EXPORT STRATEGIES - ZMVAzmva.hu/tar/een_info/idwood_export_strategies.pdf · 2015-04-01 · EXPORT...

ID: WOOD

EXPORT STRATEGIES

MAIN TOPICS:

The SMEs internationalization processes

The mode of entry into international markets

How to deal with foreign markets

Searching for information on internationalization (the sources)

Trends related to the international economic environment

How to approach the value of the products in a modern way

SMEs INTERNATIONALISATION PROCESS - REASONS

Information about foreign markets

Ripe product for domestic market

Ability in manufacture and/or in organisation (management)

Available resources (human, financial)

Ability in adapting supply

THRUSTS OF INTERNAL ORIGIN

Elements that characterise and influence the company in the decision to extend the

market abroad

Display the local market to external competition

Saturation of domestic market

Interest from foreign customers

Cheaper inputs

Process of market opening

THRUSTS OF EXTERNAL ORIGIN

Element that don’t come from company

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SMEs INTERNATIONALISATION PROCESS - STEPS INDIRECT EXPORT The company has no interest in a direct presence in foreign markets

Some factors push to a later stage: increase in labour cost opening market to cheap labour cost enhance competition in the beginning market need to make stable foreign sales

DIRECT EXPORT The company moves towards a greater presence strategically defined

Some factors push to a later stage: need to get closer to the customer need to provide the same competitors’ services need to overcome the tariff barriers need to overtake the limits of imported finished products

SETTLEMENTS ABROAD The company strengthens further its presence in foreign markets, also through management agreements or collaboration with local partners

Some factors push to a later stage: problems with local partners problems with profits’ and dividens’ repatriation need to improve the control over the capital and the work done

DIRECT INVESTMENTS The company checks independently the capital and the formed or acquired society management

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SMEs INTERNATIONALISATION PROCESS - EXAMPLES

The product is marketed in the foreign market by a sales agent, who acts as an

intermediary between the exporter and the buyer. In other cases, the product is assigned to a distributor, who buys large quantities of

goods and who is supported by a sale network. Finally, a selling dealer can interest himself about the importation, purchasing

and then selling the product.

INDIRECT EXPORT

DIRECT EXPORT

The product is committed to intermediaries specialized in trading; these subjects are

concerned to the purchase of the product, to which they take the ownership of its

distribution in foreign markets and possible marketing actions without involving the

company.

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HOW TO DEAL WITH FOREIGN MARKETS (1)

An internationalisation strategy is divided into several steps:

IDENDIFICATION of the target market;

EVALUATION of the coherence of supplied products with the objective of the market;

PLANNING the most appropriate actions to steal market share.

SUMMARY…

SALES SAFE

EFFECTIVE PROMOTION RIGHT CHANNEL RIGHT POSITION

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The last objectives of the international strategy can be summarized as follows:

allow the company to maintain/improve its position in foreign markets;

find new markets or new market segments;

identify more efficient and economical distribution channels;

ensure the meeting between the domestic product and foreign demand.


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To achieve these objectives you should:

research and process the data;

plan;

act in foreign markets in order to know them;

use the information collected to approach and penetrate foreign markets;

constantly check the carried out interventions.

Specifically, the company should:

study the foreign market in which it want to act;

find (create, search, …) the right product;

manage the product (through the right combination of marketing mix);

keep an eye on the competition;

control the distribution channels (to identify which are the most efficient);

monitor consumer feedback. 7

ITEMS TO BE ANALYSED IN THE EXPORT STRATEGY (1) MACRO-FIELDS OF ANALYSIS MAIN CONSIDERED DATA

a. POLITICAL AND SOCIAL SITUATION OF THE COUNTRY

•political and social situation • state intervention in the economy

b. ECONOMIC VARIABLES

• economic organization • analysis of the main economic sectors • economy performance • inputs availability • banking system

c. MARKET ANALYSIS

• products present on the market • potential demand • potential competitors • current prices

d. FOREIGN RELATIONS • evolution of imports • tariff barriers • non-tariff barriers

e. LEGAL ANALYSIS • certification • packaging • patent and trademark

f. OTHER FIELD OF ANALYSIS • transport costs and their impact 8

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ITEMS TO BE ANALYSED IN THE EXPORT STRATEGY (2)

develop a market analysis, a legal analysis, an economic and financial analysis;

realize exploratory and cognitive missions;

collaborate with a local partner;

evaluate variables which affect production costs;

prepare/adapt the product for export;

compare the quality standards attainable;

organize the sales and contracts activities with intermediaries;

enter in the market forming agents and monitoring competitors;

future adaptation of the organization to achieve a market share.

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MACRO-FIELDS OF ANALYSIS MAIN CONSIDERED DATA

a. financial aspects - sources of financing and lines of credit - inflation rate

b. technical and industrial aspects - availability of raw materials and components - existing infrastucture and aspects related to ecology - existence of qualified suppliers

c. human resources

- availability of labor and managment - levels of union labor - sectoral productivity - legislation of foreign labor and labor law - existence of training centres

d. market aspects

- market size and market indicators - tariff and non-tariff barriers to enter - product labeling - competitors situation - distribution situation

e. taxation - fees volume and level for business activities - existence of bilateral agreements on double taxation - methods for the valuation of stock

f. political situation - government and bi/multilateral agreements - policy price control

g. legal aspects

- foreign investment and incentives to companies - trademarks and patents protection - consumer protection law and necessary permissions

SOME FACTORS TO CONSIDER TO SET AN INVESTMENT

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MAJOR OBSTACLES FOR INTERNATIONALISATION

Limits of internal resources (financial, managerial, production, ecc.);

Lack of international markets knowledge;

Economic and political instability of the foreign market;

Fluctuations in exchange rates;

Banking and finance problems;

Protection against non-payment (SACE) ;

Need to adapt product’s marketing and promotion to the foreign market;

Defense needs of the brand/patent;

Previous negative experiences;

Difficulties in finding staff/partners;

Precarious situation of transports, roads, infrastructure of the foreign market.

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Searching for information is a preliminary activity to which the internationalisation

process founds itself.

FINDING INFORMATION FOR INTERNATIONALISATION

The activity requires a compromise between resources to commit to the data

collection phase and the accuracy level to achieve: the greater are the resources,

the better are the results and, therefore, it si useful to fix the limits for the execution

of this activity.

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Management of the company;

Specialized magazines and websites;

ICE, SIMEST, FINEST, INFORMEST, SACE;

Forum of specialists in the field;

Banking institutions;

Agencies which analyze country risks (es. SACE);

Doing Business Report of the World Bank;

Non-specialist press;

Associations, chambers of commerce, etc.;

Government statistics, central banks and foreign ministry relations;

Exchanges with the data of listed companies;

Trade fairs, B2B initiatives, joint trade missions abroad, projects (es. Enterprise Europe Network);

Country guides (es. INFORMEST Consulting, ICE);

Market research carried out ad hoc by specialized companies.

SOURCES OF INFORMATION

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ES. DOING BUSINESS : AVAILABLE INFORMATION (1)

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ES. DOING BUSINESS : AVAILABLE INFORMATION (2)

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ES. DOING BUSINESS : COMPARISON

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ES. COUNTRY RISK MAP DI SACE (1) - www.sace.it

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ES. COUNTRY RISK MAP DI SACE (2) - www.sace.it

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ES. COUNTRY RISK MAP DI SACE (3) – www.sace.it

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It is the most current and comprehensive guide for investments in 25 Countries around the World and available in Italian language. It provides updated and expertise information on issues of contract law, tax, corporate, customs, trade marks and patents, work related to business activities in foreign markets.

ES. BUSINESS GUIDE INFORMEST CONSULTING (1)

Thanks to its characteristics of reliability, security sources, upgrade, the system of Business Guide is the professional tool used by leading banking groups, industry associations and unions, from accountants and lawyers enterprise to operationally support companies, providing them with advice and speak with foreign professionals in a conscious and knowledgeable on internationalisation issues.

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CONTENTS

1. Foreign investments.

2. Companies and contracts (including trademarks and patents).

3. Import-export schemes and financial flows.

4. Taxation.

5. Labor relations.

6. Economic framework.

7. Costs for your business.

8. Transport.

9. Exhibitions and Events.

￫ Albania

￫ Armenia

￫ Azerbaijan

￫ Bosnia and Herzegovina

￫ Bulgaria

￫ China

￫ Croatia

￫ Estonia

￫ Russian Fed.

