Foxy Originals Jewelry Company Case Study

Summary

In this following case, Foxy Original is Canada bases jewelry company founded by Jen Kulger and Suzie Orol, that offers high in and high quality designs that are at affordable prices. Foxy Original jewelry target women between the ages of 18-30. Foxy Originals high in quality necklaces, bracelets, and earrings are sold in over 250 Canadian boutiques. With their growing popularity of its products Foxy Originals began running the risk of becoming over-saturated in the Canadian market. The two partners began thinking of possible ways expand their business to the United States market, since there was a limited market capacity in Canada. They wanted to expand to the U.S being that their market is 10 times larger, which would give them better opportunities to further the development of the business and enhance their product design while boosting their company’s brand. Although Foxy Original is surviving in the Canadian market, the U.S market is somewhat different than Canada in the terms of the customers’ preferences in jewelry. This may hinder Foxy and putting them behind in the U.S market, also require Foxy to incur some launching cost to help the company adapt to the different environment between the Canadian and American customers. The partner believed that it would be worthwhile to take the risk to enter to the U.S market.

Key Problems

Being that the Canadian market has become over-saturated, Foxy Original is trying to figure out the best strategy that will help them expand to the U.S. market. Foxy now must decide on what will be the best method of distribution; attending trade shows, hiring sales representatives or maybe both will help, and to evaluate the associated cost and benefit behind the alternative strategies.

Possible solutions

 Solution 1

Foxy Originals can start to sell their products at trade shows. The founders can attend these trade shows that are devoted to fashion, apparel and giftware. This is where they will have a booth to show case their products, whiles addressing customers inquires, while being able the have opportunities to take in new orders. Trade-show distribution strategy will be a good opportunity for the partners to learn about different customers’ preference and market trends. This will give them new a decision-making process on positioning their products, new product designs and benchmarking strategies. While attending, these trade shows it would start to give Foxy the opportunity to showcase their products to thousands of new potential buyers. Also, the trade shows appearances will help the owner’s opportunities to network with current and former retail owners, sales people, and new customers.

Solution 2

The partners can hire sales representatives to help them sell their products. The company will pay their employees commission that would be based on their sales volume in addition to a small monthly fee. The sales representative’s strategy will be an alternative way to develop a sale force that will help add to fashion within the U.S. This strategy will enable the company to penetrate within the U.S. market faster by taking advantage of the established sales channel and connections of the salesmen and saleswomen. The partners felt that it may be very difficult to find suitable personnel to fulfill their positions. On the other hand, new sales representative will have more experience within the US market, while also being very connected to the jewelry industry.

Solution 3

A combination approach

Foxy Originals could benefit from using both distribution methods. The partners would be able to sell their products during the trade shows and while hiring qualified salesmen and saleswomen to distribute their products. Although development of skilled sales force emerges as the preferred option, it will come with its own set of complexities and challenges. This logistics could be very complex, and if done incorrectly could put the company in competition with itself.  The sales at the trade shows may undermine the sales efforts by the sales representatives. Neither the trade show nor sales force strategy would generate enough profit that will meet their goal of $100,00. To meet this target profit goal, they must execute each strategy at the same time.

Recommendation

Based on the finding from the quantitative and qualitative assessments, I would recommend that the partners choose the trade show and the sales force strategy. The jewelry industry will lead to exposure to new customers which would be very important to penetrate within the new market, and by using the combination approach, Foxy would be able to establish their customers’ basis faster within the U.S. market. The strategy would also enable the partners to test their product during the trade shows, gain new trend and make adjustment to a better fit of the customers’ requirements. Also, the target of $100,000 is another reason to explain this recommendation. The required returns on the expansion will be disapproving since they would only take those projects that expand the marginal value of the company. This required return would act as an opportunity cost that must be considered when doing the cost and benefit analysis.

Reference

IVEY Publishing Foxy Originals –Expansion into The U.S Market Foxy Originals Catalogue., (2007)

Costs for trade-show

                                        Total              $9,300                        per show

The partners plan to attend 10 shows, therefore the total cost per show would be $9,300*10 ($93,000)

        One time investment

Total Fixed cost would be ($9,300+133) per show and $94,330 per year

Contribution margin from the trade show

Each order foxy sell will equal 25 necklaces and 12 pair of earrings and will pay $15 of shipping cost.  Therefore, total variable costs and weighted average contribution margin for a order during the trade show will be calculated as: