Sosa and Associates™
Izi-Fes
Business Export Plan
IBMS 2
Project Term 8
Silvana Cepesi
Ekene Patience
Manuela Gomes
Deanir...
1
IBMS 2, Project term 8
Table of Contents
Purpose of writing ...............................................................
2
IBMS 2, Project term 8
Monitoring the competition .........................................................................
3
IBMS 2, Project term 8
Purpose of writing
This export business plan has been written to offer the company Izi-Fes a good...
4
IBMS 2, Project term 8
Situation analysis
Izi-Fes is a Dutch-based company who deals with manufacturing and
retailing fa...
5
IBMS 2, Project term 8
Product portfolio
Since the product range is focused on female boots, we would suggest exporting ...
6
IBMS 2, Project term 8
Product comparisons
In the German industry, there is a large range of competitors, but according ...
7
IBMS 2, Project term 8
Market Analysis
Income and population
Sosa and Associates™ is researching the possibilities to ex...
8
IBMS 2, Project term 8
parts of the country. The rise in population as well as the rise in income and jobs, gives us a
p...
9
IBMS 2, Project term 8
Inflation and exchange rates
The monetary policy of the European Central Bank is to keep inflatio...
10
IBMS 2, Project term 8
Environmental analysis
Introduction
The analysis of Berlin environment is important for Izi-Fes,...
11
IBMS 2, Project term 8
gives Izi-Fes a better idea of what duty fee they have to pay in order to import their boots to
...
12
IBMS 2, Project term 8
Government and Public attitude (towards importing countries)
The German government has a very we...
13
IBMS 2, Project term 8
Germans are considered very masculine, one of the things that is highly valued for them is their...
14
IBMS 2, Project term 8
German is of course the main language in Berlin but you can easily find information in English
a...
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IBMS 2, Project term 8
Competitors
Direct competition
After an extensive research on the German market of shoe producer...
16
IBMS 2, Project term 8
UGG doesn’t manufacture its products; they outsource the production to independent
manufacturers...
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IBMS 2, Project term 8
Financial Strength
VF Corporation, a global leader in branded lifestyle apparel, announced Septe...
18
IBMS 2, Project term 8
Hunter Boots
Hunter boots are known as comfortable, fashionable boots. What sets
Hunter rain boo...
19
IBMS 2, Project term 8
Other competition
SPM Shoe trade
A brand selling boots having its own stores in Germany. SPM als...
20
IBMS 2, Project term 8
Indirect competition
Izi-Fes’ indirect competition are the department stores that have shop in s...
21
IBMS 2, Project term 8
Entry mode
Entry into a foreign country can be tricky because the business must adapt to a new c...
22
IBMS 2, Project term 8
Disadvantages
 Higher start-up costs and higher risks as opposed to indirect exporting
 Requir...
23
IBMS 2, Project term 8
Entry Barriers
Export restrictions can be positive or negative depending if Izi-Fes is consideri...
24
IBMS 2, Project term 8
Possible outlet locations
Since Izi-Fes is only exporting the products to Berlin our consultancy...
25
IBMS 2, Project term 8
In summary
Unique costs:
4x €700 (security deposit)
Monthly cost:
4x€700 (approx. 2800~3200)
Adv...
26
IBMS 2, Project term 8
Logistics
Germany is located in the central of Europe; its central position in the EU makes it a...
27
IBMS 2, Project term 8
DSE Almelo covers Germany and BENULUX countries. Another transport company is Rhesus
B.V., locat...
28
IBMS 2, Project term 8
Marketing mix
Product
Izi-Fes is a Dutch-based company who deals with manufacturing and retailin...
29
IBMS 2, Project term 8
Positioning
The Izi-Fes boots will be positioned as a high quality product for the higher end of...
30
IBMS 2, Project term 8
Place
The initial target market group of Izi-Fes was in the Netherlands. They started in the cit...
31
IBMS 2, Project term 8
Berlin Fashion Week
During the Berlin Fashion Week, fashion enthusiasts, buyers,
trade experts a...
32
IBMS 2, Project term 8
Second phase of promotion
After the initial phase of creating brand-awareness, the second phase ...
33
IBMS 2, Project term 8
In the public eye
The first step in promotional methods will create brand-awareness through bein...
34
IBMS 2, Project term 8
After-sales service
After sales service refers to various processes which make sure customers ar...
35
IBMS 2, Project term 8
Monitoring the competition
In order for Izi-Fes to be very successful in Berlin, it very essenti...
36
IBMS 2, Project term 8
 Brand Monitor
Brand monitor enables a brand owner to monitor its brand. Izi–Fes can monitor it...
37
IBMS 2, Project term 8
Implementation plan
Together with the Strategic plan, Sosa and Associates™ has developed an impl...
38
IBMS 2, Project term 8
2nd
year: 2014
1. Introduce new models/ get in line with the January sales and offer a 10% disco...
39
IBMS 2, Project term 8
Financial plan
Financial Forecast for the first year of Izi-Fes Operations in Berlin
The interna...
40
IBMS 2, Project term 8
be enough for creating the awareness desired by our client, so the other methods of advertising
...
41
IBMS 2, Project term 8
Revenues
The products that Izi-Fes will export to the German market represent fashion boots inte...
42
IBMS 2, Project term 8
Profit and Loss projection
After seeing what costs are implied by the expansion campaign and als...
43
IBMS 2, Project term 8
Reference list
1. Berlin Fashion Week (2013) About. Available at: http://www.fashion-week-berlin...
44
IBMS 2, Project term 8
12. Duty Calculator (2013) “Import duty & Taxes made easy” [Online]. Available at;
http://www.du...
45
IBMS 2, Project term 8
25. Lise, S., Else,S., Brian, M., Frederick. (2009).The Fashion Show as an Art form (Online) ava...
46
IBMS 2, Project term 8
37. Sevcenko, M. (2013) ‘Eco Fashion to the rescue in Berlin’, DW [Online] Available at:
http://...
47
IBMS 2, Project term 8
49. Van Riper, T. (2013) Forbes: “Adidas Makes Its Run At Nike” [Online], Available at:
http://w...
Project 8
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  1. 1. Sosa and Associates™ Izi-Fes Business Export Plan IBMS 2 Project Term 8 Silvana Cepesi Ekene Patience Manuela Gomes Deanira Job Kevin Ho Heylin Sosa Octavian Stanescu
  2. 2. 1 IBMS 2, Project term 8 Table of Contents Purpose of writing ...................................................................................................................... 3 Situation analysis....................................................................................................................... 4 Product portfolio.................................................................................................................. 5 Company resources............................................................................................................ 5 Product comparisons .......................................................................................................... 6 Export organization............................................................................................................. 6 Market Analysis.......................................................................................................................... 7 Income and population........................................................................................................ 7 Inflation and exchange rates ............................................................................................... 9 Environmental analysis .............................................................................................................10 Introduction........................................................................................................................10 Political and legal forces ....................................................................................................10 Socio-cultural forces ..........................................................................................................12 Competitors ..............................................................................................................................15 Direct competition ..............................................................................................................15 Indirect competition............................................................................................................20 Entry mode ...............................................................................................................................21 Direct exports.....................................................................................................................21 Entry Barriers.....................................................................................................................23 Possible outlet locations.....................................................................................................24 Logistics....................................................................................................................................26 Marketing mix ...........................................................................................................................28 Product..................................................................................................................................28 Positioning.............................................................................................................................29 Price......................................................................................................................................29 Place .....................................................................................................................................30 Promotion..............................................................................................................................30 Promotional launch ............................................................................................................30 Second phase of promotion ...............................................................................................32 After-sales service ....................................................................................................................34 Warranty ............................................................................................................................34 Payment methods..............................................................................................................34
  3. 3. 2 IBMS 2, Project term 8 Monitoring the competition ........................................................................................................35 Implementation plan..................................................................................................................37 Financial plan............................................................................................................................39 Costs .................................................................................................................................39 Revenues...........................................................................................................................41 Profit and Loss projection...................................................................................................42 Conclusion.................................................................................. Error! Bookmark not defined. Reference list............................................................................................................................43
  4. 4. 3 IBMS 2, Project term 8 Purpose of writing This export business plan has been written to offer the company Izi-Fes a good, step-by-step guidance to a good entrance of the German market with their products. We, Sosa and Associates™, as a consultancy group, have worked to assess all forces that the company will need to deal with in the new market, starting from situation analysis, external environment of the company, passing through all company resources needed to be moved once with the whole process, and ending with the competitive forces, and the obstacle we may encounter there, as well as solutions for all these steps to be taken in the most efficient way. We hope that our research paper will provide you with sufficient information about the most essential risk factors as well as the opportunities of the German market, in a manner to convince you of the success to be foreseen with the exporting of the Izi-Fes products to this new.
