OVERVIEW
Founded in 1998 by recent university graduates Jen Kluger and Suzie Orol, Foxy Originals, a Toronto-based
jewellery company, grew to become a well-known designer and producer of high-end jewellery with a strong
presence in the Canadian market. Foxy Originals’ high- quality necklaces, bracelets, and earrings are currently
sold in over 250 Canadian boutiques. The company’s fast-growing customer base consists mainly of style- and
price-conscious women between the ages of 18 and 30 years old. The company’s ability to satisfy huge demand
for low-priced high-end jewellery gave it a competitive advantage in a market that long had overlooked lowincome young women. As a result, Foxy Originals had a remarkable 400% growth (Exhibit 1) in its first three
years of business, and it continues to grow at a rapid pace. With the growing popularity of its products, Foxy
Originals was running the risk of becoming over-saturated in the Canadian market. In an effort to avoid this
problem, the company decided to enter the U.S. market by January, 2005. To achieve this goal, Foxy Originals
had to make a vital decision regarding its distribution strategy: Would the company attend trade shows or hire
sales representatives?
SWOT ANALYSIS
Foxy Originals’ strengths reside in its owners’ experience, stylish products, pricing strategy, and its current
market presence. Foxy Originals owners, Kluger and Orol, are the company’s greatest assets. Orol’s parents
owned a successful metal manufacturing company that specialized in making medals and jewellery. Orol
became familiar with the most effective and efficient jewellery production methods. Kluger had been designing
and selling her own jewellery since she was fifteen. Kluger’s experience in jewellery fashion and design helped
the company stay ahead of the latest trends in the ever-changing jewellery market. Orol and Kluger’s extensive
experience in jewellery design and production gave their company the strength it needed to compete in the
brutal high-end jewellery market. In addition, one of company’s key strengths is its ability to produce high-end
jewellery while keeping production costs at a minimum. By combining high quality with low prices, Foxy
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Originals was able to gain market share at an unprecedented rate. Gaining a decent market share gave the
company the brand recognition it needed to secure shelf space at 250 boutiques nation-wide. A strong market
presence has translated into a healthy financial gain that allows the company to continue its current operations
while exploring expansion opportunities.
Foxy Originals’ success came at a price. The company’s weaknesses include local market saturation, lack of
international market experience, and the high cost of securing retail accounts. The company realizes the need to
expand, but officials worry about their lack of experience in the US market.
Foxy Originals does not know
how the US market will respond to its products, and it does not know how competitive the US jewellery market
is. Officials similarly worry about the high cost of securing new retail accounts. Kluger’s and Orol’s method of
personally securing each new retail account is extremely effective but time-consuming and expensive. They
cannot apply this method in major American cities. Therefore, Kluger and Orol must try risky new methods-attending trade shows or hiring sales representatives.
Tapping into the US jewellery market creates almost unlimited opportunities for Foxy Originals. The company
will gain a larger customer base, wider brand exposure, and greater international market experience. The
estimated US population of women between the ages of 19 and 33 is 30 million (censusscope.org, 2000)-almost equivalent to the entire Canadian population. If Foxy Originals were able to secure even a small
percentage of this population, they would gain greater exposure, and in turn, would increase demand for its
products, making Foxy Originals the latest must-have in fashionable jewellery. Gaining invaluable experience
in the process of taking its products into a “foreign” market, Foxy Originals will find answers to critical
questions: How does the US market respond to their products? How big is the demand for their products? How
competitive is the US jewellery market? What are the best pricing, marketing, and distribution strategies? This
experience will be vital to Foxy Originals’ future expansion plans into Europe and Asia.
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Although entering the US market presents Foxy Originals with huge opportunities, it also presents significant
threats. Challenges the company may face are the risk of being eliminated by stronger, better marketed
competitors; potentially low demand for its product and expensive marketing and distribution. Given that
Signet Group, Tiffany & Company, and Zales Corporation control the American market, Foxy Originals must
establish its brand on the strength of its superior designs and lower price tags. Many Canadian customers have
supported Foxy Originals because of their pride in Canadian products, but the US market buys exclusively
according to fashion trends. Adding to the challenge, preliminary market research suggests 50% of Foxy
Originals’ designs do not appeal to American shoppers. Given half the stock’s limited appeal, marketing and
distribution costs associated with establishing the brand, securing shelf space, reaching-out to consumers, and
gaining market share may prove too much for Foxy Originals to manage.
PROBLEM IDENTIFICATION
With the Canadian market becoming over-saturated, Foxy Originals is trying to decide on the best strategy for
expanding into the US market. The company must overcome its unfamiliarity with the US jewellery market, its
lack of a solid marketing and distribution strategy, and the high costs of acquiring new retail accounts. Time is
an important factor, because Foxy Originals plans to enter the US market by January 2005. Given that it is
starting to draft plans in June 2004, the company has only six months to develop a solid plan for US expansion.
