2. Expansion Strategy for the Future Five Years
Star Appliances, Inc has entered the Canadian market in 1980. In the next five years, Star Appliances, Inc will keep exporting products to Canada. By the end of year 2004, Star Appliances, Inc expects an increasing in sales in Canada market by 15%. By establishing a manufacturing in Mexico in 2002, the labor cost and freight cost and overhead will be reduced. The cost of goods sold will be reduced by 10%.
1. External Environment
?Political / Legal – With NAFTA’s entry into force on January 1, 1994, Mexico lowered its tariffs on U.S.- and Canadian-origin goods. Mexican tariffs on U.S. goods are between five and 20 percent ad valorem, with the highest Mexican tariffs on agricultural products and finished motor vehicles. Under NAFTA, tariffs on U.S. goods will be phased out over a maximum period of ten years, varying by type of good. Sixty percent of U.S. goods now enter Mexico duty-free. The North American Free Trade Agreement (NAFTA) continues to be a key factor in boosting Mexican exports and raising the overall level of economic activity.
?Global – The Mexican market is big: U.S. exports reached US$ sixty-seven billion for 1996. It is also young: 50% of the population is under twenty-five years old. Mexican consumers like American products. They recognize most U.S. brand names and associate our products with quality and value. The leading sectors for U.S. exporters are heavily weighted toward intermediate goods and large infrastructure projects. Among the leading sectors are: Electrical Power Generation Systems, Electronic Components, Telecommunications Equipment and Services, Automotive Parts and Service Equipment, Pollution Control Equipment, Building Products, Management Consulting Services, and Mining Equipment.
2. Industry Analysis
Analysis of major competitors
Washer and Dryers
Kenmore – Kenmore has almost 7,000 sales agents in Europe and the United States. It sells products to 106 nations and regions. With ambitions to become a ?famous global brand like Japan?s Matsu*censored*a,? It also sells clothes washers to Japan and Mexico. Having chalked up 1996 sales of $747 million, Kenmore is some distance behind other global appliance brands. Part of its growth will come from foreign operations. A Mexican plant makes refrigerators and washers. A Philippine factory is to begin production this year.
Kenmore has built a domestic reputation for quality through the use of borrowed foreign technology. It is now relying on in-house research, allocating 4% of projected income (equaling almost $50 million) in 1998 and aiming to spend 7-8% of income for research by the end of 2000. Kenmore is developing environmentally based technology which, Kenmore hopes it will be the ?green? appliance manufacturer. Kenmore also will be turning out new versions of products tailored to Mexico?s needs, such as a mini-washer that cleans a small load with little water. Another cornerstone of Kenmore?s operations is service. It has 2,500 sales and service outlets and a toll-free hotline, and promises delivery or repair of appliances within 24 hours.
Maytag – Founded in Mexico City in 1947, is nowadays the leading enterprise in appliance sales and production, as well as in motors and compressors. Maytag operates various plants, located in Mexico City and four other Latin American countries. Besides Maytag?s end products, they manufacture their own plastic components, presses, compressors, transmissions and motors.
For more than three decades, Maytag has refurbished its export industry, making it possible for their products to reach more than 40 countries in America, Europe and Asia.. With its rounded shapes and exclusive washing system, Maytag ´s automatic washers offer maximum cleaning without mistreating the fabric. Its basket, with 6,8 or 10 kilo capacity, is made with indestructible materials. They have also integrated multiple independent functions and an innovative ecological cycle that avoids unnecessary waste of water. All of this supported by a 5-year warranty.
General Electric – From electric appliances, to medical equipment, GE with its multiple divisions, has a great penetration in international markets, always reflecting its great innovative spirit. In 1987, with Latin America as a goal and then the rest of the world, General Electric has established a joint venture with Mabe to manufacture various GE appliances, like the Hotpoint line of washers and dryers. GE with a re-known international brand that is well established along with MABE, the first Mexican appliance manufacturer to be internationally sold shall be able to capture a great portion of the Mexican appliance industry.
Whirlpool – In Mexico, Whirlpool is dedicated to the manufacturing and selling of ranges, washer/dryers and refrigerators. With the final goal of making a concept. Oriented towards young couples, in 1992 the brand made substantial changes in its products? aesthetics. Two years later, Whirlpool focused its efforts as a full-line appliance brand that offers the best security for investment, with products that last longer for the best price. Under this slogan, a modern, safe, dynamic, friendly and enduring image is projected. The brand is recognized for maintaining a durable line of products, with basic features and the best price. Today, Whirlpool has a complete line of refrigerators of one and two doors, stoves, ranges, extractors and compact washers with one or two baskets, automatic and semiautomatic. All of these products are certified under international quality norms
Vacuum Cleaners
In Mexico, there is not a single manufacturer of vacuum cleaners. The reason is that in Mexico there is that a small, but growing number of the total population that is beginning to modernize their homes by purchasing tile, hardwood and carpeting for their floors. Most of the Vacuum cleaners in the market are imported from the United States, Japan and Korea.
3. Expansion Strategy for the Future Five Years
Star Appliances, Inc is going to directly invest in Mexico in 2002. We are going to set up one factory in Mexico to be our first foreign production plant. Even though this type of investment is the costliest of all the modes of into Mexico, Star Appliances will have enough financial support and enough human resources for this manufacturing facility. Since our products have entered Mexico in 1985, star Appliances, Inc has built up a good reputation in terms of product quality and service packages. Our increasing market share in Mexico has demonstrated that Mexico will be one of our long-term markets.
Labor costs, freight costs, etc. will be greatly reduced due to a much cheaper Mexican labor force, if Star Appliances, Inc sets up a manufacturing facility in Mexico.
Growth Forecasts for
Years 2000, 2001, 2002, 2003, 2004
Please see attached charts.
?Projected Total Domestic And Foreign Sales
?Projected Sales By Country
Implementation
?Contact the Commercial Service of the U.S. Embassy for seeking an agent or distributor in Hungary through its Agent/Distributor Service (ADS) or Gold Key program. Further information can be obtained by contacting Department of Commerce District Offices in major cities in the United States or the Commercial Service in Budapest.
?Need for a local attorney/accountant. As a standard practice, legal counsel should be retained when engaging in business in Hungary. All legal work in Hungary must be conducted by an attorney accredited to work as a lawyer in Hungary. Many contracts require notarization as well. Several leading U.S. law firms maintain representational offices in Hungary and provide a wide range of services for their clients. An experienced accounting firm should be consulted as well.
?Consult the Commercial Service in Mexico for manufacturing information and restrictions.
The View Ahead
Under the five-year international expansion marketing plan, Star Appliances Inc. will have better performance in foreign and domestic markets. Our great achievements will be new milestones in the history of our company.
One of the most important things that our company has to consider is gaining more markets in Asia. The branch office in Japan will supply us with insights and valuable information in dealing with household appliance industry in Asia.
The future plans of our company will focus on dealing with intense competition. The Hungarian market will provide us with opportunities in exploring other countries in Eastern Europe and Central Europe.
Our integrity, creativity, intellect, and quality will aid us to achieve the goal that annual sales in Japan, Canada, and Mexico will increase by 15%.
Following our mission statement and company objectives, our company will become one of the leaders in household appliance industry and the international expansion marketing plan will be of great importance and benefit to grow our company internationally. Star Appliances Inc. is looking forward to entering the new millennium with innovative products and providing outstanding services to our global customers.