  5. 5. 4 IBMS 2, Project term 8 Situation analysis Izi-Fes is a Dutch-based company who deals with manufacturing and retailing fashion boots intended for the high-end of the market. The company was launched on 11.11.2011 in Rotterdam. They opened the store at Weena 103, at a central place in the city centre yet just off the large city centre shopping street. By being in a more intimate setting but easily reachable by the main public, they achieved the position of being “the right people in the right place”. Due to their good positioning but also the quality of the patented shoes, the efforts put into creating them and also the sustainable environment in which they are produced (respect towards the nature, the traditions and the artisans who create the designs), the brand name has grown exponentially since the launch. Izi-Fes grew into a vibrant name of the nowadays’ fashion industry. The basis of this company was the passion of 3 siblings with Moroccan roots, who wanted to have a closer look and give special attention to hand-made, unique design for each individual, environmental-friendly boots. The added-value of these boots come from the use of Kilims, which are flat-woven rugs with a great history and have stories to tell from all over Morocco. Kilims come in a lot of different styles and patterns which give the boots an authentic and vintage look. This material is processed by qualified artisans from the city of Fes, who have pure love for their work. With their bohemian and vintage look, Izi-Fes boots are perfect for today’s fashion (Fes-ion). The concept of using original handmade products and ancient traditions that outlived generations is something that makes a pair of Izi-Fes boots so desired. As the designers and owner of this business state, “In today’s world of merchandising, Izi-Fes wants to help you meditate on the beauty and allure that handmade quality adds to your personal style. “ Kilims used in Izi-Fes boots1 1 Izi-Fes. (2012). Custom type. Available: http://www.izifes.com/custom-type. Last accessed 14th May 2013.
  6. 6. 5 IBMS 2, Project term 8 Product portfolio Since the product range is focused on female boots, we would suggest exporting the whole range of products to prevent limitations in matching our consumers’ taste. Izi-Fes’s product portfolio includes: The tall edition – long boots, the midi-edition-medium length and the mini edition-short, foot-fitted boots. All of them follow a similar pattern, and are made of leather and kilims; the boots are available in sizes from 35 to 41. In the prospect that the Dutch product offering will be expanded, we will create an adequate strategy to launch those on the foreign market as well. Boots models and specifications2 Company resources The company resources needed for the export business are: Production – since the company has outsourced production in Morocco, there are no tangible assets to be brought to Berlin besides the end-product; these will be transported as described in the section “logistics” Management – or human capital - we will send one sales representative that can also handle the task of account management (the purpose of a sales representative is apart from obtaining turnover and market share, developing the market Izi-Fes is addressing). 2 Izi-Fes. (2012). Custom type. Available: http://www.izifes.com/custom-type. Last accessed 14th May 2013.
  7. 7. 6 IBMS 2, Project term 8 Product comparisons In the German industry, there is a large range of competitors, but according to our research only 2 big companies represent a real threat in our market segment. In a detailed overview further in this research paper you can find information about these 2 companies, their financial position at the moment, and the strategies they take in parallel with our own methods to emphasize the uniqueness of Izi-Fes and the way they use their resources to the maximum, as well as the points where we differ from the competitors – USP. Actually the most similar product to ours are the boots from UGG, but still we can reinforce the fact that we address a different trend – the Boho-chic, and that our boots are not seasonal products, but can be worn all-year-long. Furthermore in the analysis you can find the secondary competition in the shape of other shops which commercialize footwear, but on a different level and not touching our market share. This is part of an orientation analysis meant to give extra insight into the German clothing and footwear industry and sales. Export organization The export organization is not a constant running process for Izi-Fes; the purpose of determining the export organization is monitoring the costs related to our business, have a constant flow of demand, production, transport, devaluation of the product and sales. After determining the production rate, we can conclude it is not necessary to have a stock of products. The sales will be done as in the Dutch model, production being dependent on the demand; the result being a direct distribution from the factory in Morocco through the headquarters of Rotterdam, straight to the Berlin location; this will be explained further in the “Entry mode” section of the project, where the exact location is stated and development of our selling point, and in the logistics section, describing the way the boots arrive to their destination, in a shiny window of a fashion store, striving to become Berlin’s all-time favourite boots.
  8. 8. 7 IBMS 2, Project term 8 Market Analysis Income and population Sosa and Associates™ is researching the possibilities to export the unique Izi Fes boots to Berlin. The first matter that needs to be established it whether there is a target market for the product in Berlin. To determine whether the conditions are favourable, a number of factors have to be taken into consideration. In this section we will take a closer look at some of the Berlin statistics. The German population is 81.726.000 (2011). The population in Berlin is 3.501.900 (2011) of which 51% is female, amounting to a number of 1.785,969.. They are divided in the following age categories (Amt für Statistik Berlin-Brandenburg, 2011): Age % op people number of people 18 – 24 8,2% 146.449 25 – 34 16,0% 285.755 35 – 44 14,4% 257.179 35 1,44% 25.718 Total of women in Berlin aged 18 – 35, which is the age group we will be targeting, is 457.922. Those 448.640 women are women with different backgrounds, currently living very different lives. But considering fashion cuts through geographical and cultural borders, we will target the entire the group. Different financial backgrounds might lead to different purchasing habits, but this is not necessarily always the case. Despite not (yet) targeting a subgroup of the 457.922 women in Berlin between the ages of 18 and 35, we shall use stratified sampling to make the distinction between different boroughs, and thus possibly financial welfare. On the basis of the figures presented above, we can conclude that our market coverage aims for 448.640 women, of course in an ideal situation we would aim that all the women in this age group are our target market and will get to know our company and products; nevertheless this is not realistic so we will set at 3% market coverage in the first 6 months, meaning 13.460 potential consumers that will acquire brand awareness: to get to know who Izi-Fes is, what our products look like, price range and the feel of where we stand in the market, meaning our belonging to the Boho-chic trend. According to ‘Germany’s populations by 2060’ report (Statistisches Bundesamt DEStatis, 2009) the German population will continue its slow but steady decline. The results of this will not yet be as visible the next few years as they will be in the long term with an estimated decline of 11 to 16 million people in the next 47 years. However, despite of this overall decline Berlin’s population has been rising since 2005 and the number of job rose almost 9%, 5,5% more than the country’s average (German Institute for Economic Research DIW, 2011). Germany has a gross domestic product (GDP) per capita of $ 39.211 (2011). The GDP per capita has been rising with growth rates of respectively 0,7% in 2012, 3% in 2011, and 4.2% in 2010. Klaus Brenke, an economist at the DIW says that although Berlin has a lower GDP than the German average, the city has seen a rise that is larger than the average and that of richer
  9. 9. 8 IBMS 2, Project term 8 parts of the country. The rise in population as well as the rise in income and jobs, gives us a positive outlook on the opportunities that the Berlin market has to offer. With more people making more money, there will be an increase in the number of women that will have a desire to purchase more high end products. A growing trend of boho-chic and high end fashion. Berlin has become of major interest to artists and young creative minds and it has cultivated a reputation as one of Europe’s last bastions of bohemia for the past decade; Reddy (2009). This growing cultural side of Berlin also gives rise to a larger public that has a more bohemian or hippie style of fashion. During Berlin’s bi-annual fashion week, boho-chic has been proven a target market for many designers. Izi-Fes boots are very much in line with this trend. The success of large, high end department stores such as KaDeWe, also supports that there is a market for pricier, luxury items. More than ever, there is a focus on eco-friendly wearing in Berlin. A few examples are:  The International University of Art for Fashion, launched a new masters program in 2011, called 'Sustainability in Fashion’.  Gereon Pilz van der Grinten founded ‘TheKey.to’ and opened the door to eco- networking, answering the growing network of environmentally-conscious fashionistas in Berlin (TheKey.to, 2013).  The London fashion bus. These are all initiatives that cater to the rising need in Berlin, for eco-friendly fashion, high end fashion, and boho-chic fashion. The rise in those particular areas also gives rise to the notion that since Izi-Fes operates not only in one of those desired areas, but combines all three, they will have success in their expansion to Berlin. Berlin prides itself on being a boco-chic capitol and there is a growing trend in those areas. Berlin is also a destination for many shopping trips from people of outside the German boarders. Especially the female visitors that come from abroad specifically to see and purchase the fashion and art shows, are the women that we want to target as well. If we are able to reach those women that come to Berlin with shopping as their foremost reason, they will possibly become a large part of our target market.