ALTERNATIVE IDENTIFICATION
Foxy Originals currently has three options:
Option one: Foxy Originals can sell its products at trade shows. Orol and Kluger will personally attend
trade shows devoted to fashion, apparel and giftware. They would have a booth set up to present their products,
address customers’ inquiries, and take orders. Attending these shows will give the company an opportunity to
showcase their products to over 75,000 interested buyers. In addition, trade show appearances will give the
owners opportunities to network with retail owners, sales people, and potential customers.
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Option two: Foxy Originals can hire sale representatives to sell their products. The company would pay
them commission, based on their sales volume; in addition to a small monthly fee. Sales representatives have
more experience in the US market, and they are well-connected in the jewellery industry.
Option three: Foxy Originals can benefit from using both distribution methods. They can sell their
products at trade shows and hire a qualified sales force to distribute their products. Although development of a
skilled sales force emerges as the preferred option, it comes with its own set of complexities and challenges.
The logistics are complex. If done incorrectly, this option could put the company in competition with itself;
sales at trade shows could undermine the sales efforts by the sales representatives.
DECISION CRITEIA
Foxy Originals must establish relevant decision-making criteria by which to evaluate its alternatives. The
company must carefully evaluate expected profits, market-entry time, and the complexity of each alternative
ALTERNATIVES ANAYLSIS – MATRIX
Alternative/Criteria
Attending Trade Shows
Hiring Sales Force
Trade shows and Sales Force
Highest
Profits
No
Yes
Yes
Enter The US
Market Fastest
No
No
Yes
Least
Complex
No
Yes
No
ALTERNATIVE ANALYSIS – DISCUSSION
Attending a trade show will cost $9,433.33 on average (Exhibit 3) and will generate an average of $8,230.42
profit per show (Exhibit 6). By attending the 10 potential trade shows, the company will generate $82,304.2 in
profit in 2005. Since trade shows are scheduled throughout the year, it will take Foxy Originals longer to enter
the US market if they rely solely on trade shows as their distribution method. To attend trade shows, Kluger
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and Orol have to keep up with show schedules and locations, book tickets, have booths set-up and promotional
materials ready. The process is fairly complex, and a small mistake could sabotage all their efforts. For
example, if Kluger and Orol missed a flight, the company would miss an entire show, but it would still incur all
the expenses.
Hiring four qualified sales representatives to market and distribute their products will be a much faster way for
Foxy Originals to enter the US market. Following its regular hiring procedures, the company will spend only
$19,182.50 per rep (Exhibit 7) to have the sales force ready for invading the US market. The four
representatives are expected to generate an average of $86,320 in profits (Exhibit 9). Because the sales
representatives have contacts in the industry and relationships with retailers, they require minimal training and
transition time.
A combination of trade show attendance and hiring sales representatives may seem like the perfect distribution
method for Foxy Originals, but the numbers do not support the inference. The “comprehensive” alternative will
cost Foxy Originals $180,653.30 a year (Exhibit 10); and it will generate profits totalling only $168,624.2 a
year (Exhibit 10). Moreover, Foxy Originals cannot afford to follow an expansion plan that puts its best assets
to work at cross-purposes. Consider the following scenario: Foxy Originals decides to attend a trade show in
Detroit; at the same time, one of their newly recruited sales representatives is trying to secure large orders from
Detroit’s biggest retailers. Competing with itself in a small, depressed market, Foxy Originals incurs large
trade show expenses for a small audience, and it discourages the sales representative by invading his territory.
RECOMMENDATION
Foxy Originals should hire sales representatives to enter the US market.
The costs of hiring sales representatives are much lower than any other alternative, and the expected revenues
are much higher. Sales representatives have experience and contacts to make quick sales, assuring Foxy
Originals a quick introduction into the U.S. market. In the best case scenario, sales representatives will secure
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most of the major retail accounts, generating massive revenues for Foxy Originals, gaining a decent market
share, and giving the brand a wider exposure. In the worst case scenario, sales representatives will not be able to
make any significant sales, running up the company expense accounts and delaying the company’s expansion
into the US market. Analysis indicates qualified sales representative will generate enough revenue to cover the
costs of expansion and bring in substantial profits.
ACTION PLAN - CHART
When
What
How
Where
How
Much
By December 2004
Foxy Originals hires qualified sales representatives in the US. Provides them with
minimal training for them to become familiar with Foxy Original jewellery.
Provides them with samples and promotional materials.
Foxy Originals will follow its normal hiring proceders. Submitting job ads to the
appropriate channels (employment agencies, sales agencies, online job search
engines)
In major US cities such as New York, Los Angeles and Chicago.
$19,182.50
ACTION PLAN - DISCUSSION
Foxy Originals should hire and train four sales representatives by the end of 2004. Working with recruiters and
following its regular employment procedures, the company should hire, train, and equip four ambitious,
aggressive, enthusiastic account executives, assigning each to a major US metropolitan area. Because the
company will face fierce competition in large urban cities, Foxy Originals should focus on slightly smaller
markets with less competition and higher demand. Foxy Originals also must develop a distinctly American
collection—stylish and affordable. By differentiating itself, offering unique and affordable products, Foxy
Originals will insure profitable expansion into the US market.
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