Duque Papetiers Gros: Report on German Market Expansion Feasibility

This report assesses the feasibility of Duque Papetiers Gros, a French wholesale stationery company, expanding its business operations into Germany. It provides an overview of the German wholesale stationery market, including production and export rates, and analyzes annual spending on writing and drawing materials per capita in various European countries. The report includes an analysis of Duque's sales data from 2015 to 2017, examining sales trends and correlation coefficients. It also discusses the advantages and disadvantages of expanding into Germany and Belgium, compliance with international standards (ISO), costs associated with a new building, mean value of orders, and customer satisfaction strategies. The analysis concludes with a recommendation on whether the German market is suitable for Duque's business expansion based on market conditions, sales data, and potential profitability.

Report for Duque Papetiers Gros
Date: 25th of June, 2018
Table of Contents

1. Introduction...........................................................................................................................1
2. Analysis of Issues for Duque Papetiers Gros........................................................................2
2.1 An Overview of the Wholesale Stationers Market in Germany.........................................2
2.2 Annual Spending on Writing/Drawing Materials per Capita.............................................4
2.3 Analysis of Duque’s last three financial years of sales data (2015-2017)..........................6
2.4 Feasibility of Expanding to Germany & International Standards.......................................9
2.5 Costs of a New Building...................................................................................................11
2.6 Mean Value of Orders.......................................................................................................12
2.7 Customer Satisfaction.......................................................................................................13
3. Conclusions.........................................................................................................................14
4. References...............................................................................................................................15
4. Appendices..........................................................................................................................16