￫ Kazakhstan

￫ Latvia

￫ Lithuania

￫ Moldova

￫ Montenegro

￫ Poland

￫ Czech Republic

￫ Romania

￫ Serbia

￫ Slovakia

￫ Slovenia

￫ Turkey

￫ Ukraine

￫ Hungary

￫ Uzbekistan

￫ Vietnam

ES. BUSINESS GUIDE INFORMEST CONSULTING (2)

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ES. ENTERPRISE EUROPE NETWORK - www.friendeurope.it

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ES. UNICREDIT - www.unicredit.it/it/piccolemedieimprese (1)

ES. UNICREDIT - www.unicredit.it/it/piccolemedieimprese (2)

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ES. WORLD BANK - www.worldbank.org

Sul sito è possibile trovare pubblicazioni ed approfondimenti sull’economia dei Paesi, i progetti di Banca Mondiale avviati ed in avvio con l’indicazione di settori (energia, trasporti, ambiente, infrastrutture, agroindustria, trasporti, ecc.), piano degli acquisti, applicazioni, tempistiche, enti appaltanti ed altri documenti inerenti il ciclo di vita dei progetti.

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INTERNATIONAL ECONOMIC TRENDS (1)

In defining the internationalisation strategy, with the analysis of all factors that influence it, it will be necessary to take into account the particular context of the international crisis. The next international economic landscape will not be the same as before the crisis, and also some trends, which were already underway in the early years of this decade, have been defined in our days and studied with optical-decade the next five years. It’s possible to identify the following trends, considering some parameters with an high impact in business management.

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1. Accelerated globalisation: the main points on which companies should focus to develop or mantain competitive advantages are:

a. Competitive advantages in the world are only achieved with the focus (serve niches globally);

b. Globalisation will cover all stages of the value chain (including the recruitment of the best human resources);

c. Telecommunications costs become negligible (every corner of the world will be reached);

d. Proximity to customers;

e. Maintaining high level of innovation;

f. Maintaining of loyal and qualified employees;

g. It will be necessary to follow the demographic development and consider all immigration aspects.


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2. Greater influence of Countries’ economic policy and regulations: the economic crisis has reinforced the trend of the major politics influence and of the defining regulations, in financial and industrial sphere, so the state regulation must pay an increasing ability of company managment to interact with Government bodies and legislators, and anticipate the practical impacts of the decisions of economic policy; consider the level of Countries’ bureaucracy (World Bank - Easy Doing Business).

3. Stronger link between managment and capital, consequent importance of

managment stability and of the best internal and external human resources, tendency to bind managers actions to the company’s financial and operating results.

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4. “macroscopic” shifts of products and consumptions in the world (in addition to the high range product positioning, are emerging very cheap products lines, which ranging to respond to the needs characterized by large volumes with lower quality ).

Points and key parameters:

a) Protect the high-end segment (ex. Made in Italy), because the the natural positioning of Italian products is in the premium segment in terms of price and performance;

b) This placement is based on R&S, proximity to customers and employees;

c) Critical and observer attitude towards the existence and the creation of a cheaper market segment ;

d) The cheaper segment grows in emerging countries faster than the upper segments;

e) Long-term trend, cheap products in industrialized countries, consider in advance this right scenario.

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5. With the economic crisis customer behavior has changed irrevocably.

The approach to the international markets should be supported by such awareness and direct attention to aspects that will be decisive, such as:

a) development of price elasticity and flexibility;

b) more importance on cost or value advantages;

c) reduction of the time;

d) extended warranties and atypical guarantees, long period of trial payments based on the success, communications of tangible benefits;

e) importance of funding and/or new models to offer, analysis of the value chain.

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6. Full interconnection: the use of new communication and contat systems with customers, about promotion and sales, will affect all sectors of production.

Even for traditional production sectors, interconnection will be a total value increasingly important, both for external communication, but also for the internal impacts of the company (high ammount of information, attention to the multitasking managment result, the need to make efficient the organization).

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The application to the fundamentals operations of Revenue Managment to the marketing plan as a tool to optimize business performance. The foundations of modern Pricing (how to use the price leverage to improve fringes, the price impact on market segments, definition of margins by price, one price ‘cost-plus’ to market segmentation and pricing strategy, competitive reports) with particular reference to the economic target in the Country.

HOW TO APPROACH PRODUCTS VALUE IN A MODERN WAY

PLAN YOUR COMMERCIAL PRESENCE

ABROAD

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MAIN TOPICS:

Achieve the Action Plan: the best strategy for company and market

Business plan definition

Evaluation of economic and non-economic resources to enter the target market

Available financing for the internationalisation

Control tools

Mistakes to be avoided

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1. Business structure and management

2. Characteristics / functions / product usefulness

3. Economic management / sales and foreign sales / payments

4. Knowledge of foreign markets / information resources

5. Foreign markets’ strategies

6. Checks and controls

ANALYSIS OF COMPANY’S ABILITIES AND NEEDS

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It is necessary to investigate over : Responsibility for activities organization in foreign markets

(businessman, commercial office, export manager); Capacity of the support structure for foreign trades (activities with trading companies and/or consultants, export managers, agents); Professional technical skills (knowledge of foreign languages, of export procedures and of country’s culture),

management (organization, setting and problem solving) and staff (flexibility, charisma).

ANALYSIS OF COMPANY’S ABILITIES: STRUCTURE AND ORGANIZATION

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ANALYSIS OF COMPANY’S ABILITIES: PRODUCTS

Potential analysis of the product:

Analysis of the features, the functions, the usefulness of the product;

Comparison with the competition (product position and business areas);

Brand awareness (Is my brand known?);

Chance to adapt the product and the packaging;

Quality control (assurance systems);

Innovation of the product and the production process;

Registration policies of trademarks and patents;

Organization of after-sales service.

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ANALYSIS OF COMPANY’S ABILITIES: FINANCIAL AND ECONOMIC MANAGEMENT

Financial and economic management:

sales, foreign sales and evaluation of profitability on foreign markets;

planning and estimating sales, prices and quality, price ratio;

terms and payment options;

economies of scale in distribution;

degree of commercial risk;

investments in marketing and communication.

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ANALYSIS OF COMPANY’S ABILITIES: INFORMATION

The sources of available information:

Local and Regional - Chamber of Commerce and their promotion companies, associations, industry associations, export consortia, local press, etc.;

National – ICE, Foreign Chambers of Commerce, associations, industry associations, universities, banks, exhibitions, national press;

International - embassies and consulates, foreign banks, agents, purchasing departments, international consulting firms, trading companies, statistical offices and other databases, press and magazines.

In an increasingly competitive market, the effective use of available information in the company can be crucial for success or failure.

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ANALYSIS OF COMPANY’S ABILITIES: STRATEGIES

Identified strategies for the medium-long term: it is necessary to value

the effectiveness of current strategies and its various steps.

Evaluation of the main elements of business strategy:

Competition;

Cultural aspects of the market;

Aspects of local law and customs;

Business partners and the choice of distribution channels.

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budgets with monitoring and control instruments (annually or periodically);

cost control (in addition to production costs; for example the company monitors shipping costs and financial and insurance services?);

margin of contribution of products and services by groups (is checked the profitability of exports by products and markets?)

budget forecast and objectives (determination of the quantities, values, product’s contribution margins, different product lines).

Testing of identified strategies: Are there testing tools that periodically check

progress of export ?

ANALYSIS OF COMPANY’S ABILITIES: CONTROL AND MONITOR

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THE ACTION PLAN: KEY ELEMENTS

1. Analysis of the foreign

market 2. Business Plan

3. Resources 4.

Implementation and control

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The purpose of the analysis:

Understanding the potential of the market;

Define target customers for the needs to which spend specific communications;

Define the action plan for the company's positioning on the foreign market;

Specify in detail the budget business;

Engage the internal resources and share the plan, set the appropriate organizational structure.

ANALYSIS OF THE FOREIGN MARKET: THE PURPOSE

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Analysis of macro environment:

Political environment (action of public authorities in the economy): introduction/abolition of restrictions, protectionist measures that can considerably affect the structure of competition;

Economic environment (macro-economic data): GDP, GDP per capita, import-export, inflation, exchange rates, interest rates, unemployment, foreign investment, etc.;

Social environment: population, regions, biggest cities, culture, ethnic minorities, school education, work, income distribution, etc.

ANALYSIS OF THE FOREIGN MARKET: MACRO ENVIRONMENT

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Barriers (contingents, certificates, permits, inspections and other necessary documentation, aids, cultural aspects, consumer attitudes towards italian products.....);

Customs duties;

Market analysis: expenditure (quantity, quality); prices; types of products on the market, distribution channels;

Analysis of competitors: brands (products) national (types and prices and estimated market shares); foreign brands (products) on the market (types and prices and estimated market share);

Market segmentation: groups analysis of potential customers for the company's products.