  10. 10. 9 IBMS 2, Project term 8 Inflation and exchange rates The monetary policy of the European Central Bank is to keep inflation rates close to, but below, 2% through its ability to control interest rates (ECB, 2013). This policy to maintain price stability will continue to be upheld and the inflation of 2% in Germany in 2012 will continue to fluctuate but remain between the 1 and 2 per cent. This will prevent prices of goods from fluctuating to extreme percentages. Interest rates in Germany have been declining to new lows. In the fall of 2011 the interest rates were still at 1,5% in Germany. But the benchmark interest rate was last recorded at 0.50 percent in April (Trading economics, 2013) and they are still declining. The interest rates are also controlled by the European Central Bank. They will not rise significantly in the short term, because keeping them low is a way to steer people towards investing rather than saving their money. And it also makes it more attractive to take out loans to make those investments, which in turn has contributed to the rise in GDP. The inflation rate is not currently a risk to prevent Izi- Fes from reaching and/or keeping their target market. The exchange rates of the Euro have been ‘floating’ a little. Over the last couple of years the exchange were: Euro per US dollar: Moroccan dirham (MAD) per US dollar: 0,78 (2012 est.) 8.69 (2012 est.) 0,72 (2011 est.) 8.09 (2011 est.) 0,76 (2010 est.) 8.42 (2010 est.) 0,72 (2009 est.) 8.06 (2009) 0,68 (2008 est.) 7.53 (2008) (CIA, The world factbook, 2013) As you can see the currencies have been fluctuating, but not very with large percentages. And since Izi-Fes does not work with very large quantities, creating prices in the millions, the currency changes will not create significant changes in the end price of the products. The only currency rates that need to be considered is that of the Euro to the Moroccan Dirham, since Morocco is the only country in the value chain that does not have the Euro as a currency.
  11. 11. 10 IBMS 2, Project term 8 Environmental analysis Introduction The analysis of Berlin environment is important for Izi-Fes, so that they can identify the factors that might affect the different important variables that are likely to influence Izi-Fes supply and demand levels and its costs. The constant changes that are occurring in the different societies in the case of Izi-Fes in Berlin, can create an uncertain environment that can impact one way or the other Izi-Fes’ performance in the German market. This analysis will examine the impact that the environment has to companies in Berlin. For Izi-Fes the results of the environment analysis is very important because, then they can be used to take advantage of opportunities and to make contingency plans for threats when getting ready for business. Political and legal forces Import Restrictions The European single market gives the advantage to move goods or services freely within the European market. This doesn’t mean that products won’t have certain import duties and custom fees. Even if the goods come from a EU country, it can impose certain regulations and duties. However, if the good are imported from a non EU country they have to comply with custom import regulations and the different requirements and standards. It is important for Izi-Fes to know what the import restrictions on Kilim carpets and boots are. (The German Business Portal) The basic benefit that Izi- Fes can derive from exporting to the EU market is that if the products are up to their standards and are certified by the EU departments than there is no restrictions on the movement of the products cross borders in the member countries. The main restrictions that the European Union has imposed are all approved under the WTO agreement, but with the passage of time the tariffs and non-tariff barriers along with other restrictions are being eradicated. Thus, making the international trade more accessible and simpler. The carpet use to produce Izi-Fes boots is a Moroccan carpet named Kilim. For this type of carpet the HS Commodity Code is 5705.00.8099. The MFN duty rate is 8% with a sales tax of 19% in Germany. (Import duty & taxes for Carpet) Before starting to export, Izi-Fes needs to register in Berlin for a single tax reference number, regardless if they are establishing a local company or not. This registration is important for all applicable taxes but specially for the VAT. This means that even if they are not established. they are entitled to a percentage of the VAT. This is an advantage for Izi-Fes because no matter how little it might seem it’s a gain. In Germany, all entrepreneurs who are engaged and independently active in a trade, business or profession for the purpose of generating income, are liable to value-added-tax, also known as turnover tax. The German standard VAT for the supplies of goods and services is 19% but certain goods like books and food and services are subject to the lower rate of 7 percent. Having in mind that all goods imported into the German market have to comply with the rules and regulations such as labeling, packaging materials and quality control. (Taxation and Custom Union, 2013). It is important for Izi-Fes to have knowledge of this information, because their boots are made from Moroccan carpets, but on the other hand the duty rate of 17% still needs to be paid. This
  12. 12. 11 IBMS 2, Project term 8 gives Izi-Fes a better idea of what duty fee they have to pay in order to import their boots to Germany. Product Standards To protect the environment and consumers at the same time, Germany indicates that certain substances must only be used in some quantities or are withdrawn completely from the production of the footwear. For this reason the production process has to be controlled carefully and only ecologically compatible materials should be used. Products tagged with the “PFI Inspected Footwear Plus” label meet the strict PFI test requirements that include testing for the most important harmful substances and ensure that much more than only the legally regulated chemicals are tested. This is completed with selected physical tests, carried out by qualified footwear experts, including the PFI size fitting test. (PFI Germany). Izi-Fes boots have to pass through this testing process in order to get the approval to sell their boots in German territory. Once the PFI approve that the quality of the boots and the materials has no dangerous or harmful substances for the environment and consumers, then the boots are able to be sold. The best way Izi-Fes could protect their brand in Germany is by patenting the brand. In Germany, no translation of the specification of the European patent needs to be supplied (status: 1 May 2008). Under Article 64(1) EPC, the European patent automatically confers on its proprietor from the date the mention of its grant is published in the European Patent Bulletin, the same rights as would be conferred by a national patent granted in that state. (Patent Validation Worldwide) If Izi-Fes would only like a provisional protection of brand, they need a full translation of their patent specification in German. In case the translation is not filed according to German requirements, there can be a delay in the publication of the patent, but no other consequences. Once the patent is given the grant, Izi-Fes doesn’t need a translation for the renewal of it. However, there is a fee that needs to be paid within three months after receiving the request for the publication. The special fee that has to be paid is 6o Euros. If the fee is not paid in time, the request for publication of the translation is deemed to have been withdrawn. (Patent Validation Worldwide)
  13. 13. 12 IBMS 2, Project term 8 Government and Public attitude (towards importing countries) The German government has a very welcoming attitude towards foreign direct investment. They have an open market for mostly all industry sectors. The German legal framework for foreign direct investment favors the principal of freedom of foreign trade payment. Making of Germany the largest market in Europe, which is based on 20% of Europe’s GDP and is the home of 16 % of the EU population. (NBI Expo). For the past years Germany has become stronger, more developed and one of the leading economic powers worldwide. Part of the country's central economic policy is to welcome foreign investors and encourage overseas investments in Germany. The legal framework as well as the financial decision makers and civil service all correlate to ensure that investors will feel secure and comfortable investing their cash and resources in the country. (Germany Investments) What makes Germany attracting to foreign investors is that no extra taxes are paid, but at the same time they are entitled to specific tax benefits. This is to help them with the building process of their business and to help profit from it. The tax benefits can vary depending on the kind of business you are going to start with or in the area you will like to invest. Germany also offers a certain tax subsidy, that is given at 25%-27.5% of the investment and depending the amount of staff. (Germany Investments) The German attitude towards foreign investment gives Izi-Fes the advantage of being accepted into Germany without being rejected by the government or the people, giving Izi-Fes the chance of expansion and growth in another market. Socio-cultural forces Attitudes and Beliefs Germans are most of all considered to be the masters of planning. While doing business in Germany, you should bear in mind some issues concerning the German business culture. Business meetings follow a formal procedure. German managers work from precise and detailed agendas, which are usually followed rigorously; moreover, meetings always aim for decisive outcomes and results, rather than providing a forum for open and general discussion. Maintain direct eye-contact when addressing German colleagues, especially during initial introductions. Use the formal version of you (“Sie”), unless someone specifically invites you to use the informal “Du” form. It is usually best to let your German counterpart take the initiative of proposing the informal form of address. (NBI Expo). Germany is based on a strong middle class, their rights are extensive and they must be taken into consideration by managers. A direct communication must be kept between the two parties, and for the Germans keeping meeting is also important. Germans don’t like to be controlled and a leader is only taken into consideration when they show experience. Unlike the Germans, the Dutch culture has a low power distance, where the power is decentralized and the managers also take into account the knowledge of their respective workers. In the Netherlands staff are expected to be heard when having a different opinion.(Hofstede, G.)