1. Introduction
Analysing the business status of a particular industry or market is beneficial for organizations
who are potential new entrants. Conducting a proper analysis is also advantageous for the
organizations that are looking forward to expand their business in foreign countries. The
company ‘Duque Papetiers Gros’ is France based wholesale stationery company that
specializes in providing printer cartridges, paper-based supplies and many other stationery
items. They have a strong customer base in France and currently, they intend to expand their
business in Germany and Belgium. Both these places are considered as suitable for stationery
market. This assessment conducts a proper analysis of the stationery market of some of the
European countries, focusing mainly on the market of Germany and form a conclusion whether
the market is suitable for business expansion or not.
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2. Analysis of Issues for Duque Papetiers Gros
2.1 An Overview of the Wholesale Stationers Market in Germany
The German stationery market is one of the biggest contributors in the economic development
of the country. In the years between 2014 and 2015, more than 70% of the wholesaler and
retailers of the country witnessed profits in their business and it is expected to increase in the
upcoming years. At the same time, the domestic demand for stationery items grew by 2.5%,
while the international demand grew by 5% between the years of 2014-2015 (Dasanayaka et
al., 2017). The demand in German stationery items grew due to the intervention of creativity in
the ordinary notebook or pens. The country is home to some of the eminent names in the global
stationery market such as Faber-Castell, Montblanc, Lamy, Stabilo and many more (Han and
Ma, 2018). The production, import and export of the stationery items of the country will
provide a better insight to the suitability of conducting business in the country.
Figure 1: Production rate of stationery items in Germany
(Source: MGCC Perspectives, 2018)
From the chart depicted above, it can be said that the production rate of stationery items has
amounted to about €510 million in the year of 2014. According to the MGCC reports, the rate
of export has also increased in the year of 2014 and it is much higher than the import rate of the
country. The production and export rate of the country suggests that Duque will be able to gain
substantial amount of profit in Germany. The convenience related to e-commerce will allow
the company to distribute their products effectively.
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Figure 2: Export rate of writing instruments in Germany
(Source: MGCC Perspectives, 2018)
The above chart depicts the export rate of various writing instruments from the stationery
market of Germany. In the year of 2014, the stationery market of the country exported
stationery items worth of €675.7 million. The German stationery market is driven by an intense
tendency to consume and invest equally by private and commercial customers respectively
(Dash et al., 2018).
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2.2 Annual Spending on Writing/Drawing Materials per Capita
(Appendices- Bar graph)
Figure 3: Annual Spending of 12 countries on stationery
(Source: MGCC Perspectives, 2018)
From the above table, it can be stated that the countries Switzerland, Germany and Austria
have the highest per capita expenses in terms stationery items. France follows up next in the
list for having a per capita expense of €28.30m. However, since the company is already
operating in France so the former three countries can be considered suitable for Duque’s
business expansion. The combined expenditure of the three countries on stationery items is
€105.7m. These three countries have the ability to provide substantial amount of opportunity
for the company to flourish in their market and gain customer loyalty.
Initiating business operations in the Eastern European countries will not be considered suitable
for the company. The per capita expenses of these countries are very less which implies that if
Duque decides to operate in those countries they will not be able to gain enough profit in their
business. If the per capita expenditure of the Eastern European countries is combined then they
will generate the value of €24m, which is very less than the combined value of the countries
Switzerland, Germany and Austria. If the company decides to expand their operations in
Slovenia, Italy and Slovakia then the company will earn moderate profits. The per capita
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expenditure of these countries is €48.8m, which implies that the countries will not be able to
provide the favourability of the market that the company needs. The best-suited country for the
business operations of Duque Papetiers Gros is Germany. Conducting operations in this
country will allow the company to gain sufficient amount of profit in their stationery business.
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2.3 Analysis of Duque’s last three financial years of sales data (2015-2017)
A. (Appendices- Table formula for the sales of 3 financial years)
Table 1: Duque’s sales data of three financial years
(Source: Created by the learner)
B. (Appendices- Pie Chart for 2016 and 2017 sales of Duque)
The pie charts here represent the sales of the company in the years of 2016 and 2017. From the
charts, it is evident that the company encountered more sales in its stationery items than in the
year of 2017. The sales of most of the items decreased in the year of 2017. However, the sales
of writing/drawing materials increased in 2017, mainly due to people spurring into creativity
business or for leisure.
C.
Table 2: Correlation Coefficient
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(Source: Created by the learner)
Figure 4: Scatter Diagram of the sales of the company
(Source: Created by the learner)
The above scatter diagram above depicts the sales of the three financial years of Duque
Papetiers Gros. In the scatter diagram, the presence of R2 represents the existence of correlation
coefficient, which is mainly found between zero and one. When R tends closer to zero then the
existence of value is considered false and irrelevant. However, when R tends closer to one then
it can be said that the prediction of the value is strong and appropriate. When the value of
correlation coefficient is 0.5, then the value is considered weak but the prediction and the
relevance of its nature is identifiable. The table above depicts that the company sales in the
fiscal year of 2015-2016 was approximately 0.9, indicating that the prediction is relevant and
strong. The sales figure between the fiscal year of 2016-2017 is 0.85 and that indicates that the
prediction is strong and relevant. The sales figure between the years 2015-2017 combined
produces the value of R2 as 0.54, which leads to the interpretation that the relevance of the
value of the correlation is minimal.
D. According to the scatter diagram presented above, it can be said that the linear progression
in the sales figure indicates that the sales of the company is expected to increase in the
upcoming years. The company will also witness substantial increase in their profit and sales by
the end of 2018. It is being expected that the increase in the sales of the company will be more
than that of the previously annual sales combined up to 3 years.
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2.4 Feasibility of Expanding to Germany & International Standards
A. Before expanding their business operations to Germany and Belgium it is important that the
company considers some important aspects of the market situation prevailing in those places.
The pros and cons that Duque might witness after their expansion to Germany and Belgium are
as follows:
Table 3: Advantages and Disadvantages of business expansion in Germany and Belgium
(Source: Created by the learner)
The above table demonstrates the pros and cons that the company ‘Duque Papetiers Gros’
might witness, if the company expands its business operations to Germany and Belgium. From
the above table, it can be addressed that the weight of pros are greater than cons, which subtly
indicates that the stationery market of Germany is favourable and that the company will be able
to gain substantial amount of profits if they choose to expand to Germany and Belgium.
B. To expand business operations in any of the European countries, it is important that an
organization is able to comply with certain international standards that are being set by the
authorities (Iso.org, 2018). When an organization is able to comply with the business standards
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of any organization then, it ensures that the organization will able to conduct its business
operations smoothly. Some of the ISO standards are as follows:
ISO 9004: 2009- This international standard aims to provide guidance to companies about how
to initiate business activities in a sustainable manner. This standard does not provide
certification to the organizations for initiating quality management approaches rather they
initiate the use of contractual form.
ISO 14004: 2016- For companies who aim to achieve their targeted aims and objective by
maintaining a sense of admiration for the protection of environment, this standard is a suitable
guidance for them. This standard ensures that the organizations are able to achieve the
necessary environmental aims and objectives.
ISO 4217: 2015- The aim of this international standard is to make sure that there are no
barriers in currency transactions on international level. The companies can use the currency
codes in alphabetic or alphanumeric manner for easing their international transactions.
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2.5 Costs of a New Building
A. When interest is applied at the beginning of every year, for loan repayment the cost per
month is identified to be €1767.99
Where,
P is the principle loan amount = €200,000
t is the time for repaying the loan = 30 years
(Appendices for calculations)
B. When the interest is applied in the beginning of every month instead of every year, the
monthly cost is identified as below:
Here,
P (€200,000) which is the principle loan amount
Size of the payment is unknown (R)
Interest rate is 10% (r)
Interest every year is 0.1/12 (i)
Total number of days is 360 (n)
The formula used for generating the size of the payment is:
P = R*[(1-(1+r)^-n)/i]
Therefore, it can be said that the value of R is €1755.
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