The Business Concept
Origin of the Idea
Xiong Shi Fa Lang (XSFL) originated as a family business. The founder, Xiong Shi, was a man skilled in cloisonné art. He lived during the Qing dynasty era where he learned about cloisonné art. With this background, he developed interest in starting a business in the cloisonné art. In 1969, he established the Xiong Shi Fa Lang company that produces Chinese traditional handcrafts such as enamelware. The company operated more like a factory during these initial stages. The business has been passed down through three Xiong’s family generations. Now, Songtao, the grandson of Xiong Shi, is operating the business. Songtao Xiong was influenced by both his father and grandfather and later developed keen interested in the family business. They wanted him to continue, inherit, and flourish the family business. The Xiong Shi Fa Lang is now a flourishing family business in the Chinese market. Currently, Songtao Xiong and his team are looking towards expanding into the Canadian market. The Canadianmarket presents several better opportunities for the cloisonné art (Wei & Na, 2015).
The Xiong Shi Fa Lang (XSFL) specializes in the manufacture and sales of a wide range of cloisonné art from Chinese origin. In particular, these are special enamelware characterized by thin metal strip separating the coloured areas.Currently the company is producing four different types of products. The first one is the enamel watch dial. It produces this high-end product by collaborating with watch brands in both China and Switzerland. The second one is the diverse collection of enamel art crafts. These products target art collectors through auctions and exhibitions. The third one includes tea ware and dine, which targets a wide range of broad sales channels and customers. The fourth one includes a wide range of customized bracelets, pendants, and jewellery rings, etc.The company believe these two products with sell best in the Canadian market. They are planning to introduce these products along other Chinese cloisonné art in the new target market.
Goals and Objectives
The company is guided by the following goals and objectives.
- The company want to carry forward the production and development of traditional cloisonné and enamel techniques in the world.
- To be the leader in producing best Chinese traditional handcrafts.
- To pass down and make alive the skills of producing flushing traditional Chinese enamels.
- To deliver consumer expectations of cloisonné art.
- To expand its market all over the world.
- To maintain production of high quality products.
Growth, Expansion, and Diversification
Xiong Shi Fa Lang (XSFL) is using definite growth, expansion, and diversification strategies. As noted by Li and Li (2015), the company uses strategies that are largely contingent upon their existing financial situation, government regulation, and market competition. The primary growth and expansion strategy adopted by XSFL is the sales increase and new market entry through new opening of subsidiaries. This is why the company targets the Canadian market. The company also diversify its products to help it meet specific customer needs. Through this strategy, the company produces a wide variety of a similar product. Diversification is extensively applied in the manufacture of bracelets, pendants, and jewellery rings.
The Industry and Market Analysis
(a) Industry Overview and Characteristics
The company’s market can be categorized into two namely (1) jewellery manufacturing, and (2) Fabric, Craft & Sewing supplies stores. This is because most of the company’s products fall into the two sectors. Therefore, information must be obtained from the two sectors. In Canada, the total value of jewellery manufacturing industry is mainly composed of both small and medium sized business. It is estimated to worth more than 3 billion dollars. United States is the largest exporter of jewellery product to Canada. It commands half the Canadian market share. A huge market gapexists that needs to be filled by new companies.
Market research by Peartree Solutions Incorporation (2003) revealed that the Canadian jewellery market has been down trending since the beginning of 2009. The economic downturn of 2008 pushed many consumers to reduce their expenditures on jewellery products. Although the economic crisis created great impact, the demand for customer jewellery has not been affected. The demand still remands high in the Canadian market. The affordability of costume jewellery has made an effective alternative to the fine jewellery used in the fashion industry. It is appealing to all ages and incomes in the Canadian market. Costume jewellery continually reflects the current trend in the Canadian market. It comes in many diferent colours, styles, and materials. Many jewellery consumers in the Canadian market are actively using the internet to shop for the right product. This is an advantage for the XSFL Company.
On the other hand, the Canadian fabric, craft and sewing market is relatively small. Furthermore, it is highly competitive given the set of skills required aside from other business constraints. These factors make it harder for new businesses to succeed in the Canadian fabric, craft,andsewing industry. However, this can be a huge advantage for the Xiong Shi Fa Lang Company because it uses high-end techniques in the manufacture of its products. However, the industry revenues started growing in 2009 due to improved economic condition Canada. The industry is also being boosted by the emerging “Do It Yourself” (DIY) trends that emphasize on creative art. This makes Canada a prime market for the XSFL’s fabric, craft, and sewing products.
(b) Industry key Success Factors
Xiong Shi Fa Lang is likely to succeed in the Canadian market because of its good leadership and management. The company has invested in productive leadership and management. The company chief executive, Songtao Xiong, graduated with a major in Economics and International Trade at The Capital University of Economics and Business. He strongly believes in leading the business in a way that carries forward and develops the traditional enamel and cloisonné techniques. He has several characteristics of successful entrepreneurs. First, he is passionate, confident, and optimistic about the business and the Canadian market. In addition, their factory is full of skilled people only.