  14. 14. 13 IBMS 2, Project term 8 Germans are considered very masculine, one of the things that is highly valued for them is their performance. Performance is also required at an early age of their life, a perfect example for this is that they are put at different types of school at the early age of ten. They like to develop their self-esteem by learning from their mistakes; the Germans ‘live to work’. Managers in Germany are required to be able to make decisions, and make sure that it is the right one. In other words being assertive. The Netherlands is hugely different from Germany, they are very feminine compared to the Germans. This means that in the Dutch culture people have a balance between work and life. Dutch managers support their people and their decision are made by involving everyone in this act. When a situation arises it is solved by negotiations and agreements. Dutch are known for their long discussions until consensus has been reached. (Hofstede, G) Education Berlin has the most fashion training centers in Europe and provides international design departments with a steady stream of highly qualified new talent. Ten design schools (public, university-affiliated and private) offer high-quality education. Their programs range from artistic to technical training, but various institutions also provide courses focusing on the business management skills that entrepreneurs require. More than 800 young, hungry and creative designers and fashion labels currently reside in Berlin. With more than 6 well-known designs universities, Berlin has become a great place to become a recognizable designer. One of the most recognizable universities, ESMOD Berlin, is a state recognized private International University of Art for Fashion and is comprised of 21 international fashion schools worldwide and has its Berlin base in Kreuzberg. Due to the influences and because of the creative freedom enjoyed by designers in Berlin, Izi-Fes has a great opportunity. It means that Izi-Fes’ style of Boho-Chic boots will be recognized by the target market. It also gives an open window to Izi-Fes, because if they decide to integrate new designs to their line of boots, they will have the option to hire or look for designers or expertise in the shoes industry. Languages Germany’s official language is German, with more than 95% of the population speaking the German as their first language. In Germany there are different minority languages spoken such as; Sorbian by 0.09% of the east population of Germany, North and West Frisian, spoken around the Rhine estuary by around 10,000 people, which is 0.01% of the people who also speak German. Danish is spoken by 0.06%, mainly in the area along the Danish border. Romani, an indigenous language is spoken by around 0.08%. Immigrant languages include Turkish, which is spoken by around 1.8%, and Kurdish, by 0.3%. (Germany).
  15. 15. 14 IBMS 2, Project term 8 German is of course the main language in Berlin but you can easily find information in English and sometimes in French. Due to the football World Cup in 2006 all public transportation staff got language training and should be able to help you in English (although probably with a strong German accent). Most people under 40 in Berlin are able to speak English with varying degrees of fluency, but it might not be as widely spoken as you might expect, so a few key German phrases are worth having, especially in the suburbs and less touristy places. Basic French and Russian is partly spoken because French in West Berlin and Russian in East Berlin were taught in schools. (Germany). One of the first barriers that companies face on the path of internationalization is differences in natural languages. The importance of the language is essential to every aspect and interaction in doing business. Izi-Fes will have to use the German language to advertise and make business agreements with their counterparts. For the Germans it is important that business is carried out in their own language rather than a foreign language. Having this in mind Izi-Fes should get a translator for when having business meetings in Germany. Material Culture The effort made by German consumers to look for information when they make their everyday purchases varies. Depending on whether one is doing routine shopping involving products one already knows or whether one is planning to purchase a new product, without any prior experience of it. Depending on the circumstances the same person may devote more or less time to doing his shopping and choosing his products, as the case may be. Depending on the products. (The European Consumers Attitude). The products for which German consumers tend to be more attentive include; products with high unit price, food products, other products that comes in contact with the body and those that could be rejected for environmental or sometimes ethical reasons. One of the way to attract German consumers is with advertisements: it helps to inform them about the product. Also with a formal or informal way like with the word-of-mouth. The reputation of the brand or distributor is one of the most important aspect of the product for German consumers. (The European Consumers Attitude). Germans are known to purchase more brands and fashion clothing and shoes. This makes them rather picky when buying clothes or shoes. For Izi-Fes their new perspective consumers are very important, the business will revolve around them. For this reason is important that Izi- Fes gains good understanding of its target market, because the more they know about the German consumers, the more they can fulfill their particular needs and wants.
  16. 16. 15 IBMS 2, Project term 8 Competitors Direct competition After an extensive research on the German market of shoe producers, we have found out that we are dealing with three major companies as a direct threat on the competition level, since our product belongs to the branch of luxury comfortable boots. Nevertheless there are also other shoe producers on the market that are threats on the competition level. We have chosen to focus only the main ones since Izi-Fes is selling its products to more or less the same target market as these competitors. In the following lines we will explain how these companies interact on the current shoe market, their influence and strategies in order to acknowledge the possible problems we could encounter while entering the market where these companies already have a strong established position. UGG UGG Australia is a luxury comfort brand and the category creator for luxury sheepskin footwear. The UGG brand has enjoyed several years of strong growth and positive end-user consumer reception. UGG’s parent company Deckers Outdoor carefully manages the distribution of its UGG products within higher-end specialty and department store retailers in order to best reach their target consumers, preserve the UGG brand’s retail channel positioning and maintain the UGG brand’s position as a mid to upper-price luxury brand. UGG’s market coverage and niche are mostly higher earning women between the ages of 20 to 45. For these customers the most important features of the UGG is that it’s extremely comfortable, it’s luxurious, fashionable and has a high quality because of the texture it’s made of (sheepskin). (Deckers Outdoor Corporation (2013) “2012 Annual Report”) In recent years, sales of UGG products have benefited from significant national media attention and celebrity endorsement through its marketing programs and product placement activities, raising the profile of the brand as a luxury comfort brand. UGG’s dedicated marketing team works closely with targeted accounts to maximize advertising and promotional effectiveness. They do this by placing the products in TV-series, shows and movies and advertising in national high-end fashion and lifestyle magazines and billboards. These are strategies Izi-Fes could also use. In addition to Deckers Outdoor’s wholesale business, they also sell products directly to consumers through their websites and retail stores. As of December 31, 2011, Deckers Outdoor had a total of 34 UGG Australia concept stores and 11 retail outlet stores worldwide. Products sold through the concept stores are sold at the suggested retail prices, enabling UGG to capture the full retail margin on each direct to consumer transaction. The outlet stores sell some of UGG’s discontinued styles from the previous season, plus products made specifically for the outlet stores. (Deckers Outdoor Corporation (2013) “2012 Annual Report”)
  17. 17. 16 IBMS 2, Project term 8 UGG doesn’t manufacture its products; they outsource the production to independent manufacturers primarily in China. They also require the manufacturing partners to comply with their Ethical Supply Chain guidelines and Restricted Substances policy as a condition of doing business with the UGG company. They also require their licensees to demand the same from their contract factories and suppliers. Just like Izi-Fes UGG currently holds trademark registrations for the brand in the US and in many other countries, including the countries of the European Union (which includes Germany), Canada, China, Japan and Korea. Due to the popularity of the UGG products, they face increasing competition from a significant number of competitors selling imitation products. This is a problem also Izi-Fes faces. Options they can take into account are introducing a regular more affordable brand. The aim will be to hinder the fake Izi-Fes market and to introduce new customers to the more affordable brand. Also, it will increase the profit margin. Izi-Fes can do it by introducing it as an internet brand. This can be a very good idea but if Izi-Fes does this the potential problem statement will be whether this idea could ruin the premium reputation of Izi- Fes or not. After posting its 14th consecutive year of double digit growth and surpassing $1.2 billion in annual revenue, the UGG brand is showing no signs of slowing down. One of the more critical investments they made in 2012 was to emphasize and aggressively pursue new, diverse, and more sophisticated marketing. Their motivation wasn’t only about reaching and converting prospective consumers, but about engaging key existing consumers with their new categories of products. (Deckers Outdoor Corporation (2013) “2012 Annual Report”) Timberland Timberland makes boots, shoes, clothes and gear that are known to be comfortable enough to wear all day and rugged enough for all year. In 2012, millions of used plastic bottles made their way into their shoes and boots. The idea is to put the most environmentally responsible materials possible into Timberland products. One of those materials is recycled polyethylene terephthalate—commonly called PET—the plastic used to make water and soda bottles. Timberland puts as much recycled content as possible into product design and works to ensure these choices are cost effective. (Timberland Responsibility “Product”, 2013). This strategy is a very effective characteristic of their marketing mix. Nowadays people are more aware of everything that have to do with the “green environment” so customers see this as a motive to buy Timberland boots.
  18. 18. 17 IBMS 2, Project term 8 Financial Strength VF Corporation, a global leader in branded lifestyle apparel, announced September 13, 2011 that it has completed its previously announced acquisition of The Timberland Company for $43 per share and a total consideration of $2.3 billion. With $1.4 billion in revenues in 2010, Timberland became part of VF's Outdoor & Action Sports coalition. The acquisition of The Timberland Company for $2.3 billion also marked a record for VF Corporation, as the largest acquisition in their company’s history. VF’s total revenues in 2011 reached $9.5 billion, up 23% from the prior year. The Timberland acquisition added more than $700 million to revenues. With approximately $1.7 billion in expected annual revenues, Timberland marks a new chapter for VF. They are targeting a 10% annual revenue growth rate for Timberland, or $900 million in revenue growth over the next five years. VF Corporation (2013) “2011, A record year” Timberland’s worldwide revenue was $1.4 Billion in 2010. Timberland (2013) “Fast Facts” . The financial strength of Timberland on its own is not published but with the financial strength of the inquisitor we can conclude that they have established a strong position on the market at the moment, which allows them to hold a certain competitor advantage towards other existing companies in the shoe branch. Financial position, VF Corporation. (VF Corporation (2012) “Financial Summary”) Another reason why Timberland is a threatening competitor for Izi-Fez is because of the stores they have in Germany. By researching we found out that there are three Timberland stores in Berlin and that between 200 miles from Berlin, there are 9 more stores. (Timberland “Store locator”, 2013) On Timberlands website people living in Germany can order Timberland products and get them delivered at home. This is an important competitive advantage.
