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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Recommendation for Oriental Rug Expansion in Iran

Oriental Rug [Digital image]. (n.d). Retrieved from https://nazmiyalantiquerugs.com/vintage/modern-vintage-persian-rugs/modern-vintage-tabriz-rugs/fine-vintage-tabriz-persian-rug-51042/

Prepared for:

Ms. Marilyn Spencer

CEO, Lynx Corporation

Prepared by:

ABC Consulting Firm

Due Date:

12/01/2017

Table of Contents

Contents Page

Executive Summary 3

Introduction:

o Problem Statement

o Research Process

o Proposed Subsidiary Company – Overview

Proposal Details:

o Foreign Location

o Market and Industry Analysis:

 SWOT Analysis

 Consumer Profile

 Competitive Analysis

Conclusion:

Reference List

Appendix

Executive Summary

Recommendation:

Our team would like to recommend Lynx Corporation's Chief Executive Officer, Marilyn Spencer to expand Rugs Express to Tehran, Iran. This move will expand the company globally and allow people from around the world to experience the quality of traditional rugs. Each rug is handmade and unique with different designs, colors, shapes, and sizes.

Problem Statement:

The CEO Lynx Corporation, Marilyn Spencer would like to expand her business globally. She wants to place her business in a non-English and non-European speaking country, which is why she chose to open in Iran.

Objectives:

The objectives of this mission are as follows:

• Leverage technology for production of authentic Persian rugs

• Utilize the talent of local weavers

• Provide high quality product

Approach/Methodology:

Selection and Interview Process

On November 9, 2017, I interviewed Sam Nuwayhid, the store manager of Caravan Imports Oriental Rugs in Madison, AL. He was asked a series of questions regarding oriental rugs. Upon completion of the interview, he explained that the rugs are all extremely labor intensive thusly why you will pay a pretty expensive price tag for a real oriental rug. Most of the time the rugs are made out of silk, wool, or a silk-wool blend. He told us during the interview that an 8 x 10 rug typically has about 600,000 hand-tied knots. The yarn is died and can take up to a week and half to dry.

Introduction

Problem Statement:

Lynx Corporation's CEO Marilyn Spencer would like to leverage the power of the global economy to expand her business. She has asked that a feasibility study be conducted to explore the possibility of expanding a sector of Lynx Corporation in a non-European, non-English speaking country. Provided in this proposal is a recommendation as to the location, product/service and feasibility of this expansion.

Company – Overview:

Lynx Corporation is firm which offers quality rugs to variety of clientele. The firm has got organizational culture and focused on quality and customer satisfaction. The chief executive of the firm Marilyn Spencer, who is an innovative and aggressive individual. The company makes rugs of different sizes and colors depending on the nature of demand. Each of the product is made using high-level creativity and uniqueness which fits the demand of the market.

Proposal Details

Foreign Location

• My dad was born and raised in Tehran, Iran and moved to the United States when he was sixteen years old. He used to travel back and forth every so often, and he would always bring a rug back with him to the states. My family would sit on the floor and listen to him explain the history behind the rugs. I remember looking at all the intricate colors and patterns and have always been fascinated with it. Oriental rugs are just a small part of my heritage, but I genuinely find it fascinating.

Hand-knotted rug [Digital image]. (2012). Retrieved from https://loveofrugs.files.wordpress.com/2012/06/weaving.jpg

• Geographic Advantages/Disadvantages

Moving to the Iran exposes the business to wide access of growing population hence high demand of the products. The location is strategic for shipping of the raw materials, hence a competitive advantage.

• Natural Resources

The country has got various sources of natural resources that will benefit the venture. They include silk and wool which will boost the growth of the firm

• Available Labor

The labor market in Iran is plentiful and the men and women work an average of 44 hours a week.

• Economy

There is swift economic growth in the country. Access of labor and support from the other countries makes the country to have strong economic condition.

• Cultural Trends and Differences

The culture of the individuals is different from the home country. However, there is demand for artistic commodities and furnishing of the home, making the country suitable for expansion of the venture.

Proposal Details

Market and Industry Analysis

Studies show that there is growing demand of home furnishing, which the organization will benefit because of rising change in way of living. The other important feature is the pricing of the rugs in the market.  Since most of them are made of silk, wool or even combination of both, the quality is unique in the market, the demand is rising. The organization will position itself strategically in the market. Technology will also be employed to overcome local competition since the industry is not very competitive.

SWOT Analysis

The growth of the Carpet Industry in Iran is an indication that demand is raising. Over time, households have been buying different types of homemade carpets used for various purposes. Examination of the market and business environment in Iran indicates that there several factors which investors should be aware. They include market changes, growth patterns, demand level, population growth, competition, technological factors as well as legal factors. Iran is one of the countries which is not a native English speaking country. The culture is also different from the US way of live, hence different and unique in its own way. The section gives detailed examination of the strengths, weakness, opportunities and threats of the firm.

Strengths of the firm expansion

Operation in foreign country offers different types of strengths for the organization. They range from parent company financial structure, management and leadership, internal culture, operations and strategic planning. Also there is wide exposure to innovation, labor and human support. The company will be making the carpets manually, hence there will be employment of human input in the process of production. Iran has got wide access of human capital, mostly women and men who can be hired without use of lengthy procedures. Over the years, growth of artistic skills have led to demand of labor and carpets in the country. The carpets are also associated with natural beauty and quality. There will be wide strengths of the company and the business at large. The company will also have an access to effective management skills. Most of the senior management will be drawn from the parent company to ensure that there is no erosion of the culture. Still, there will be a benefit of financial access. Management and leadership are crucial facets of the organization. The process of weaving the carpets has always been done in a unique way to ensure that the quality is kept. It will be a growth factor for the organization in this case, since individuals will have an exposure to training and hence production of quality products. There are also benefits associated with the financial access from the mother country. The company will not struggle with set up costs just like new ventures, since there will be support from the home country. Other things like evaluation and strategic planning will be done to eliminate poor growth of the firm. The strong team of leadership will also introduce the home culture to ensure that operations are done as per the plans and market specifications. The quality of the products will hence remain.