ANALYSIS OF THE FOREIGN MARKET: AIDS/BARRIERS

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ANALYSIS OF THE FOREIGN MARKET: BUSINESS PLAN

The Business Plan is the instrument that helps to translate in economic and financial terms the plan for market penetration. The structure should be flexible and tailored to the different targets, who are to be pursued, and the different actors involved in the Action Plan.

1. Qualitative: strategies for market entry;

2. Quantitative: demand of resources and the financial plan of the operation.

As a result of detailed market analysis it will be possible to define the key elements of the business plan:

The definition of foreign market entry strategies include:

Defining the positioning on the selected foreign market: identification of market segment that has the optimal characteristics for a successful entry strategy.

Definition of marketing strategies - Marketing Mix:

product policies: enhancement measures;

pricing policies: definition of the price depending on the value and usefulness perceived by potential consumers of the foreign market;

distributive policies: the choice of distribution channels (direct or indirect);

communication initiatives and promotion that will ensure the achievement of the objectives set for the foreign market.

Assessment of sales volumes on the foreign market.

Plan of assets (short, medium and long term).

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BUSINESS PLAN: ENTRY STRATEGIES

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BUSINESS PLAN: THE NECESSARY RESOURCES

The action plan should take into consideration the needs of all the resources necessary to achieve established objectives:

Human resources and internal organization: must turn the action plan into active and competitive concrete realities making the most of the internal know-how.

Availability of financial resources: is the most important element and it is fundamental for the implementation of initiatives of the action plan.

The issues related to the correct financial settings of projects plays a role of highest importance. Currently a company that plans to follow initiatives abroad has access to the following financing channels:

1. The credit market in the medium and long term; 2. Financial Instruments incentives provided by national and European legislation.

OPERATIONAL SERVICES FOR EXPORT:

cases on the basis of the districts and enterprise networks

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MAIN TOPICS:

Personalized services for commercial penetration

Non-formalized groups of companies to enter new markets (chain companies and enterprise network)

Setting and ways of working

Examples realized in the BRICs

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COMMERCIAL PENETRATION IN FOREIGN MARKETS

1st STEP:

PRODUCT/MARKET SURVEY in order to evaluate the interest of your potential clients in your products and commercial offer.

2nd STEP:

CUSTOM COMMERCIAL PENETRATION through a defined program of activities: operative check of potential partners and their interest in your products, business meetings abroad, start of trade negotiation.

3rd STEP :

TRADE DESK IN FOREIGN MARKET to strengthen the relationships with present and new clients, present commercial offers, press for answers, support the sales, the presence and the promotion abroad.

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PRODUCT/MARKET SURVEY

The service allows to identify selected commercial counterparties that express interest in the type of proposed products and in the start of commercial negotiation.

Then, it allows to obtain information useful for placing the product in a given market through interview and evaluation on field.

Contact is made with potential customers (identified with company name, address, website, e-mail address, telephone number and name of the contact person) for verification and confirmation of the start of the collaboration with the Italian company.

During the field interviews relevant information about possible benefits and / or problems of commercial penetration in the Country are collected.

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CUSTOM COMMERCIAL PENETRATION

Custom program of internationalization for stable commercial inclusion in one or more markets, also through the establishment of a distribution network.

• Definition of products to be exported

• Choice of markets with greatest potential

• Adapting supply to markets • Brochure in foreign language • Video conference with Country

experts

• Search of counterparts • Analysis and verification of counterparts • Italian company and catalog presentation • Selection of counterparts that are specifically

interested to trading • Organization of meetings at company

headquarters with foreign experts

• Assistance in conducting and concluding negotiations • Language assistance • Transmission of offers, orders • Document translation

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TRADE DESK IN FOREIGN MARKET

• To meet the immediate need of the customer • With a complete orientation to sales results • For greater interconnection with the client company Provides a sustained commitment over time, and the provision of resources and relations in the Country. You will carry out preliminary assessments of sectors and markets with greatest potential before activating the exclusive commercial representation.

OTHER SERVICES • Organizing B2B meetings at the premises of foreign companies • Translation of materials in the local language and commercial adaptation • Preparing the website of the company on the local domain • Participation in fairs, organization moments demonstration, etc.

ACTIVITIES:

• Preliminary assessment of the foreign market potentiality;

• Design of a business program with the aim of creating a group of 4/5 SMEs from the same sector and interested in the economic development abroad (SMEs not competing with each other);

• Identification in loco and mapping of importers and distributors, retail chains, retail outlets, etc.;

• Clients scouting and selection based on the profile which is preliminarily agreed and on the inquiries collection;

• Ongoing promotion and reletionship development with potential business partners who are interested in products;

• Desk in the foreign Country to support relations with local customers;

• Business missions in the foreign Country. 53

NON-FORMALIZED GROUP OF SMEs TO ENTER NEW MARKETS (1)

The programme is aimed at a group of SMEs and is oriented to the realization of sales

of products and acquisition of orders from foreign clients on an ongoing way.

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NON-FORMALIZED GROUP OF SMEs TO ENTER NEW MARKETS (2)

Among others, non-fromalised groups of SMEs already implemented:

• FURNITURE in Ukraine, Russian Fed., China, Poland

• Fashion-apparel and accessories in Poland

• Hydro-thermosanitary products and materials for the building in Serbia and Croatia

• Materials and systems for GREEN-BUILDING in Russian Fed.

• Materials and systems for building and GREEN-BUILDING in Slovakia and Poland

INTERNATIONAL TENDERS IN WOOD AND

FURNITURE SECTOR

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MAIN TOPICS:

The system of the European Enterprise Network

Tenders of the World Bank and international public and local institutions

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ENTERPRISE EUROPE NETWORK (1) - www.friendeurope.it

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INTERNATIONAL TENDERS - http://tender.informestconsulting.it (1)

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INTERNATIONAL TENDERS - http://tender.informestconsulting.it (2)

SECTORAL FOCUS OF WOOD AND FURNITURE

SECTOR

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MAIN TOPICS:

Brazil

India

China

Russian Federation

FURNITURE SECTOR IN CHINA

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CHINA – ECONOMY: OVERVIEW GDP $ 12,61 trillion

GDP - real growth rate 7,8%

GDP – per capita $ 9.300

Industrial production growth rate 8,1%

Unemployment rate 6,5%

Inflation rate (consumer prices) 2,6%

Exports $ 2,057 trillion

Exports - commodities electrical and other machinery, including data processing equipment, apparel, radio telephone handsets, textiles, integrated circuits

Exports - partners US 17,2%, Hong Kong 15,8%, Japan 7,4%, South Korea 4,3%

Imports $ 1,735 trillion

Imports - commodities

electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, motor vehicles

Imports - partners

Japan 9,8%, South Korea 9,2%, US 7,1%, Germany 5,1%, Australia 4,3%

Sources: www.cia.gov, 2012

http://www.cia.gov/

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CHINA – SOCIETY: OVERVIEW

Population 1.349.585.838

Labor force 798,5 mil.

Population below poverty line 13,4%

Population growth rate 0,46%

Urban population 50,6%

Major urban areas - population Shanghai 16,5 mil.; BEIJING (capital) 15,5 mil.; Chongqing 9,4 mil.; Shenzhen 9 mil.; Guangzhou 8,8 mil.

Median age 36,3 years Sources: www.cia.gov, 2012

http://www.cia.gov/

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CHINA: THE FURNITURE SECTOR

Location Specialised base

Dayong, Zhongshan city,

Guangdong Redwood furniture production base

Lecong, Foshan city,

Guangdong Furniture materials capital

Dalingshan, Dongguan city,

Guangdong Top furniture export base

Anji County, Zhejiang Leading bamboo furniture and commodity bamboo

producer with the largest moso bamboo reserves

Ningjin County, Shandong Carpet capital

Regional best production

based in China

In our days, China is the world’s highest producer and exporter of furniture items and interior design.

The improvement propensity is costant and extremely fast inside the country, which has reached during the 2012 a production value of 137.526.696.000 Euro.

The local production is fragmented in over 60.000 furniture manufacturers, the majority of which produce for the small-medium segment; about 200 foreign companies work for the highest and advanced luxury production lines and they come specially from Italy, United States and Spain; in the market are present also several notable OEM (Original Equipment Manufacturer).

The top 5 provinces producers are situated on the East coast (Zhejiang, Guangdong, Fujian, Shandong, Henan) and in 2011, when the furniture’s output has reached 696.490.000 of pieces, they held the 80,57% of the national furniture production.

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CHINA: LOCAL PRODUCTION AND KEY FACTORS

A wide range of raw materials are used in the production, from wood to rattan, plastic, metal, but the key and the most essential segments are: the wooden furniture and the metal furniture.