  19. 19. 18 IBMS 2, Project term 8 Hunter Boots Hunter boots are known as comfortable, fashionable boots. What sets Hunter rain boots apart from the competition lies in the result of a very strong, watertight boot that will perform under the toughest conditions. Hunter has a large target market as it makes many different styles of wellington boots to fulfil the large range of consumer’s needs. Each individual group targeted appears to be very specific as the company has created boots for general consumers who would wear them for gardening or going for walks, consumers going to festivals and so on. Also, they have moved into targeting consumers who will wear the boots as a fashion item. Each target segment is being marketed in many different ways, for example, Hunter has images of celebrities wearing the boots which makes them appear young and fashionable. The footwear and accessories label delivered sales of £56m in 2010 and £80m in 2011. Peter Mullen, chairman of Hunter Boot, said: “Hunter is enjoying great success and the brand continues to go from strength to strength”. In the 1990s Hunter entered the market, becoming at its peak the number two producer in the market with 35% market share. The chairman stated that the brand continues to go from strength to strength which means that by now the market share could be more than 35%. Warranty Customers may exchange new, unworn, or unused products within an amount of days from the date on which the goods were shipped to them or from the date they bought the goods in a store. The amount of days the customer has to return the item depends on the store in the different countries. Some stores provide 30 days and some 14 days. Most of the time the purchased item should be returned at the store where it was bought. This counts for UGG, Timberland and Hunter. Hunter, for example, will only allow exchanges for items that are of the same or lesser value as the original style purchased. In the case that the exchange item is of lesser value, they will credit the difference back to the original card used for purchase. The items must be returned back in a sale-able condition for the companies to initiate the exchange.
  20. 20. 19 IBMS 2, Project term 8 Other competition SPM Shoe trade A brand selling boots having its own stores in Germany. SPM also ships to Germany. Steven Madden Steve madden is seen as a very fashionable brand. Even though it is not the most comfortable brand, it has a lot of loyal customers because of its brand awareness. “Everybody wants to have a pair of Steve Madden”. Prada Prada targets higher earner women between the ages of 25 and 50 years old. It is a very expensive brand with a huge brand awareness. Clarks Clarks operates over 35 countries, they have ambitious growth plans as they position themselves as a truly global brand. Germany is one of Clarks’ key markets. The company taking the Clarks name to Europe like never before. In Germany, for example, the company is opening up more of their own retail stores, as well as actively growing their franchise and wholesale businesses. Nike Another market that is a treat for Izi-Fes is the sneaker market. Examples are Nike and Adidas. These are seen as comfortable and fashionable brands, especially for young women between the ages of 15 and 25. Market leader Nike enjoys a 54% global market share (In the sneaker market), while Adidas enjoys a 4.4% global market share.
  21. 21. 20 IBMS 2, Project term 8 Indirect competition Izi-Fes’ indirect competition are the department stores that have shop in shop. Izi-Fes is going to be sold in the largest department store in the continent of Europe, since a few years creating a fresh and hype image among the people in Berlin, KaDeWe. Competitors for the KaDeWe department store are for example Galeries Lafayette and Galeria Kaufhof. Reading the annual report of the Metro group we can conclude that galleria Kaufhof uses its marketing mix very well. Kaufhof knows what strategies to adapt to make its customers happy and what to do to make them come back to the department store. This is a huge competitor advantage for Kaufhof. In 2011, the sales division remodelled 45 department stores in accordance with the individual strategies. In spite of the localization effort, the sales division's marketing continued to ensure that customers experience Galeria Kaufhof as an unmistakable, recognisable brand. This strategy is very important because brand loyalty and recognition is something a lot of companies have difficulties with. Galleria Kaufhof took the decision to give up its departments for consumer electronics and media. A major reason for this decision was that the sales division could use the newly available space for other, higher-margin assortments, particularly textiles. This is a smart approach because if you can get higher profit from another assortment, then it’s better to replace them. (Metro Group (2012) “Annual report 2011”).
  22. 22. 21 IBMS 2, Project term 8 Entry mode Entry into a foreign country can be tricky because the business must adapt to a new clientele, new legal regulations and new competition. In order to introduce Izi-Fes’ products to new customers in Germany, we have devised a strategy plan based on the analysis of previous research done. After focusing on the strengths and weaknesses of Izi Fes and the nature of the competitive landscape, we have decided to slowly establish our place in the market by exporting the products to Germany and to place them strategically with the use of minimum resources. Direct exports Because of Izi-Fes’s limited product line and small exporting volumes, the best solution would be to make use of Direct Exporting. Direct exporting is the exporting of goods and services by the firm that produces them. This type of entry mode is called externalization, Izi-Fes will have low control and risk but high flexibility. The firm’s products are manufactured in the domestic market and then transferred directly to the host country, in this case Germany. When the direct export entry mode is used the producing firm takes care of exporting activities and is in direct contact with the first retailer in the foreign market, for example a departments store. A few advantages of direct exporting are that the business trips are much more efficient and effective because they can meet directly with the customer responsible for selling their product. Also, the customers provide faster and more direct feedback on the product and its performance in the marketplace. As Izi-Fes develops in Berlin, they have greater flexibility to improve or redirect the marketing efforts. It also include more control over the export process, potentially higher profits, and a closer relationship to the overseas buyer and marketplace, as well as the opportunity to learn what you can do to boost overall competitiveness. This type of exporting also gives a better protection of trademarks, patents, goodwill, and other intangible property. Disadvantages can be that Izi-Fes may not be able to respond to customer communications as quickly as a local agent can and since it’s a new brand in Germany it may take time to cultivate a customer base because they are already used to other brands. Advantages  Control over choice of foreign representative companies  Good information feedback from target market, developing better relationships with the buyers  Better protection of trademarks, patents, goodwill, and other intangible property  Potentially greater sales, and therefore greater profit, than with indirect exporting.
  23. 23. 22 IBMS 2, Project term 8 Disadvantages  Higher start-up costs and higher risks as opposed to indirect exporting  Requires higher investments of time, resources and personnel  Greater information requirements  Longer time-to-market as opposed to indirect exporting. Our first priority is to identify and select several high-end German department stores and retailers where we can display our products for sale. A big part of our strategy will be focused around the store-in-store concept and selling through sales representatives. Retailers, especially of consumer products that require little after-sales servicing, are frequently direct importers. For example If Izi-Fes is exporting its products to a department store, the department store is considered to be the retailer. Trading companies are firms that develop international trade and serve as intermediaries between foreign buyers and domestic sellers and vice versa. So it is basically a firm that connects buyers and sellers within different countries (can be the same country) but does not get involved in the owning of the products or services. A store-in-store is an agreement in which Izi-Fes rents a part of the retail space to be used by a different company to run another, independent store. Often the store-within-a-store is an owned by a manufacturer, operating an outlet within a retail company's store. For example, the American department store Bloomingdale's has had such arrangements with Ralph Lauren, Calvin Klein, DKNY and Kenneth Cole. Neiman Marcus, another American department store, has had them with Armani and Gucci. In this case, Izi-Fes will be renting shelves in high end departments stores and retailers like KaDeWe and Voo Store. Because the retailer offers prime locations for which it charges a rent per shelf, Izi-Fes makes a higher profit than it would through a wholesale model, and the consumer gets a lower price. A study also found that the arrangement works best for relatively non-substitutable goods, like cosmetics and high-end brand fashions.
