Siteasy Furniture Company Goes International

CASE DESCRIPTION The primary subject matter of this case is the first introduction of a company's products into International Markets. Secondary issues include conducting secondary market research by small firms in foreign markets; international terms of trade; identifying relevant tariffs; market segmentation; exchange rates and exchange rate fluctuation. This case has a difficulty level of 4-5 and is targeted at business students in a first course in international business or international marketing. The case can be used either as an introductory course case, as it covers many of the problems typically encountered as a business expands into international business, or as a relatively straightforward functional case on pricing in the international environment. One hour of class time should be sufficient to handle the case discussion and students should budget 3-4 hours of time for case preparation. CASE SYNOPSIS The SitEasy Corporation is a small manufacturer of quality furniture located in Colorado Springs, Colorado, USA. Sales at the 12 year old company have grown steadily and the company expanded two years ago into a much larger factory capable of doubling their output, while maintaining their quality level. However, the housing market peaked shortly after their move in 2005 and in 2006 it started to soften. Current distribution is to exclusive stores on the west coast and the upper northeast in the U.S. The idea for foreign expansion was initiated in response to flat sales in current markets and a lot of excess capacity in the new factory. Past comments from two, large northeastern retailers that a large number of their customers were shipping the furniture directly to Canada led to the idea of exploring international markets. Following a discussion of the relative change in value of the US dollar and the Canadian dollar, the case fast forwards to the issue at hand, answering the inquiry from a potential Swedish distributor met at a German furniture trade show. Pricing must be established for a portion of their exclusive furniture line for the Swedish market, along with forecasts of expected sales and expected effect on plant capacity and firm profitability. This requires identification of accepted terms of trade, relevant tariffs on the type of goods being offered, consideration of exchange rates, and most importantly, the expected size of the market for SitEasy furniture in Sweden. INTRODUCTION The SitEasy Corporation is a small privately held manufacturer of tables and chairs made from the hardwoods of the northwest located in Colorado Springs, Colorado, USA. The company was formed 12 years ago by two old college friends, Bill Martin and Greg Huth. They had been involved with industrial design for a number of years and were quite successful. They wanted to furnish their homes with quality, contemporary pieces and found it difficult to find the type of furniture they desired to match their lifestyles in the marketplace. After an extensive search of the furniture market in Colorado, they identified a niche in the market for residential furniture that they stated in the following way: people desiring high quality pieces if contemporary furniture, made largely by hand, resembling some of the early twentieth century classics and bringing them into the contemporary homes of the affluent. Each piece should be signed by a craftsman and numbered. Given the vision for the products to be produced, great emphasis was placed on quality workmanship in production and achieving placement in the right retail environments. These were defined as retailers of similar lines of expensive, quality furniture, who could be counted on to properly display and merchandise their products. The promotional mix was designed with a target market of individuals much like themselves in mind to reinforce the uniqueness of the individual product and its value as a representation of true craftsmanship. The company achieved moderate success during the first five years with distribution in west coast markets. …