Wood furniture manufacturing settles the largest proportion of the Chinese furniture sector (70%) and the main factors which contribute to its incrise are:

- the economic and the population growth;

- the disposable income;

- the rise average per-capita of living spaces;

- the large variety in terms of design;

- the change in people’s age which brings more opportunities to industries (according to a furniture industry survey, those aged 20 to 30 regarded for 42% of the market and ‘it is expected that the number of these young adults will enhance by 77 millions between 2005 and 2015’).

Metal furniture manifacturing has developed rapidly in China in recent years; the strong consumers’ demand for furniture is influenced by the low products price, thanks to which this sector is more popular among young people

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CHINA: DEMAND ANALYSIS (1) In China the living conditions are on an ongoing improvement and people are becoming more and more willing to invest in home decoration. They would substitute their home furniture once every 10 years, so about 40 million households would replace their furniture each year. Consumers require more personality and comfort from their living space and trends focus either over an urban, fast, modern lifestyle, both a peaceful, natural, old lifestyle. The key words of the furniture industry trends are:

office furniture (thanks to the recent construction boom and the new open-space concepts typical of the american office layouts);

hotel furniture (there are almost 15.000 star-ranked hotels in China for which more than 5 mil. rooms require to be renewed and promoted for an ongoing development of tourism);

kid furniture (parents pay peculiar attention to their kid’s living atmosphere; especially for rich family);

furniture style (during the next 5 years, purchasing concepts among consumers will change from searching cheap and durable furniture, to green and environmentally-frendly products);

The key interior decoration space are: living room, kitchen and bedroom, to which Chinese focus their traditional lifestyle to improve their public relations and to maintain a right healty sleep.

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The high segment (represented by the 3% of the furniture market) is dominated by foreign products (imported or local) and by local families (classic Chinese style or Ming contemporary style).

The growth rate attended for the next 10 years is about the 20%.

In 2012 the request overtook 3.757.560.000 Euro.

The main factors which determinate purchase choices are:

1. the quality (41%)

2. the brand (18%)

3. the material (15%)

For Chinese consumer the “price” is less important than the “quality” and the “style”.

Modern classical furniture combining Chinese and Western elements and for richest Chinese furnitures should be massive (like the American style) and with classic decoration and details (symbol of elegance and wealth).

CHINA: DEMAND ANALYSIS (2)

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CHINA: IMPORT

In 2009 the World financial crisis led to a significant decline in the World trade and economic activities; however it seems that there is no influence to the Chinese furniture importation market. The total import value increas year per year or remain stable with little decrease: 2009 = +20.55% 2010 = +68.65% 2011 = +52.29% 2012 (prima metà dell’anno) = +20.30% Germany, Japan, USA, Italy, South Korea and France contribute to formed the top

6 Countries which own the most part of the Chinese furniture market in the first decade of the 21° Century.

In 2011 Germany and Japan made up 1/3 of the total Chinese imporation value.

Italy is always one of the main players in the Chinese import and the marketing share of Italian furniture increased from 4,86% in 2010 to 7,94% in 2011. The top 3 categories in the recent 3 years were: 1. seats 51,75% 2. metal and wooden furniture used in office, kitchen and bedroom 23,73% 3. lamps, lighting and fitting 16,84%.

72

CHINA: EXPORT

China has improved its esportation: from 18.787.800.000 Euro (2009) to 33.818.040.000 Euro (2012).

More than the 80% of China’s furniture exports come from OEM; Chinese manufacturers are moving towards higher value-added production spending more on design and branding.

In 2011 Chinese furnitures was exported to over 100 Countries (regions): most from Asia – North America – Europe top 5 are: United States, Japan, Germany, United Kingdom, Australia

In the first half of 2012 Italy was the 16° state to which China has exported its furniture production, represented by 358,659,102 euro.

In 2012 the top 3 categories exported to Italy had been: 1. seats 32.39% 2. metal and wooden furnitures 26.86% 3. lighting 31.50%

73

CHINA: THREATS AND BARRIERS

For foreign partners the main focus is on high-end customers, because producing for the mid-low class could be a risk, since it’s harder to compete with Chinese local production prices.

Furniture manifacturers and trading companies are more likely to have success in the market if they are constantly conscious of consumers needs.

Some customers services include: assurances and repair services.

The most common problems in the Chinese market are:

• poor production processes; • poor products design; • sub-standard materials.

Imported furniture products need to stick with safety and quality requirements decided by Governments Policies and Regulations.

Some potential barriers for foreign partners could be: • high costs of transportation; • long time of delivery; • long-term investments; • copying of italian design by local small and medium manufacturers.

74

CHINA: CUSTOMERS AND DISTRIBUTION SYSTEM

The majority of Chinese customers come from the high segment of the market; the selected products are sold to them through several different channels: multi brand stores; showrooms; luxury shopping malls; airport and rail terminals (in which several VIP rooms were built specially).

For all the remaining customers there are several: chain stores; Supermarkets; dedicated furniture districts; warehouse clubs; mass merchandisers.

(Many factories are built near the hypermarkets in order to reduce all the costs).

Design magazines are the main information source for people who are interested in buying something new.

75

Fairs names Sectors Period Place

LED Show Furnitures and

lights 23°-26°

Februar 2014 Guangzhou

(China)

WMF – Woodworking Machinery and

Furniture

Wood furnitures and

tools

11°-14° March 2014

Pechino (China)

Home Textile & Homedecore China

Household furniture and

products

18°-22° March 2014

Guangzhou (China)

In the last decade luxury furniture has grown annually more than the 30%.

The key consumer market for high-end imported furniture is situated in Shanghai and in Beijing, than along the China’s East coast.

CHINA: FAIRS AND OPPORTUNITIES

CHINA:

FURNITURE SECTOR IN RUSSIAN FEDERATION

76

78

RUSSIA FEDERATION – ECONOMY: OVERVIEW GDP $ 2,555 trillion






Exports $ 529,6 billion

Exports - commodities petroleum and petroleum products, natural gas, metals, wood and wood products, chemicals, and a wide variety of civilian and military manufactures

Exports - partners Netherlands 14,4%, China 6,4%, Italy 5,3%, Germany 4,5%

Imports $ 334,7 billion


machinery, vehicles, pharmaceutical products, plastic, semi-finished metal products, meat, fruits and nuts, optical and medical instruments, iron, steel

Imports - partners China 15,5%, Germany 9,5%, Ukraine 5,5% Sources: www.cia.gov, 2012

http://www.cia.gov/

79

RUSSIA FEDERATION – SOCIETY: OVERVIEW

Population 142.500.482



Population growth rate -0,02%


Major urban areas - population Moscow 10,5 mil.; St. Petersburg 4,5 mil.; Novosibirsk 1,3 mil.; Ekaterinburg 1,3 mil.; Nizhniy Novgorod 1,2 mil.


http://www.cia.gov/

80

Marketing research of the supply of commercial buildings with furniture basing on the expert interviews with the companies, working in the furniture and design sector.

Target groups :

companies, which specialize in complex supplies “under key” of all staff for the big projects (they supply all starting from engineering communications and finishing with furniture and interior design);

design companies, which have experience of such projects; building / architectural companies, which have experience of such projects; importers / distributors of the profile goods; companies, which produce other types of the furniture and can be interested in

import of the chairs.

Goals of the marketing research were:

to evaluate decision makers in the “contract sector”, which can be the key-partners in Russia (Moscow);

to study which are the “real” (as possible) costs for importing in Russia; to check if the Russian producers of kitchens usually sell also chairs and tables; to determine who are Russia significant chairs producers.

RUSSIA: MARKET RESEARCH

81

The question "Types of furniture" allowed multiple choice of the answers.

Most participants (73,08%) are engaged in sales or production of furniture for HoReCa.

One more feature of the Russian market is the lack of specialization in certain types of goods.

About 60% of respondents include into their assortment two or more of the suggested types of furniture.

46,15%

43,59%

50,00%

44,87%

51,28%

42,31%

73,08% Furniture for HoReCa sector

Bedroom Furniture

Living Room Furniture

Furniture for vestibules, halls

Office Furniture

Kitchen Furniture

Furniture for cabinets and studios

RUSSIA: TYPES OF FURNITURE

82

21,43%

94,29%

38,57%

Live

Commercial

Municipal

57,69%

57,69%

69,23%

69,23%

57,69%

46,15%

Medical

Kindergartens

Schools

Administrative

Cultural and recreative

Sport

43,28%

80,60%

79,10%

11,94%

32,84%

Offices, business centres

Restaurants, cafes

Hotels

Business parks

Shops, salons

Almost all the companies are engaged in a commercial real estate equipment (94,29%). About 35% of the companies work in 2 or more spheres.