  24. 24. 23 IBMS 2, Project term 8 Entry Barriers Export restrictions can be positive or negative depending if Izi-Fes is considering exporting to Berlin or setting up a shop in Berlin Market. Mentioned below is some of the entry barriers that can be imposed by the host country: TAX In order to export to Berlin, Izi fez has to pay some taxes, although it is exempted from paying Import duties because Izi- fez in located in the Netherlands which belongs to the European Union. Language as entry barrier Language difference is considered as an entry barrier when entering a new market. Lack of speaking and understanding the German language can lead to communication break down and misunderstanding. Hence Izi-Fes main company is in The Netherlands which speaks Dutch language and is planning to do business in Berlin which speaks German language, the language difference could pose as an entry barrier, but if Izi-Fes decides to learn the German language, this will enable Izi-Fes to understand their target market more better as well as its culture. Culture Difference in Culture of the Berlin Market can serve as an entry barrier. The German way of doing business is different from The Netherlands. German is extremely regulated, has a high affinity for low risk investment and often bureaucratic. If we do employ staffs for Izi-Fes in Berlin they have to accustom with our culture, policies, strategies and working hours and Izi-Fes has to learn about the behavior of the people in Berlin and their norms and ethical values which might be very challenging. If Izi-Fes intends to employ some staffs in Berlin, they might need to undergo some extra training. It is also very paramount for Izi-Fes to employ sales representative from Berlin, someone who speaks the language and understands the culture. Advertising Creating awareness can be very challenging in the Berlin market, because the customers in Berlin might be already acquainted and gotten used to the previously existing brands of shoes, and Izi-Fes might need to spend a lot of money and time in order to create awareness and beat competition. Also some customers in Berlin might be loyal to established products in Berlin, the presence of established shoe brands can be a barrier of entry for Izi-fes in Berlin market Minimum thresholds When importing goods into Germany, duty is not charged, if either the total value of the goods (not Including shipping charges or insurance) does not exceed €150 or if the amount of duty payable, does not exceed €5 (Germanlawjournal 2013). Neither duty nor VAT is payable if the total value of the goods (not including shipping charges or insurance) does not exceed €22.
  25. 25. 24 IBMS 2, Project term 8 Possible outlet locations Since Izi-Fes is only exporting the products to Berlin our consultancy group had to look for a department store where Izi-Fes can fit best in. Izi-Fes is also known for having celebrities wear the handmade boots so in order to keep the image, high end retailers and department stores are our main goal. KaDeWe The KaDeWe is the largest department store in continental Europe and it stocks quite an impressive range of high end designers. KaDeWe was opened in March 1907. As the leading department store in the country, it presented customers with an array of desirable goods from around the world - from the latest Paris fashion show looks to exotic south sea fruits. Always a firm step ahead of the competition, KaDeWe today, as well as offering a vast variety of products, is also setting new standards in service. Each day up to 180,000 customers from around the world are welcomed in cordially by the KaDeWe before being attended to on more than 60,000 sq m of sales space by some 2,000 employees, for each of which customer needs and first class service take pride of priority. The KaDeWe lies in the heart of Berlin which means you can get there easily from any location, whatever the form of transport. This department store sells hundreds of top brands. Looking at only the women’s shoes department, top brands which of course will also be the competition of Izi-Fes are Prada, Armani, Hugo Boss, GUESS, UGG, Lacoste and so on. Voo Store If Izi-Fes wants less competition in the same store they can also sell their products in “Voo Store”. Voo Store is located in central Kreuzberg, in a backyard on Oranienstrasse. The selection of designers and products play a key role, with an emphasis on design, creativity and good craftsmanship. As for the price level of the merchandise, it’s just as varied as the labels and styles on offer. Like there’s written on the website they emphasis on design, creativity and good craftsmanship, exactly the competencies of Izi-Fes. Other department stores are Galeries Lafayette, Department store Quartier and Galeria Kaufhof. Initial and monthly costs Amount of shelves total: KaDeWe 1 Galeries Lafayette 1 Quartier 1 Voo Store 1 The estimated rental fee for the shelves are about €700-€900 per shelf each with a month’s value for the Security Deposit. The department store or shops in department store may require up to 20% commission on all sales. Because Izi Fes only rents 1 shelf per store, an in-store sales representative will not be needed.
  26. 26. 25 IBMS 2, Project term 8 In summary Unique costs: 4x €700 (security deposit) Monthly cost: 4x€700 (approx. 2800~3200) Advantages One of the biggest advantages of department stores is immediacy. That means, if someone wants to purchase something right this instant, they will prefer a brick-and-mortar store over shopping online where they would also have to wait for shipping. Another advantage is that you will have more customers if you have a brick-and-mortar store in addition to your online presence, some people just don't shop online. Disadvantages Disadvantages are that you have to pay rent for a store, and you have to invest a lot of money in your stock. Online-only stores avoid this in many cases, because they don't have to pay rent or for a large stock. They can ship it from a partner by order without ever having to own it themselves. Depending on the thing that you want to buy, some people won't buy online.
  27. 27. 26 IBMS 2, Project term 8 Logistics Germany is located in the central of Europe; its central position in the EU makes it an ideal distribution center in Europe. Sosa and Associates™ is researching the best possible logistics for exporting the unique Izi- Fes boots to Berlin. One of the most important decisions of small and medium sized enterprises (SMEs) is the choice of logistics because it affects the firm’s future decisions. Exporting to Germany should be a natural step by Izi-Fes to convey its products to Germany in order to reach the great German market and maximize profit. EU standards and regulations govern the import and export activities in Germany. It is also important to choose the best means of export that is least expensive. To export goods to Germany, it is very essential to develop German trade relationship. Customs brokers have the expertise and experience to navigate through EU import regulations and expedite the process. The rules and regulations are very lenient, import licensing is not required with exceptions of certain goods such as products that might affect public health or safety. Freight transportation can be used by Izi-Fes for transporting its goods from The Netherlands to Germany. The different means include by air, waterway (sea), and road transport. We at Sosa and Associates™ think that road transportation is the most suitable option for Izi-Fes to transport its goods to Germany. This approach involves contracting with trucking companies to pick up, transport and deliver the goods. A second suitable option for Izi-Fes is rail freight transportation; this process involves the use of railways to move goods. The goods can be loaded in a detachable container; most shippers use road and rail services in order to manage dependable road freight transport and create more efficiency. There are also other factors to consider before choosing the means of transportation of Izi-Fes goods such as financial resources, structure of the industry, packaging, pricing, labeling, the standards and regulation of the overseas market, customs clearance and payment. The need to comply with the overseas market is paramount. In order to overcome differences in business culture, language barriers and confusion, it is advisable to go into internationally agreed Inco terms with the foreign market (German market to spell out terms). It is important to bear in mind that Germans take punctuality seriously, are risk averse and appreciate plenty of advance notice. Izi-Fes can contract with DSE Almelo for its exports.  DSE Almelo is a shipping agent which is located in The Netherlands which specializes in shipping goods, road haulage in the export of packaged goods via, road, sea, or airfreight (DSE Almelo 2010). The above mentioned company takes care of all necessary paper works, such as complex customs document, and optimal tracking of your shipments.
  28. 28. 27 IBMS 2, Project term 8 DSE Almelo covers Germany and BENULUX countries. Another transport company is Rhesus B.V., located in The Netherlands. Rhesus has an office in Rotterdam. Because of Rotterdam having the main port In The Netherlands, Rhesus only works with well trained professionals. Izi-Fes also requires a ware-house in Germany for their commodity storage. This will increase their efficiency in case of urgent demands. The distance from Rotterdam to Berlin is 750km approximately. The transportation price from Rotterdam is 0.75Euros /km per 20 tons of items. Therefore total transport cost from Rotterdam to Berlin(One way) is 0.75*750 =562.50 Euros per 20 tons of items.
  29. 29. 28 IBMS 2, Project term 8 Marketing mix Product Izi-Fes is a Dutch-based company who deals with manufacturing and retailing fashion boots intended for the high-end of the market. Izi-Fes boots are high quality, unique, branded, fashionable boots. The boots have a sole that is made in Italy and shipped to Morocco. There the heel is added which is made from very strong wood. The rest of the boot consists of leather and authentic Kilim rugs. Kilim rugs are flat-woven rugs with a great history and have stories to tell from all over Morocco. The first people that used Kilims for fashionable reasons were hippies that enjoyed the freedom of taking road trips through, among other places, Morocco. To make a pair of Izi-Fes boots the shape is cut out of leather and out of the rugs by hand. This results in no two pairs being identical, because they are cut out from different places in the rug. The artisans in Fes, Morocco, have a love for their craft and are very precise and professional when it comes to their arts. These quality boots are handmade by skilled craftsmen in a sustainable environment. The design is patented which has prevented others from creating identical products. This has contributed to their exponential growth since the launch. With their bohemian and vintage look, Izi-Fes boots are perfect for today’s fashion (Fes-ion). As the designers and owner of this business state, “In today’s world of merchandising, Izi-Fes wants to help you meditate on the beauty and allure that handmade quality adds to your personal style. “
  30. 30. 29 IBMS 2, Project term 8 Positioning The Izi-Fes boots will be positioned as a high quality product for the higher end of the market. Izi-Fes creates a competitive advantage by having original handmade products, made according to ancient traditions that outlived generations. Because of the use of the kilims no two pairs of boots are identical, creating a uniqueness in the boots that is not found at any of our competitor and is something that makes a pair of Izi-Fes boots so desired. The design for the boots, which are patented and prevent copying, and the efforts put into creating them and producing it in a sustainable environment justifies their value proposition being “more benefits for a higher price”. Price More The same Less Benefit More More for more More for the same More for less The same The same for less Less Less for much less Price To calculate the price at which the boots will be sold, we have to take several things into consideration. We have to calculate the costs for getting the product through the entire value chain, from shipping the sole from Italy to Morocco, to shipping the finished boots from Morocco to Berlin. Production costs, shipping, all the overhead costs, and we also have to take a look at the prices the competitors uphold. We especially have to take into account the possible target market’s willingness and ability to purchase the boots at the set price. Izi-Fes’ competitive advantage of handmade boots of which there are no two pairs the same, allows us to price them in accordance to competing high end, branded, fashionable boots. The boots will be sold at not exactly the same but very similar prices as in the other two geographical areas: the Netherlands and Ibiza. The price the consumers will have to pay is: 195 EUR for the Mini edition, 210 EUR for the Midi edition and 225 EUR for the tall edition.
