. In terms of labour cost both foreign and domestic enterprise are
treated equally and fair (Crick and Spence, 2005). The economic of country will help the
company to establish itself in effective manner. Social factors- 20% of the total population of Brazil lives under poverty line and there are
many people which belongs to lower income group. This can creates some sort of
obstacles in the growth and development of Boffi. Technological factors- The IT sector of Brazil is improving at a very good pace and
therefore, it will be very beneficial for f Boffi. Environment factors- The country is trying to stop the cutting of trees and protecting
environment. This can become one of the barrier of Boffi as to make furniture, wood will
be required. This problem can be overcome by importing wood from other countries. Legal factors- The legal factors are also supportive as opening a new business do not take
much longer time. Foreign investments are appreciated by the country which means
adequate opportunities for Boffi.
Micro environment of Brazil
Strengths
 The economy is growing at a rally
good pace.
 Brazil is politically stable which is a
strength of country.
Weakness
 20% of population is below poverty
line
 corruption has emerged as one of the
biggest weakness of the country.
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Opportunities
 Growing demand of furniture
 Few competitors in the market
Threats
 Strict environmental laws
 Fluctuating demand of products
Motive for internationalization
One of the major motive of Boffi behind internationalization is to expand its market
share. It has been found that in some of the markets, the company is facing adverse
environmental conditions. This has resulted in lowering down the sales and profitability of the
brand (Lambert, García‐Dastugue and Croxton, 2005). Now Boffi is looking forward to expand
its operations in countries such as Brazil and Sri Lanka. Another motive behind this decision is
to increase market share and profits of the brand. It will also result in increasing customers base
and brand image of the company.
Evaluation of national competitive advantage
The national competitive advantage of both Brazil and Sri Lanka consists of four major
factors which are factors conditions, demand conditions, relating and supporting industry and
firm strategy and rivalry (Yiu, Lau and Bruton, 2007). In Sri Lanka the factor conditions such as
high literacy rate will help the company. On the other side, the stability of Brazil will be factor
conditions. Boffi deals in high end luxurious products and therefore the demand conditions are
not appropriate. Related and support industry such as wood and pulp in both the countries will
get beneficial from the same. Further in both the countries the firm structure and strategy
represent its culture.
Evaluation of entry modes
In order to enter in Sri Lanka's market the mode of franchise can be used. One of the
main reason this mode has been selected is that it will help the brand to grow and expand more
quickly. The size of country is not so big and thus, during the initial stage the mode of
franchising is more suitable. Capital required will be also very less and it will help in growing
Boffi in effective manner. Thus, it can be stated that the method of franchise is very suitable and
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it is also feasible because the company has also made franchise in some of the markets. On the
other side of this, the mode of joint venture is more suitable for Brazilian market. The company
can jointly form venture with the existing players in the market. The reason why joint venture is
considered for Brazil is that it will help in lowering down the risk associated with new markets.
Thus, it can be said that the mode of joint venture is suitable for market such as Brazil. The
company wont find any kind of difficultly in establishing joint ventures because of its brand
name in global market. Therefore this mode is also considered as feasible.
CONCLUSION AND RECOMMENDATIONS
From the above report it can be concluded that in many markets, Boffi's operations, sales
and profitability has been affected by the changes in macro environmental conditions of those
markets. Now it is very beneficial for the company to expand in new countries. It can be also
concluded that Brazil and Sri Lanka are the two new countries in which Boffi can expand its
operations. The pros of operating in Brazil are the growing economy and IT infrastructure can
provide a very potential platform for the company. On the other side of this, cons of operating in
Brazil includes high rate of poverty. People may not adopt and afford the luxurious kitchen and
furniture offered by the brand. At the time of operating in Sri Lanka, high rate of literacy and
economic growth are the two major factors which will acts as pros. The cons of operating in Sri
Lanka are that the legal factors in country are very strict and if laws are not followed then fines
and penalties may impose on the company which will affects its entire brand image.
Recommendations
 It can be recommended that Boffi is required to carry out effective market research
before going through any kind of international expansion.
 It is also recommended that best and most suitable entry methods are required to be
selected.
 It can be recommended that Boffi needs to follow the laws, rules and regulations which
has been developed by the country.
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REFERENCES
Books and journals
Cateora, P.R., 2008. International Marketing 13E (Sie). Tata McGraw-Hill Education.
Crick, D. and Spence, M., 2005. The internationalisation of ‘high performing’UK high-tech
SMEs: a study of planned and unplanned strategies. International business review. 14(2).
pp.167-185.
Doole, I. and Lowe, R., 2008. International marketing strategy: analysis, development and
implementation. Cengage Learning EMEA.
Lambert, D.M., García‐Dastugue, S.J. and Croxton, K.L., 2005. An evaluation of process‐
oriented supply chain management frameworks.Journal of business Logistics. 26(1).
pp.25-51.
Morse, J.M. and et. al., 2008. Verification strategies for establishing reliability and validity in
qualitative research. International journal of qualitative methods. 1(2). pp.13-22.
Ruzzier, M., Hisrich, R.D. and Antoncic, B., 2006. SME internationalization research: past,
present, and future. Journal of small business and enterprise development. 13(4). pp.476-
497.
Thompson, A.A. And et. al., 2008.Crafting and executing strategy: The quest for competitive
advantage: Concepts and cases. McGraw-Hill/Irwin.
Tzeng, S.F., Chen, W.H. and Pai, F.Y., 2008. Evaluating the business value of RFID: Evidence
from five case studies. International Journal of Production Economics. 112(2). pp.601-
613.
Wild, J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited.
Yiu, D.W., Lau, C. and Bruton, G.D., 2007. International venturing by emerging economy firms:
the effects of firm capabilities, home country networks, and corporate
entrepreneurship. Journal of International Business Studies. 38(4). pp.519-540.
Online
Boffi. 2015. [Online]. Available through: <http://www.boffi.com/>. [Accessed on 16th December
2015].
Sri Lanka. 2015. [Online]. Available through: <http://www.heritage.org/index/country/srilanka>.
[Accessed on 16th December 2015].
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