Weaknesses

The operation of the firm will also face some challenges in due course. Since the firm is not perfect, there will be cases of weaknesses in course of operations. The firm will face some challenges such as lack of familiarity with modern marketing skills in Iran. The hand-made carpets are customized in most cases targeting given market niche. The firm will have challenges in mastery of the market composition in the first two years. Studies will therefore take time, something which might lead to lose of customers. There will also be a challenge of internal organization in the first six months. It will take time for the new employees to master the unique art of making the mats for the customers. Control measures will hence take time for full implementation. The prices are also likely to be high compared to the products from the industries made by machines. The high pricing might hence be a challenge in the market, leading to reduced level of revenues in the first months. The above challenges will however, be overcame through intensive training of the employees. There will also be an adoption of modern promotional strategies to ensure competition in market. Others include intensive market studies to master the nature of the market.

Opportunities in Iran

Moving to Iranian market opens numerous opportunities for the firm. The country has got readily available labor force, something with will cut down the challenge of export employees. The country has got growing population. The large number of individuals will hence offer an access to human capital. Still, there will be training which will ensure that the quality of human capital is furnished with excellent skills. The population and demand of home furnishing is rising in the country. The above is growth opportunity for the company. Change in the traditional view of living in unfurnished houses is ending, creation new demand for the commodities. There is also expansion of the markets in the country, something that will spur demand of the carpets in Iran. The government support of private sector is another big opportunity. There is determination of the government to support the non-oil industries in the country. The support will hence lead to growth of the organization because of government incentives in the country. The above support factors and use of technology in the process of commodity distribution will ensure growth of the venture. There will be use of unique way of weaving the mats and the carpets, making them to have strong brand in the market. The pricing will also be done depending on the size and quality, hence customization.

Threats

The carpet investment in Iran will be faced by some threats. The common ones according to market studies and evaluations in the country, the venture will experience technological and competition threats. Others include decrease in prices and exports threats in the industry. Still, there will be threats associated with recession and copying of the designs. Changes in technology may pose serious competition for the market segment of the hand-made carpets. Still, the process of importation of poor quality with imitation our design may lead to decline in the customer loyalties. Individuals may have a challenge of choice and differentiate of the commodities when it comes to the market. Till, cases of recession may occur, leading to decline in the purchasing power of the individuals. In such cases, there is like hood of reduction in profits of the firm. Economic changes leads to reduction in the level of disposable income of the customers, hence lower purchasing power. The overall effect is reduced demand and hence low profitability. There is also a threat of the local firms and individuals copying the design and the way of making the products. In such cases, there will be likelihood of creation of direct competition. Still, changes in political environment may threaten the business. However, the above challenges can be solved through taking risk mitigation measures and s comprehensive strategic planning to encounter the future.

   

Proposal Details

Consumer Profile

The company focuses on the households who use rugs for various purposes. The common use of rugs include house furnishing and motor vehicle decoration. Others are used in corporate organizations such as offices. The mainly target is hence middle-level income households.  The composition is individuals aged 26-55 years who have got significant amount of income. The choice of the clientele is based on fact that the rugs are above the normal market price. Still, they will be customized to meet the demand of the individuals. The organizations which need the rugs are also part of the market, hence they are targeted in course of planning.

Proposal Details

Competitive Analysis

Examination of the market shows that there is population growth and high demand of home furnishing the country. The above is growth factor for the company. Change in the traditional view of living in unfurnished houses is ending, creation new demand for the commodities. There is also expansion of the markets for artistic products in the country, something that will spur demand of the carpets in Iran. Still, there is strong government support of private sector, something that will lead to favorable working conditions.

Our Competitive Advantage

The company has got unique features such as strong brand name in the market. The rugs are also customized, something that will give them a competitive advantage, hence overcoming local competition. There will be a clear strategic planning to ensure utilization of the local talent in course of weaving the rugs. Still, use of technology will make the organization outstanding in course of supply of high quality rugs. Other features include growing market and rising demand in the market.

Conclusion

Expansion to the foreign country will offer an excellent opportunity for growth and expansion of the Caravan Imports Oriental Rugs. The company will leverage on the growing economy in the new country as well as the technology in Iran. Since the company has got strong brand and the commodities are highly differentiated, penetration in the Iranian market will be relatively easier. Still, the organization has got strong company culture which is based on innovation and customer satisfaction. The choice of the target market in this case is the households. There is growing demand of home furnishing, which the organization will benefit because of rising change in way of living. The other important feature is the pricing of the rugs. Since most of them are made of silk, wool or even combination of both, the quality is unique in the market. The organization will position itself strategically in the market. Technology will also be employed to overcome local competition. The firm will work closely with local individuals with a view of integrating the home country culture with the local culture. There will be studies of the market trends and examination of the changes to ensure that changes are made in advance.

References

Oriental Rug [Digital image]. (n.d). Retrieved from https://nazmiyalantiquerugs.com/vintage/modern-vintage-persian-rugs/modern-vintage-tabriz-rugs/fine-vintage-tabriz-persian-rug-51042/

Hand-knotted rug [Digital image]. (2012). Retrieved from https://loveofrugs.files.wordpress.com/2012/06/weaving.jpg

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