  31. 31. 30 IBMS 2, Project term 8 Place The initial target market group of Izi-Fes was in the Netherlands. They started in the city of Rotterdam where they received clients from everywhere in the country. Soon they expanded sales to include other stores, making the boots available in more locations. Currently Izi-Fes is also available in Ibiza. They were primarily also only available in one store to maintain the sense of limited availability and uniqueness of the product. We want to apply this same strategy to Berlin. Being a fashion capital that has seen a rise to clothing and shoe stores and –lines that cater to the boho-chic fashion style, there are several opportunities for selling points in Berlin. We want to make the boots visible through fashion gatherings such as the Berlin Fashion Week and other stages for high end, higher priced fashion, and also on stages that cater to the needs of the art lovers. However, at first we want to limit the availability of the Izi-Fes boots outside of those occasions to a few department store locations where consumers can come to buy the boots. This will add to the must-have sense of the fashion item. Also initiatives that profile new brands are often visited by foreign visitors for whom the product becomes more attractive as it is harder to access. The four stores we want to have as selling points for the Izi-Fes boots are: KaDeWe, Galeries Lafayette, Quartier and the Voo Store. These are the largest department stores in Berlin and the most known ones. They house a range of fashion items (among other things) from lower end to high end brands. Selling at these four stores in the high end products sections, will contribute to the luxury feel of the product. Promotion Promotional launch The first aspect we need to focus on when it comes to promotion, is to create brand-awareness for Izi-Fes. The brand is currently only being sold in the Netherlands and in Ibiza and has little to no brand-awareness elsewhere in the world. To get the people of Berlin, and its visitors, acquainted with the brand we need to come up with a way to reach those woman that the product is designed for. This can be done through several mediums and as such, we will not limit ourselves to one. The first step to get the brand ‘out there’ without having to invest much, is to be seen on the stages of Berlin’s different fashion initiatives. Twice a year there is a fashion week in Berlin that consists of several different stages that all focus on one theme and cater to the needs of different target groups.
  32. 32. 31 IBMS 2, Project term 8 Berlin Fashion Week During the Berlin Fashion Week, fashion enthusiasts, buyers, trade experts and the media come together and interact at shows and awards ceremonies. They also collect information at fashion trade shows and attend exhibitions and off-site events. This summer the theme will be ‘green-fashion’ which is very much in line with the Izi-Fes production. Among this week's eco-shows are: Showfloor Berlin, Lavera Showfloor, GREENshowroom and the Ethical Fashion Show. The Showroom Days take place in various locations, largely as public events, for everyone interested in fashion (Berlin Fashion Week, 2013). The shows all have different topics within the green-fashion theme. The Gallery Berlin, which is in the same week, shows contemporary fashion, design and accessories. This year the fashion show will be held in abandoned opera prop factory, Opernwerkstätten, and focuses on individuality. People wanting to visit the shows have to register, ensuring that they are all interested in what will be shown. Media coverage will get the Izi-Fes brand awareness beyond the potential individual buyers and store representatives that will also be present at the Opernwerkstätten. A lot of shows are on invitation or request only, but this does not have to be a limitation, because than you will immediately reach potential consumers only. But there are also a lot of stages that are open to the public. For almost all shows the rule applies that all brands are welcome provided that their products are in line with the theme and that they register in time. For the Berlin Fashion Week stage, the main stage, only invited brands will appear on the catwalk. However, these will all be clothing designers and there is still room to negotiate with the brands about the possibility of having the models wear Izi-Fes boots or accessories on the runway. This option is available in all the catwalk shows that showcase clothing. But a lot of stages are open to different fashion items, including boots.
  33. 33. 32 IBMS 2, Project term 8 Second phase of promotion After the initial phase of creating brand-awareness, the second phase of increasing brand- awareness and attracting customers continuously will start. Izi-Fes can adopt different methods in its promotion strategies. Advertising is an essential part of this. A very useful tool would be to go down a similar path as in the Netherlands and Ibiza. Izi-Fes had a local celebrity as the ‘face of the brand’. This went a long way as far as having potential consumers see the brand as high end, luxury, unique and especially desirable products. They can organise a major launch of the first shop and invite this celebrity to autographs and ‘hang out’ with the customers. Advertisements on social media and fashion company websites are also necessary to get the attention of fashion loving potential consumers. Just like in the Netherlands Izi-Fes needs to be present in places where they will encounter potential consumers: in the fashion scene, at parties, etc. And they approach consumers both personally, for instance for a mailing list, and in the form of well designed leaflets. Another form of advertising is having large advertisements at bus stops and in shopping malls. And Izi-Fes has to present in fashion magazines as well. Price discount/ price off deals Price deals for consumers is reduction of price on the products of promotion. The consumer tend to safe money when they purchase an item, price discounts are communicated through window display , magazines, newspaper. Price reductions encourage consumers to buy products. An introductory offer is a good example.
  34. 34. 33 IBMS 2, Project term 8 In the public eye The first step in promotional methods will create brand-awareness through being present in all the different fashion shows in Berlin. The media coverage and mouth-to-mouth advertising will help create brand-awareness amongst our target market. To become know by even more people, we will have to quickly take advantage of this first initiative and try and reach our potential consumers through actively pursuing them. TV commercials is not the way to go. Instead we think that approaching the consumers in a similar way as in the Netherlands will be most effective. Izi-Fes has to become present in all places where we think potential consumers might be. Promotion people/teams must go into malls where they sell upscale clothes in a similar fashion style and address people. Make it known that Izi-Fes is a unique, branded, patented, luxury boot that is made from Italian and Moroccan high quality materials and currently only available in Ibiza and the Netherlands, but will soon come to Germany and will only be available in their city. This can be accompanied by actually taking orders for the boots, or having a few pairs to be sold on the spot. This will not only create brand awareness but also a sense that the boots have limited availability which will add to women’s ‘need’ to have them.
  35. 35. 34 IBMS 2, Project term 8 After-sales service After sales service refers to various processes which make sure customers are satisfied with the products and services of the organization. The needs and demands of the customers must be fulfilled for them to spread a positive word of mouth. In the current scenario of Izi-Fes, positive word of mouth plays an important role in promoting the brand and products since Izi-Fes is a new brand for the German customers. If the after sales service isn't pleasant for the customers, they may think twice before doing business with that store again and will not come back to buy more of Izi-Fes products. Instead, they will turn back to brands they already know and have experience with. This is a reason why after sales service plays such an important role in customer satisfaction and customer retention. After-sales services generate loyal customers. Customers start believing in the brand and get associated with the organization for a longer duration. A satisfied and happy customer brings more individuals and eventually more revenue for the organization. Izi-Fes employees should listen to the customers’ feedback and make them feel comfortable. The customer service officers should take a prompt action on the customer’s problems and they must be resolved immediately. Warranty A common example of after sales service is the provision of a warranty for the good. A warranty allows the good to be repaired or replaced if it breaks down within a certain period of time after purchase. Any product found broken or in a damaged condition must be exchanged immediately by the sales professional. Payment methods The payment methods available to consumers could vary per selling point. Izi-Fes boots will be sold in-store and the methods that each particular store has available to its customers, is what the consumer must choose from. Usually this will be a possibility to pay in cash, per debit card or credit card, and in some cases this will be extended to cheques. Izi0Fes has no control of the payment methods offered by the store.