Usually they provide furniture for restaurants, cafes, and hotels (about 80% of the companies, dealing with commercial real estate choose these categories).

Governmental buildings, which are also equipped by our respondents, include a range of objects.

RUSSIA: REAL ESTATE EQUIPMENT

83

53,73%

93,67%

72,15%

Low Medium High

Most companies of a profile market (93,67%) offer mid-priced furniture to equip service providers.

More than 70% of respondents act in several price ranges, about 40% - in all the three proposed.

It is common for Russian suppliers of furniture and equipment to offer their clients furniture of different price levels, quality characteristics and design.

RUSSIA: PRICE RANGE

84

56,41%

7,69%

3,85%

62,82%

20,51%

15,38%

5,13%

15,38%

7,69%

30,77%

6,41%

2,56%

2,56%

6,41%

3,85%

12,82%

Russia

Ukraine

Belarus

Italy

Poland

Germany

Austria

Spain

France

China

Malaysia

Indonesia

Taiwan

USA

Turkey

Other … The question about Countries, represented in the assortment list of respondents, expected several answers.

The graph shows the Countries that were marked by at least two companies.

Products from EU countries are offered by 69,62% of companies. From South-East Asia (including China) – 31,65%. From the CIS countries (including Russia) – 59,49%.

"Other Countries" are: the Netherlands, Denmark, Finland, Portugal, Czech Republic, Slovenia, Bulgaria, UAE, and the Baltic countries, including Latvia.

RUSSIA: IMPORT COUNTRIES

85

The main Italian companies, working in the Russian furniture market

61 companies-respondents out of 79 have foreign brands in their assortment.

7 of the surveyed firms, working with foreign brands, offer more than a hundred of different brands:

Studio "Barrock Casa" (~ 100 brands)

Design-studio "Mirabelle" (~ 200 brands)

Studio of Italian furniture "AST-alfa" (~ 400 brands)

Studio of Italian furniture "Best-project" (~ 100 brands)

"Kreops" LLC (~ 100 brands)

Interior studio "Abris" (~ 100 brands)

Salon of Italian furniture "La Casa" (~ 400 brands)

RUSSIA: ITALIAN COMPANIES

86

The most popular Italian brands are:

Pedrali

Cattelan Italia

Bonaldo

Veneta Sedie,

Seven Sedie

TONON

Potocco S.p.A.

One of the characteristics of the Russian market is that most companies have an already formed group of foreign suppliers, that meet the objectives of their activities and tastes of the target audience.

RUSSIA: ITALIAN BRANDS

87

Restoracia www.restoracia.ru: production of furniture and bar counters for restaurants, bars, cafes, and distribution of furniture and equipment of leading foreign producers. Designing and equipping of catering: development of stylistic concept of the restaurant, bar or cafe, interior design, process design, equipment, furnishing.

New Style www.newstyle.ru: wholesale of furniture for commercial and office space. Solutions for offices of Hi-End class and cost, integrated delivery to community organizations, educational institutions, home offices, HoReCa program. Sales in 89 Russian regions. Specialize in office furniture and chairs, but there are also 11 models of bar stools.

Vista www.vistamebel.ru: production of tables (more than 20 models), chairs (about 50 models), furniture for home and cafe/ restaurants. Repair and restoration of furniture. Groups of goods: Chairs and stools, tables, furniture for hotels.

Burocrat www.buro.ru: integrated solutions for office. Portable office equipment, printing supplies, accessories, media, as well as furniture, stationery and souvenirs. The furniture and plastic products: office and computer furniture of various designs, plastic folders, files and archive boxes of different size, color, size and density.

Bentwood www.bentwood.ru: production of decorative rattan furniture, chair of beech, fonts for Russian bath and sauna made of oak, larch and cedar. Furniture for restaurants and bars: chairs on a metal or wooden frame; tables of various sizes, made in a particular style; Different furniture for cafés, including sofas, chairs and other products; bars and table tops of different shapes; comfortable and stylish furniture for hall (chairs, coffee tables and other).

RUSSIA: LOCAL PRODUCERS (ES. CHAIRS AND TABLES)

88

69,44%

6,94%

23,61%

27,78%

Directly

Importer

Representative

Dealer

It is common for the enterprises of the Russian market to purchase furniture directly from producers (69,44%). This is mainly due to high mark-ups of additional levels in distribution channels.

Direct supplies give an opportunity to optimize the total cost of room equipment.

8,86% of companies prefer the Russian producers, 60,58% of companies prefer foreign producers.

RUSSIA:PURCHASE SYSTEM

89

Answering the question about schemes of work with suppliers, respondents were able to choose several answers, because often companies use different scenarios depending on the supplier. The specific feature of the Russian market is that most companies (88,73%) are working with the suppliers on prepayment.

88,73%

23,94% 28,17%

23,94%

Pre-payment Partial payment Post-payment Delay of payment

84,62%

23,08%

1 Month 14 days

23,94% of companies have resorted to a system of deferred payment. In 84,62% of answers the grace period is 1 calendar month. 23,08% of experts mentioned a period of 14 days. Thus, 7,69% of companies may use different terms for deferred payment.

RUSSIA: SCHEME OF WORK WITH SUPPLIER

90

Answering about criteria for selecting a foreign producer, participants of the interview had to express their preferences in scores.

The same point could be set to several factors.

81% of companies rely on the price segment (4 and 5 on a five-point scale). As mentioned earlier, many companies form their assortment of different price categories.

71% take into account terms of delivery, especially because the supplies from abroad are often delivered to the Russian market with a delay.

81%

71%

57%

66%

59%

18%

Price segment

Delivery time

Country of production

Payment schedule

Classification of commodities

Quality

RUSSIA: CRITERIA FOR SELECTING A PRODUCER

91

38,46%

57,69%

3,85%

Yes, always Yes, depending on customer's needs

No

The decision to add into the interior tables and chairs in 57,69% of orders is made according to the customer’s needs. This is another specific feature of the Russian market.

In half of the projects final choice is made by the executive companies. This proves the importance of a broad assortment and partner relations with suppliers and producers.

Very popular comment was: “Executor offers to the Customer products of several partners (3-4) and together with the Client they make the final decision”.

50,00%

36,11%

38,89%

9,72%

4,17%

2,78%

8,33%

Executive company

Architect

Importer

Designer

Producer

Managing company

Final customer

RUSSIA: CRITERIA FOR DECISION

92

The most popular Internet-resources for advertising of the executive companies are:

Popular Russian web searchers:

www.yandex.ru,

www.rambler.ru,

www.google.ru

Own sites of the companies

Databases and internet-directories

86,30%

5,48% 5,48%

21,92%

5,48%

Internet, databases

Professional unions, organisations

International information systems

Mass media and outdoor advertising

Exhibitions

RUSSIA: INTERNET RESOURCES

93

61% of companies characterize the current situation in the furniture market of

Russia as stable.

Recession

23%

Increase

16%

Stability

61%

RUSSIA: CURRENT SITUATION

94

RUSSIA: CHANNELS OF DISTRIBUTION

Answers to the question about the most popular channels of distribution represent, that cooperation with the sales agents is unpopular among the companies surveyed (11,94%).

About 42% of respondents use 2 or more channels.

Variants, mostly mentioned, are: “Representative”, “Exhibitions”

In comparison with the ways of purchasing, demonstrated before, the answer “Representative” here comes to the first place with 49,25% (against 23,61% of purchases through representatives).

49,25%

38,81%

32,84%

49,25%

11,94%

Representative Direct sales Distributor Exhibitions Agent

95

22,50%

62,50%

15,00%

More than 50% 25%-50% 0%-25%

79,1% of companies feel, that the greatest proportion in expenses structure is occupied by “Customs clearance”.

Average percent of expenses of the foreign are within 25-50% of the total costs.

79,10%

37,31%

8,96%

32,84%

10,45%

Registration as a

participant of

foreign trade

Certificates,

permissions,

licenses

Passport of the

import deal

Financial activities

for the contract

payments

Customs clearance

RUSSIA: EXPENSES STRUCTURE

96

RUSSIA: MAIN BARRIERS WHEN ENTERING THE RUSSIAN MARKET

The most popular answers were:

1st place: to search for the target market

2nd place: to pass customs control (customs clearance)

3rd place: to have a competitive price

4th place was split by the following two problems – time of the delivery and to become well-known (to invest into advertising)

17,14%

35,71%

37,14%

34,29%

60,00%

11,43%

28,57%

40,00%

2,86%

4,29%Language

Connection

Customs control

Burocracy, corruption

Taxes

Search of the target market

Becoming well-known

Competitive prices

Delivery time

Services

97

RUSSIA: EXPENSES STRUCTURE

More than 3/4 of respondents prove that Certificate of Conformity GOST R is necessary for selling foreign goods in the Russian market.