Another key success factor for the company is the appealing designs and outstanding colour combinations. Xiong Shi Fa Lang provides appealing Chinese cloisonné art on all its jewellery and watch products. The company also uses outstanding colour combinations that subsequently attract buyers’ interest. The Canadians love quality designs and colour combinations. In addition, the company is entering the Canadian market with low cost manufacturing efficiency. This actually allows them to use attractive retail pricing strategy and earn good profits. It will maintain its production in china to minimize the cost of production.
(c) Forces, Competitive, Technological, and Government
Several forces are at play in the Canadian market. First is the growing internet use. Many Canadian consumers are now turning to the internet to shop for diferent products. The company is entering the Canadian market recognizing that majority of the consumers are switching to online shopping. Leading are the youthful generations aged between 20 and 50 years. Mots young female and male jewellery consumers in Canada are shopping online. The same trend is seen in the fabric, craft and sewing products. The company’s competitiveness to tap the online customers is essential to their success in Canadian market. This is creating an interesting opportunity.
The advantage of the Xiong Shi Fa Lang, and what will make it thrive in the Canadian market, is its collaboration with technology gurus. Although it is relying in heavy technological advancements, the company collaborates with the leading companies. For instance, it collaborates with the partner with a Swiss watch brand for the production of top-notch Enamel dial watch brands. This has a major contribution towards its success. In addition, the company is using technology to produce innovative designs for its wide range of products. These products are recognizable and trending in the market.
Within the last two decades, both political and economic factors have played great roles in driving the jewellery industry in Canada. This also applies to the fabric, craft, and sewing industry. The two industries have remained highly competitive characterized with increasing demands. The Canadian economic is steadily growing thus would support the company’s business activities. Secondly, the Canadian government has been offering favourable conditions for doing business in Canada. Taxes have been substantially lower to favour the entry of new companies. The Canadian government has also created several incentives for new and thriving businesses that attract Xiong Shi Fa Lang.
(d) Target Market
Currently, Xiong Shi Fa Lang is targeting the Canadian market. While entering into the Canadian, the company will maintain manufacturing its products in China. This is done to help minimize the cost of production and increase profitability. The company already has well performing factory with skilled workers in China. Therefore, the company only need to hire sales and marketing team while entering the Canadian market.
The Canadian market presents amble business opportunity for Xiong Shi Fa Lang Company. First, ether is growing demand for the Chinese cloisonné arts. There is increasing number of your females in Canadian who greatly cherish jewellery finished with the Chinese cloisonné art. The Canadian jewellery market is huge. It is estimated to worth more than 3 billion dollars. Females with the age range of 20 to 50 years are the primary consumers of both fine and costume jewellery. The Canadian market is continually changing. This reflects the current trends in new and stylish designs that are more appealing to the consumers. Canadians generally love outstanding designs, patterns, and colours.
Vancouver has also created the huge market potential in Canada. This port city in south-western British Columbia opposite Vancouver Island is a leading business hub in Canada. It is the Canada’s third largest city and the chief pacific port. It serves as the entry point for many people and goods. As explained by Zeeshan (2015), the population of Chinese living in Vancouver has been on the steady increase since 2002. Many Chinese immigrants stay in this city thus creating more interest in Chinese art and antiques. The company first targets the people living in Vancouver because they have developed interest in the Chinese products.
(e) Market Potential and Competition
There is huge market potential in Canada. The entire Canadian market is estimated to worth 3 billion dollars. There is also another substantial market size for the fabric, craft, and sewing products. The Canadian population is very high. Besides, it is rapidly growing. The high population in Canada will provide ready market for the company’s products.
Despite the high market potential, there is stiff competition for the Canadian’s jewellery industry. Exports from countries such as United States, China, and India provide the stiff competition. Besides, there are relatively low entry barriers in the Canadian market. This is because the government has reduced the number of taxes. For instance, there is no excise tax on all imported goods.
(f) The Window of Opportunity
In summary, the window of opportunity in Canadian market is influenced by the increasing globalization, internet, and e-commerce. The ecommerce opportunities are real and huge. The growing buyer preference to the Chinese art and antiques has also shaped the window of opportunity in Canada.
(a) Marketing Strategy
Xiong Shi Fa Lang is planning to use two marketing strategies to sell its products in Canada. First, the company is going to have its sales representatives in major cities such as Vancouver,Montréal,Toronto, and Ottawa among others.Vancouver will be used as the entry point into the Canadian market. This is because the city has already developed a taste for the Chinese art and antiques.
Secondly, the company will use the ecommerce hub to sell its products in the Canadian market. Already there are millions of Canadians purchasing products over the internet. The company has discovered that ecommerce is an easier way of getting the Canadian customers. Nearly half of the country’s population use the internet daily. The company will set its own online stores where people can view and purchase their products. The company is planning to use customizable online stores where customers can create their own designs for dial watches.
(b) Market Segment
Market segmentation is the key to raising visibility and awareness of the Xiong Shi Fa Lang and their products. The company has gathered a lot of information concerning their target customers. These pieces of information were useful in the segmentation of the market by determining their customers their specific needs.
To achieve its goals and objective, XSFL will primarily focus on two distinctgroups in the Canadian market: the galleries and the end consumers. The galleries will be used as the primary distribution and retail channels in Canada. The galleries include local jewellery stores, local art stores, as well as museum shops. Products will be imported direct from china where they are manufactured. On the other hand, the end consumers will directly interact with the sales representatives over the internet and other local stores. They include individual art collectors.
The Canadian market will be segmented and grouped into the four major cities namely Vancouver, Montréal, Toronto, and Ottawa. The characteristic of each population will be identified to help develop appropriate products for them. Various products will be produced that suit the specific need of each city or region. This strategy will help position XSFL as an innovative, unique, and artistic provider of Chinese art and antiques in these four major cities (Peartree Solutions Inc., 2001).
(c) Competitive Advantage
There is stiff competition in the jewellery industry. However, Xiong Shi Fa Lang enters the Canadian market with high competitive advantage. First, the company has significantly reduced the cost of production by maintaining the manufacture of its products in china. It has high performing factory in china, which has employed skilled workers. The company has stable and reliable workforce back in china. Its current manager, Songtao Xiong, is also highly experienced and skilled in the Chinese cloisonné art business. He is currently working with a team of qualified and experienced six designers, four apprentices, five administrators, and several craftsmen specialized in the manufacturing process.
Secondly, the company has put strategies of tapping the ecommerce opportunities. The company is setting up its own online store for the Canadian market. It has built online stores where people can directly and easily buy vases and dial watches. The beauty of their online store is that it allows for customizations. Customers can independently create their own designs for dial watches and send to the sales representative. This will create a great market catch for the company.
Brand recognition is another greatest asset for Xiong Shi Fa Lang. the company is known for producing quality and lasting products. The company will find success in the Canadian market for quality and price. There are no serious competitors in the Canadian market specializing in the manufacture of Chinese cloisonné art.
Lastly, large economies of scale will make it even easier for Xiong Shi Fa Lang to succeed in the Canadian market. The company has established itself in the industry, with more 50 years of services. It has enough resources and experienced labourers.
(d) Marketing Mix
Marketing mix is a powerful business tool used by marketers. It is crucial in determining he right product or brand to offer in the market. The marketing mix that will be used by XSFL include product,price, promotion, and place. They all determine the success of the business in the new market. Ideally, the company will follow specific approaches of distribution, pricing, advertising, customer service, as well as promotion to reach its target customers (Zeeshan, 2014). They are discussed below.
Pricing: The Company will use an affordable pricing strategy. However, it must be based on the cost of production, and exportation. This is because the company will be manufacturing its products in china then importing the new Canadian market.
Promotion: Since it is new in the market, the company will offer a number of promotions for its products. The company will use internet to promote its products. The distribution channels will also serve as promotion and advertising avenues.
Place: The Company’s products will be distributed through the websites, network of galleries, art collectors, as well as local jewellery stores.
Product: The Company will product quality products customized for the Canadian markets. Customers will have opportunity to provide their design for watches among other products through the internet.
(e) Revenue Projections
Given the prevailing market condition in Canadian, Xiong Shi Fa Lang anticipates to enjoy increasing revenue collection starting from year two. The revenue projection is divided into break-even point, sales forecasts, and expense forecasts.
The break even analysis indicates that the company will need $4,000 of its monthly revenue in order to reach the break-even point.
|Monthly break-even revenue||$3,411|
|Estimated Monthly Fixed Cost||$3,400|
|Average Variable Cost||32%|
The company will spent the first month setting it its business and building inventory in Canada. There will be no sales during this month. Likewise, the second month will be spent on setting up distribution channels. This month will also be marked by limited sales. Serious sales activities will start on the third month. The company will start exhibiting and selling its products through the internet and local stores.
The company has budgeted for its marketing as well as distribution and importation expenses. The marketing expenses include the art festivals, art shows, and trade fairs. Other expenses include entry/promotion fees, and travel costs, among others. The company has also includes the expenses related to developing new website.
Li, W., & Li, N. (2015).The legend of enamel on fingertips, Retrieved from:http://www.chinafeatures.com/web/rw/201505/t20150507_13129.html?from=groupmessage&is ppinstalled=0
Peartree Solutions Inc. (2001). Conseil des métiers d’art du Québec (CMAQ). Retrieved from:http://canadiancraftsfederation.typepad.com/files/study-of-the-crafts-sector-in-canada.pdf
Peartree Solutions Inc. (2003). Conseil des métiers d’art du Québec (CMAQ). Retrieved from:http://canadiancraftsfederation.typepad.com/files/ccf-fcma-study-profile-and-development-2004.pdf
Zeeshan Haider. (2014). Jewellery Manufacturing in Canada. (IBISWorld Industry Report 33991CA). Retrieved from: http://0-clients1.ibisworld.com.mercury.concordia.ca/reports/ca/industry/default.aspx?entid=888
Zeeshan Haider. (2015). Fabric, Craft & Sewing Supplies Stores in Canada. (IBISWorld Industry Report 45113CA). Retrieved from:http://clients1.ibisworld.ca/reports/ca/industry/default.aspx?entid=1081