77,94%

52,94%

45,59%

5,88%

Certificate of Conformity GOST R

Certificate of Quality (GOST, ISO)

Sanitary-hygienic сertificate

Not necessary

FURNITURE SECTOR IN BRAZIL

98

100

BRAZIL – ECONOMY: OVERVIEW

GDP $ 2,394 trillion



Industrial production growth rate -0,8%




Exports - commodities transport equipment, iron ore, soybeans, footwear, coffee, auto

Exports - partners China 17%, US 11%, Argentina 7%, Netherlands 6%



machinery, electrical and transport equipment, chemical products, oil, automotive parts, electronics

Imports - partners

China 15%, US 14%, Argentina 7%, Germany 6%, South Korea 4%


http://www.cia.gov/

101

BRAZIL – SOCIETY: OVERVIEW

Population 201.009.622

Labor force 106,3 million



Urban population 87%

Major urban areas - population Sao Paulo 19,96 mil.; Rio de Janeiro 11,83 mil.; Belo Horizonte 5,73 mil.; Porto Alegre 4 mil.; Brasilia 3,8 mil.


http://www.cia.gov/

102

With a population of over 200 million, of which about 30 million people with an income comparable to that Europe

Strong propensities to consume and to search for products at the high end of the market, where the design is a important element

Structural investments: Olympic Games (2016), World of Soccer (2014)

Growth in purchasing power and household income: investment property (real estate).

BRAZIL –LOCAL MARKET

103

BRASIL – FURNITURE SECTOR

Brazil is the first furniture consumer market and the main producer and exporter in the Latin America region

It contributes to 2% of overall world global production in furniture sector and it represents 1% of world furniture exports

Almost 2% of total consumption on an annual basis are intended to furniture and furnishings

The target for furniture of medium-high level is represented by the class of income ranging from 1.500 to 3.000 USD/month

The South-East region is the most dynamic, with an increasing of the import in furniture sector of almost 68% (2010)

High quality products are imported especially in Rio De Janeiro and San Paulo

Custom duties on furniture are very high on imported products

This situation push to a local production of furniture and furnishing

104

Brazil holds the largest supply of tropical timber in the world

There is the predominance of small and medium enterprises

Productive process characterised by high verticalisation (several production processes prepare several products in a single production unit)

Wood furniture represents 78,9% of the total furniture market; office furniture ranks 2nd

Wood furniture for residential use is the most important in this segment

Furniture industry has modified its productive process by means of new organisational techniques, new management methods, and new labour methods, as well as through the introduction of new machines equipment, and technological innovations

The Brazilian domestic industry does not have a defined standard for its products, such as in Denmark and Italy, famous worldwide for its design

Brazil has skilled labor base

BRAZIL – GENERAL PROFILE OF THE LOCAL PRODUCTION

105

The national furniture industry is also characterised by the predominance of small and medium enterprises, in which there are few large enterprises, and also by companies of the economy’s informal sector. Its productive process is characterised by high verticalisation, i.e., several production processes that prepare several products in a single production unit. The furniture sector is formed by 17,000 productive units which formally employ 295,000 people. Also, there are 11 furniture clusters representing 29% of the actives companies in Brazil. The cluster led by the city of Bento Gonçalves (Rio Grande do Sul) is the biggest in number of companies, employment and volume production. In 2012 were produced 461 millions of furniture pieces in Brazil, a growth of 6.8% in comparison with 2011. To make this result possible, the sector invested R$ 1.3 billions in 2012, totalizing R$ 4,3 billion between 2008-2012. This year, growth estimative are 8.2% in volume and 9.7% in figures in comparison with 2012 (based on performance from January to April 2013). Also, the consumption of wood panels has grown 34% between 2008-2012. From this amount 9.3% only in 2012. The consumption of solid wood was 12% in the same period.

BRAZIL – FURNITURE INDUSTRY

106

The furniture sector is formed by 17.000 productive units which formally employ 295.000 people. Also, there are 11 furniture clusters representing 29% of the actives companies in Brazil. The cluster led by the city of Bento Gonçalves (Rio Grande do Sul) is the biggest in number of companies, employment and volume production. In 2012 were produced 461 millions of furniture pieces in Brazil, a growth of 6,8% in comparison with 2011. This year, growth estimative are 8,2% in volume and 9,7% in figures in comparison with 2012 (based on performance from January to April 2013). Also, the consumption of wood panels has grown 34% between 2008-2012. From this amount 9,3% only in 2012. The consumption of solid wood was 12% in the same period. The reports foresees that in 2013 the GDP will grow around 2,5% against 0,9% in 2012. The projection for the retail segment of furniture and mattresses is up 6,5% in volume, compared to 6,3% in 2012. Production of furniture should have an increase of 8,2% in parts, compared to 6,8% in 2012.

BRAZIL – FURNITURE INDUSTRY: GROWTH AND FOCUS

107

Agglomerate wood production was of 758 thousand m3 in 1994, and increased for 1.8 thousand m3 in 2003, what it meant a 238% growth. , the sector grown still more till 2013 , since the producing companies of panels, ironware, coverings, inks and the own companies of furniture are growing. The furniture hubs are the main consuming agglomerate markets, since almost 90% of produced volume is destined to furniture manufacture. The greater parcel of the national production is absorbed directly by the furniture industry. A smaller volume is commercialized by resale and destined to the moving sector of small bearing. In Brazil, the wood, one of the main raw materials used for the production of agglomerate panels, come from forest plantations entirely. The companies Placas do Parana, Tafisa and Berneck use the 100% of pinus in the manufacture of agglomerate panels; the Eucatex Company uses the 100% of eucalyptus, whereas Duratex and Satipel combine pinus and eucalyptus in varied proportions.

BRAZIL – AGGLOMERATE WOOD PRODUCTION

108

The Brazilian furniture industry is formed by more than 16,398 small, medium and large domestic capital companies (in its majority) that have generated more than 208,584 jobs These companies are located in center-south zone of the country principally, constituting in some states, furniture hubs, as Bento Gonçalves, in Rio Grande do Sul; São Bento do Sul, in Santa Catarina; Arapongas in Parana; Mirassol, Votuporanga and São Paulo in San Pablo; Ubá in Minas Gerais, Linhares in Espírito Santo. 1. Micro companies (up to 9 employees): 12.108 2. Small companies (of 10 to 49 employees): 3.446 3. Medium (of 50 to 99 employees): 432 4. Great (more than 100 employees): 312 Total: 16.298

BRAZIL – ESTABLISHED FURNITURE INDUSTRIES

109

BRAZIL – GENERAL OVERVIEW OF LOCAL PRODUCTION Mining industry.

Free zone of Manaus: industry of motor vehicles, electronics and toys.

Agribusiness, ecological turism.

Agribusiness, ceramics, mechanical, shoes, textiles, clothing, furniture.

Tourism, footwear, petrochemicals,

clothing, handicrafts.

Is the locomotive of the Country (for more

than 50% of GDP): engineering, aeronautics,

electronics, financial services.

FURNITURE SECTOR IN INDIA

110

112

INDIA – ECONOMY: OVERVIEW GDP $ 4,761 trillion

GDP – real growth rate 6,5%






Exports - commodities petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel

Exports - partners US 12,7%, UAE 12,3%, China 5%, Singapore 5%, Hong Kong 4,1%



crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

Imports - partners China 11%, UAE 7,7%, Saudi Arabia 6.7%, Switzerland 5.9%, US 4.9%


http://www.cia.gov/

113

INDIA – SOCIETY: OVERVIEW

Population 1.220.800.359





Major urban areas - population New Delhi 21,7 mil.; Mumbai 19,6 mil.; Kolkata 15,2 mil.; Chennai 7,4 mil.; Bangalore 7 mil.


http://www.cia.gov/

Structure of Furniture sector in India

114


Facts about India Population:1,210,193,422 (1.2 billion)

Area: 3.3 million square kilometres

Geographical location :Lies between latitudes 8 °4'& 37 ° 6 ' north and

longitudes68 ° 7 ' and 97° 25' east

Coastline length :7600 km

Exchange Rate: 1 EUR =84.5672 INR (Indian Rupia) / 1 USD =62.5493 INR 1000 INR = 11.8257 EUR

Languages : 17 major languages, 844 dialects

Major religions :Hinduism,Christianity, Islam, Sikhism, Buddhism, Jainism

National anthem :Jan gana mana written by Rabindranath Tagore

National Song: Vande Mataram, composed in Sanskrit by Bankimchandra

Chatterji

115


Social India is a country of unity in diversity. India is socially rich but the capital market is

very attached with the social factors

The role of communications in accelerating socio-economic development should not be

underestimated. It is critical to empower every individual to connect to people, information and

services regardless of their location or income.

India is expected to have 130.6 million mobile internet users by March 2014. In

addition, India can achieve broad-based internet impact by aiming for digital inclusion of nearly

40 per cent of its population to reach a user base of 500 million by 2015, rather than the

likely target of 330-370 million,

India will add more Internet users than any country in the world over the next three years,

as average penetration rises from 10 per cent to 28 per cent

Primary reason for current non-use remains the high cost of using telephony including costs

of charging and opportunity cost of finding network coverage

Both rural and urban users reported increasing access to telecommunications is leading to

more contact with family and friends, improving information regarding family events, reducing

cost of travel, and increasing speed of communication.

116


Economical The economical measures taken by the government of India has a very strong

relationship with the capital market.

Inflation Rate :

• Inflation often refers to Consumers Price Index. The Indian CPI shows the change in prices of a standard package of goods and services which Indian households purchase for consumption.

• The annual rate of inflation, stood at 6.84% (Provisional) for the month of February, 2013 compared to 6.62% month of January.

Economic Growth: • Economy of India is the TENTH LARGEST in the world by 2012GDP, value of $1.824

trillion • India No.3 in GDP PPP in 2012 with 4.684 $ trillion, but still well behind per capita GDP

in purchasing power with its value $ 3829 • The growth in GDP during 2012-13 IS ESTIMATED AT 5.0 PER CENT as compared to the

growth rate of 6.2 PER CENT IN 2011-12 • GDP at current prices in year 2012-13 is likely to attain a level with growth rate of 13.3

per cent over the year 2011-12 117


Parameter Name Value

GDP Current Price $ 1.843 Trillion (2011)

GDP Growth Rate 7.8 percent (Q4,2011), 6.1%(Q3,2011-2012)

GDP( PPP) $4.5 trillion

GDP per Capita $1,489

Unemployment Rate 3.8(current)

Inflation Rate 8.9

118


Future of Indian Market With an estimated population of about 1.2 billion people, representing 17% of the population world, India is the second most populous country in the world (after China). literacy rate the country is 74.04% and almost 70% of Indians live in rural

areas, although in recent

Migration to larger cities has led to a dramatic increase in the country's urban population: more than two-thirds of GDP of India is from the cities', even they

are contribute to only one-third of the population. The per capita income of India (nominal) is U.S. $ 1,219, ranked 142nd in the world. It is estimated that the per capita

income in India will register an average growth rate of 13% until to 2020, when it reaches U.S. $ 4,200.

119


Composition of Indian furniture market

1. Entities non-organized 3.5% 2. Small producers and retailers locally 4% 3. Industrial manufacturers and retailers interstate 9% 4. Importers and retailers 83.5% The organized sector was affected, however, the inherent limitations in an industry in the early stages of its development, which has a significant impact in the value chain, in particular: Presence of a still limited industrial production with large volumes and a distribution network capillary extended to the entire national territory on. Blurred distinction of roles and functions between importers, manufacturers, distributors and retailers. Product quality is often inferior to international standards

120


Composition of Indian Market

121


This is the best time for foreign investors to enter India Everyone’s fretting over the rupee’s decline against the dollar. Concerns are mounting over rising import bills and ensuing inflation. The concerns are not unwarranted, but this cloud has a silver lining: The rupee’s devaluation and government’s changes on the rules governing foreign direct investment (FDI) are good news for investors in India. On its part, India’s central bank, the Reserve Bank of India (RBI), has done well to not impose restrictive capital controls and has let the rupee find its own valuations under the given circumstances. For investors, this represents opportunity—and potentially, a very lucrative one This presents an enormous opportunity for a foreign investor looking at a long-term India play allowing the investors to acquire Indian assets at a very attractive valuation. For example, assuming all other variables to be static, an asset worth $100 million in 2008 can now be potentially purchased at under $60 million at today’s exchange rates. Such gains cannot be ignored given the undervaluation of the rupee and potential for a long-run downward slide. This should interest global players looking to acquire Indian companies which would now be available at significant discounts from their peak valuations. looking to locate themselves in India or to simply source products and services from India. The cost of setting up a business in India has definitely declined in dollar terms; this should help global small and medium enterprises who were hesitant on their India plans to finally make the leap.

122


FDI measures However, it is clear that further increases in GDP growth rates cannot be sustained without adequate reforms and greater support for industry and private enterprise. The markets have spoken and the government has now instituted a new wave of reforms to make India more competitive and business-friendly, a welcome and necessary gesture. It is now possible for foreign entities to acquire 100% ownership in Indian businesses in telecommunications, and it is widely expected that FDI in e-commerce may also get the nod soon. This is in addition to relaxations in other sectors such as real estate, multi-brand retail, power, asset reconstruction, and credit information

Strong consumer story Despite slowing down, India is still growing at 5-6% of GDP on an annual basis, the domestic consumption story is still strong, the fact that the prize for such investors who decide to establish in India now is unsurpassed by few countries in the world. India has a massive middle income population. A substantial number of individuals in this group have risen from lower income segments and have a consumption appetite that is keeping the wheels of the economy churning ever faster. 123


The tourism and hospitality industry of India

The tourism and hospitality industry of India is thriving and growing at a fast pace. The country's travel and tourism industry is one of the most profitable industries in the country The Indian tourism sector needs an urgent image makeover and higher investment in infrastructure, including through public-private partnership (PPP) mode to capitalise on opportunities provided by overall growth in world tourist arrivals, according to the Economic Survey 2012-2013.the medical tourism market in India has also witnessed a rapid growth over the past few years.

Market Size The amount of foreign direct investments (FDI) inflow into the hotel and tourism sector during April 2000 to April 2013 was worth US$ 6,664.20 million, as per data provided by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce. Foreign tourist arrivals (FTA) during the Month of June 2013 stood at 4.44 lakh as compared to FTAs of 4.33 lakh during June 2012, registering a growth of 2.5 per cent. Foreign exchange earnings (FEE) during the month of June 2013 were US$ 1.2 billion as compared to FEEs of US$ 1.15 billion during June 2012, registering a growth of 4.3 per cent. 124


House Systems The market for electronic security equipment in India is largely untapped and under-served as there exist need for greater awareness and education about the need for security equipments and their benefits. The growth in the Indian market has come with the growing awareness among different end user segments. The Indian security market is witnessing immense growth from sectors such as city surveillance, public transport, hospitality, airport security, BFSI, retail, BPO,manufacturing, college campuses, infrastructure companies and education. The government, in general, is the biggest segment in terms of volume demand. PSUs are also a vertical with significant demand. The private sector, enterprises as well as SMBs, shows potential although their demand is dwarfed by that of the government sector. We can get an idea of this by examining some of the main market segments for security solutions. The market for security systems in India is expected to grow at a compounded annual rate of over 30% over the next three years. Comprised of access control systems, surveillance equipment, alarm systems, and fire detection and protection systems, approximately 60% of the products sold in India are imported. Rising concern over terrorism and crime and a growing outsourcing industry are the key drivers of demand.

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Local Producers In the organized sector:

Manufacturing industry groups: produce furniture using industrial structure(Manufacturing, logistics, retail) exists. In many cases, the furnishing products do not represent the core business but a business unit, for instance Godrej Interior (part of the group Godrej Industries) and Style Spa (Birla Group). In other cases, the production of decorative objects becomes the company's core business: @ home Nilkamal today makes up 75% of sales Company that produces plastic objects;

Companies that produce only their own products and sell them through stores owned or franchised (Featherlite, Ekbote, Durian, Damien). Normally, these companies have a network-interstate sales and own machinery and technology import.

Among the types of products most in demand from the market there are kitchens, furniture and materials for office, padded. In particular office products are recording in recent years a substantial flow of investments in commercial and productive activities on site, especially in the city of Bangalore in the Indian state of Karnataka, given the presence of large multinational groups of ICT:

Herman Miller has a technology transfer agreement with Featherlite and has an office Technical in Bangalore;

Haworth has a production unit in Pune and showrooms in Mumbai, Delhi, Chennai and Bangalore;

Steelcase has a trading company in Bangalore and sales outlets in Delhi (Gurgaon) and Mumbai;

Vitra has its Indian headquarters in Bangalore and distributors / dealers in Mumbai, Delhi and Chennai.

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Imports to India

127


Imports to India

128


Demand Analysis(1)

In a study on the habits of the Indian consumer in the sector of furniture and conducted in 2011, the Indo Italian Chamber of Commerce and Industry interviewed more than 400 end-users, intermediaries (architects, importers, distributors, retailers and manufacturers) and opinion leaders in the cities of first band (Delhi, Mumbai, Bangalore, Chennai and Kolkata), with more than 4.5 million inhabitants, and in the second-tier cities (Ludhiana, Pune, Pondicherry, Goa), smaller towns in which the growth of the class media is particularly dynamic. The research has enabled us to identify some recurrent features of the Indian consumer, that:

• is generally price sensitive, but has a propensity to invest in products furnishing significantly;

• is very attentive to the relationship between strength and design of the product;

inform you, before you buy a product, mainly through magazines and consult with architects / designers for the final choice of a product;

In this context, THE ITALIAN FURNITURE is generally known and appreciated for its high design level (especially SOFAS, CHAIRS, KITCHEN FURNITURE, DINING TABLES AND LIGHTING) and for its durability.

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Demand Analysis(2) •Nevertheless, the availability of products made in Italy, and of different ranges of finishes and models, still very limited: the demand exceeds the supply.

•However, it is appropriate to define the exact nature of the question, especially in light the attitude of Indian consumers towards luxury products, as the products of Made in Italy design and decoration should be considered as such.

•With regard to the Asian markets, have been identified in stages in the approach to the goods of luxury each of which is characterized by an approach and a specific perception the quality, price, brand.

•In this evolutionary process towards luxury, the Indian consumer is gradually evolving from , by lack of knowledge of the existence of certain brands and products to , which recognizes the brand and, despite not having the knowledge to appreciate the characteristics specifications that differentiate the individual product / brand from others, buy it as a tool to promote their own state.

•Given the economic dynamism and the population size of the country, there are no accurate data on the segmentation by income levels of the Indian population.

•From a reworking of data from sources of different types shows that the range of citizens with an income that allows the purchase of luxury products is about 25 million of individuals. However, given the nature particularly price-sensitive and still little awareness of the quality of Italian products, it can be assumed that the number of likely Potential buyers Indians roams about at least 10 million people. 130


India, the world’s eighth largest consumer base, boasts an organized furniture industry estimated at US$8b, growing fast. What the Furniture People says Srikanth Srinivasan, CEO interiors division, Sobha Developers, Bengaluru, says: “People used to engage carpenters to come and furnish their houses, but that is changing now. “People no longer wish to hand over the jobs to carpenters and chase them instead they are looking at more professional options like Big Bazaar and Home Furniture to cater to these needs. However, what India now needs is a major furniture retailer like Ikea, where one can buy high quality furniture from.” Raghunath, manager projects, Innerspace. Manohar Gopal, director, Featherlite Group, Bengaluru, says: “If you look at the trend earlier, it was more cubiclebased design. Today, people are looking for more openness in the office, and lowering wall heights. They want to go green, so partitions are made open from below for proper air circulation, and steel is being replaced by particleboard and MDF, as steel absorbs energy and air conditioning.” http://www.furnitureproduction.net/resources/articles/2013/06/2052410138-profile-indias-furniture-industry

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http://www.furnitureproduction.net/resources/articles/2013/06/2052410138-profile-indias-furniture-industry














Population demographics according to standard of living

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Population in cities of India

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Italian Companies in India

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Italian companies present through distribution agreements and sales

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Distribution Channels In India - Types

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Imports to India •Over the last five years, Indian imports in the sector of furniture and design are grown steadily (average growth rate of 30%) and increased from € 400 million in 2006-07 to € 1,150 million in 2011-12. •Italy, with exports amounting to € 40 million in 2011-12, is the fourth largest exporter to India after China (€ 430 million), Germany (€ 100 million) and Malaysia (43 million €), and its market share, after have suffered a decline in 2010-11, in 2011-12 stood at 4.8% of the total. Registering an average annual growth rate of 26%, so it is less than the average total is compared to that of direct competitors (imports from China are growing at an average rate of 36% of those in Germany 39%). • As a result, during the period 2006-12 the market share of Italy decreased from 6% to 5%, while other competitors have improved their share (China, from 40% 49% Germany 8% to 12%) •The leading products of Italian exports in 2011-12 were wooden furniture (€ 26 million) and lighting (€ 12 million). Those German exports in the same period were sessions (51 million €), accessories / components (€ 32 million) and lighting (18 million €). 137


Total Imports to India

138


Imports to India from Italy

139


Exports made by Italy

Italy followed by Spain, the market has the significant variations in the period CHANGES IN THE RANKING OF EXPORT 2005-2010

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FOCUS: DOING BUSINESS IN ITALY

TOPIC RANKINGS DB 2013 Rank DB 2012 Rank Change in Rank

Starting a Business 84 76 -8

Dealing with Construction Permits

103 100 -3

Getting Electricity 107 109 2

Registering Property 39 47 8

Getting Credit 104 97 -7

Protecting Investors 49 46 -3

Paying Taxes 131 133 2

Trading Across Borders 55 59 4

Enforcing Contracts 160 160 No change

Resolving Insolvency 31 32 1

DOING BUSINESS 2013 RANK


CHANGE IN RANK

73 75 2

DOING BUSINESS 2013 DTF** (% POINTS)


IMPROVEMENT IN DTF** (% POINTS)

65.8 65.0 0.8

http://www.doingbusiness.org/data/exploreeconomies/italy 141

http://www.doingbusiness.org/data/exploreeconomies/italy/











http://www.doingbusiness.org/data/exploreeconomies/italy


FOCUS: DOING BUSINESS IN INDIA



CHANGE IN RANK

132 132 0




51.9 51.7 0.2




182 183 1

Getting Electricity 105 99 -6


Getting Credit 23 23 No change


Paying Taxes 152 149 -3

Trading Across Borders 127 125 -2

Enforcing Contracts 184 184 No change

Resolving Insolvency 116 109 -7

http://www.doingbusiness.org/data/exploreeconomies/india/ 142

http://www.doingbusiness.org/data/exploreeconomies/india/













FOCUS: DOING BUSINESS IN SRILANKA



CHANGE IN RANK

81 96 15




60.4 56.0 4.4


Starting a Business 33 71 38


112 116 4

Getting Electricity 103 104 1


Getting Credit 70 80 10


Paying Taxes 169 175 6


Enforcing Contracts 133 134 1


http://www.doingbusiness.org/data/exploreeconomies/srilanka 143

http://www.doingbusiness.org/data/exploreeconomies/sri-lanka/











http://www.doingbusiness.org/data/exploreeconomies/srilanka


FOCUS: DOING BUSINESS IN NEPAL



Dealing with Construction Permits 97 88 -9

Getting Electricity 96 96 No change


Getting Credit 70 67 -3


Paying Taxes 114 109 -5


Enforcing Contracts 137 136 -1




CHANGE IN RANK

108 107 -1




58.4 58.3 0.1

http://www.doingbusiness.org/data/exploreeconomies/nepal 144

http://www.doingbusiness.org/data/exploreeconomies/nepal/










http://www.doingbusiness.org/data/exploreeconomies/nepal


Opportunities Internationally: Employment laws in India

145


The Indian market has the characteristic features of the emerging countries: great dynamism & growth not supported by an adequate economic development of basic infrastructure and supply chains. Specifically interiors market, this misalignment generates the gap between demand product quality furniture and their actual availability on the market. The reasons for this gap between supply and demand, as we have seen, depends on several factors: 1. Local production : a few players with a production capacity of industrial present with points- sales in major urban centres by only a few years; 2. Die : still little specialized, where operators are at the same time importers, distributors and retailers; 3. Statement : In addition to barriers to imports, the existing legislation is still limiting for foreign investment in multi-brand retail market. Nevertheless, the signals that indicate great opportunities out there: 1. growing purchasing power of the population, 2. great development of urban infrastructure, with the construction of several townships, complexes residential, office, commercial, 3. legislation that is gradually opening up to foreign investment in retail, 4. a general appreciation for Italian products. So this is a market that is experiencing a time of great expansion and development is crucial that Italian companies are able to seize the opportunity and serve the market, in order to obtain a competitive advantage when it takes off. This study therefore aims to provide large-scale producers and SMEs Italian instruments to assess an investment in India and suggest a road-map for a progressive approach effectively and efficiently the Indian market

Conclusions

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World Bank Projects in India

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Example of World Bank Tender in India

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INFORMEST CONSULTING S.r.l.

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Tel. +39 0481 547328

e-mail: [email protected]

web: www.informestconsulting.it

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