  36. 36. 35 IBMS 2, Project term 8 Monitoring the competition In order for Izi-Fes to be very successful in Berlin, it very essential for the company to monitor what their competitors are doing or not doing, and using this information to beat competition. Good observation of competitors’ strategies will give Izi-Fes insight into their strengths and weaknesses. The first step Izi-Fes has to take is to determine who their direct and indirect competitors are (Main), thereafter, begin to monitor and analyse them. The following steps have to be taken :  Explore and analyse the competitors’ websites Izi-Fes has to explore and analyse their competitors’ websites, check out what works well, and what does not, and try to improve their own sites. Viewing competitors’ website will enable you to find out the marketing strategy they are using where you might not have been aware of it earlier. It is also advisable to study competitors’ products in order to compare the similarities and differences of their product with ours.  Follow on social networks Almost all companies and businesses have accounts on social networks such as Facebook, LinkedIn, twitter, blogs, etc. These companies tend to release special promotions on these social network sites and read competitors newsletters such as, case studies, whitepapers, press releases, etc. Also keep a database of all our competitors’ news coverage: who is covering them? What are they saying? And so on.  Sign up to receive their emails or newsletters Izi-Fes receiving emails from their competitors can help the company to see the perspective of a customer within your industry. You can get a good idea as to the tone of voice, creative style and offer you want to include in your email, and which ones you would like to steer clear of. It’s always interesting to consider a point of view or positioning that may be different or even similar to your own.  Online surveys The best way for Izi-Fes to keep up with their customers is to know exactly what they want. Guesswork and gut-instinct won’t cut it, so it is important to turn to surveys to gather data about their target consumers. Izi-Fes can unlock the power of surveys to research a target market, understand buying habits, get product feedback, measure customer awareness and gain new customers. You can also find out what they think of your competitors.
  37. 37. 36 IBMS 2, Project term 8  Brand Monitor Brand monitor enables a brand owner to monitor its brand. Izi–Fes can monitor its brand and be updated and informed in instances whereby the brand is vulnerable or cases of brand damage, manipulation and counterfeiting. Brand monitor can also be applied on social networks to view weekly trends, reaction meter and top referrals. Brand monitor can also be used to monitor popular visitors, popular pages and so on. It is a very good tool for monitoring competition. All these tools will help Izi-Fes to get a very clear understanding of what their competition is doing, how they are perceived by (potential) consumers and how Izi-Fes can use their weaknesses to their own advantage.
  38. 38. 37 IBMS 2, Project term 8 Implementation plan Together with the Strategic plan, Sosa and Associates™ has developed an implementation plan to support Izi-Fes’ objectives and break their strategy-to-be into identifiable steps, each assigned to specific people within the company, in order to take out the best measures for a successful export of the products to the German market. The team available at the Berlin headquarter will be made of:  one senior manager responsible for the controlling and financial plan(referred to as S.M.); and  one marketing executive responsible for promotion activities (referred to as M.E.) They will interact frequently with the managers in Rotterdam, since they need to report to this headquarter and constantly ask for approval of all new deliveries of stock and/or changes in marketing mix and all promotion activities. Following a natural timeline of this process, Izi-Fes will have to carry out the following activities: 1st year : 2013 1. Visit Berlin for recognition and if possible schedule appointments with prospective partners. This will be carried out by : S.M. on : 1st July 2013 . Expected difficulties: language barrier- a translator will be needed. 2. Re-establish contact with the partners of our choice and settle the deals/sign the contracts: lease of the warehouse, rent of the shelf space, transportation costs, distribution of the promotion materials . Expected difficulties: legal barriers – a legal advisor with knowledge of the German export law will be needed. 3. 1st September 2013: Make the first delivery of goods: X pairs of boots, sizes 35-41 , mixed colors/kilim models. Expected difficulty: response of customers to our brand- a consultant/ sales advisor/Izi-Fes representative will be available in the shop. 4. Control and check-up of the shop and the current level sales made by the local consultant assigned by Izi-Fes , Skype-meeting with the managers in Rotterdam to assess the current situation and decide over renewal of stock. 5. Receive the new stock, draw up an inventory summary ; assess the current financial situation and prepare an annual overall report of the profit ; mail these documents to the Rotterdam headquarters.
  39. 39. 38 IBMS 2, Project term 8 2nd year: 2014 1. Introduce new models/ get in line with the January sales and offer a 10% discount on old models 2. 1st March: assess sales and profits in comparison to the price reduction, make a new inventory analysis, process all info into a quarterly report 3. Prepare a new visit of the Managers to have a real feel of how the business is doing, read the reports available, decide on new supply levels, renegotiate prices of storage and marketing-if necessary. 4. 1st April-deliver new stock of X number of boots- all sizes, to all the X number of stores. 5. Continues subsequently with reports and renewal of stock quarterly- every 3 months. The S.M. will probably not be needed to be available at all times if there are no implementation mistakes so far. The M.E. will need to have a monthly check of all promotional activities and Fashion events to be attended and our product to be present in the public eye. 6. 1st December: preliminary Annual report and first conclusions to be drawn: a new Skype- meeting will be done with the Rotterdam managers and all future decisions will be discussed. This implementation plan is just meant to serve as guideline and can be modified at any time by common agreement of the Rotterdam and Berlin team. There will be of course, changes needed in the case of extra difficulties encountered in the new market, maybe also a change of strategies, but the most essential part is that all these changes need to be made public to the employees involved, in order for this export marketing plan of Izi-Fes to Berlin to be successful into its last details. In the case that the strategy has proved successful and Izi-Fes will decide to go further with this strategy, we will prepare also an implementation plan for the upcoming 3 years, updated with the best approaches to this constantly developing international business environment.
  40. 40. 39 IBMS 2, Project term 8 Financial plan Financial Forecast for the first year of Izi-Fes Operations in Berlin The international expansion of Izi-Fes to the German market will impose a certain amount in costs. In this part we will describe which these costs are but also what the forecasted revenue for the first year of doing business in Berlin is. Costs The costs of this operations can be divided in five main categories :  Selling location(s) costs  Transport costs  Deposit of stock costs  Taxes  Advertising The selling location costs are referring to the costs that Izi-Fes is required to pay to the department store for renting one space (shelf) where they can place the boots. Researching the prices asked by the four stores that Izi-Fes will contract we found out that the rent of one shelf can range from 700 EUR to 900 EUR per month. Besides this regular cost, a one-time security- deposit is required and is the equivalent of one month’s rent. Furthermore the department store management requires each renter to pay 20 % of its annual sells made from its store. The transportation costs is another important aspect of the expansion. Since the headquarters of the company will remain in Rotterdam, Netherlands, the company will have to send the boots from this location to a warehouse based in Berlin. The modality that will be used by Izi-Fes to transport its products to Germany will be by road transportation (trucks). The prices for a 20 tons truck fully loaded can range from 0.75 to 1.50 EUR / km. The distance from Rotterdam to Berlin is about 750 Km. Stock deposit costs refer to the necessity of having a local warehouse in Berlin from which the stores will be easily and faster supplied when needed. We estimate that for the first year, a 100 m2 will be sufficient to satisfy the operations. The prices for a warehouse located near Berlin vary from 30 to 60 EUR / m2 / month. The taxes are other expenditures that can be seen as costs. As it was mentioned in the earlier PEST analysis Izi-Fes will need to pay 19 % which is the amount of the local VAT and 8% of the value of the exported products which represents the duty tax for the Moroccan carpets. Advertising is one of the biggest costs that must be taken into consideration by Izi-Fes management board. The first brand awareness impact will be created during the Berlin Fashion Week which is held twice a year. The participation at this fashion shows is free of charge but because it will impose a great planning and organizing efforts that for Izi-Fes will be more that the company can handle, the alternative will be to contact other fashion companies from the boho-chic fashion niche to propose the idea of including the Izi-Fes boots in the dressing pattern that will be worn by the models of those companies in their presentations. Of course this will not
  41. 41. 40 IBMS 2, Project term 8 be enough for creating the awareness desired by our client, so the other methods of advertising Izi-Fes should consider are: television and radio commercials, billboard advertising, and flyers. These will be the channels that will reach the target market Izi-Fes is focusing on. The costs involved for this operations differ from type to type. For the TV and radio commercial the average price is 3000 Euro / 30 seconds of advertisement. This though won’t be such an efficient solution in the beginning since besides the costs paid to the television companies, the creation of the commercial will rise the costs significantly. The same it applies for the radio advertisements. The best and cheapest solutions will be the rental of billboards and flyer distribution in the area where the department stores are situated. The billboard cost of production is 118 EUR / piece plus the rental of the place where this can be situated, which can range from 20 to 50 EUR / Day depending the area where it is situated. Our research showed that in the area where big department stores are situated the costs of renting the billboards is higher , so our estimation will be around 50 EUR / day. Flyers: the price for producing 50.000 fully colored flyers is 1400 EUR. The flyers will also be distributed in the areas surrounding the store locations. We assume that the billboards should be seen 120 days per year focusing on the months September, October, November, December and January. Also the flyers should be distributed at least once a month during the up- mentioned months. And also during the rest of the year but on a lower rate, for example once at the other month. Name Type Number Frequency Cost/Type Yearly cost Store Shelves renting 4 12 months 10.400 EUR 41.600 EUR* Boots production costs Pair of boots 1 - 80 EUR/ pair 132.160 EUR Transportation Road transportation 1 Quarterly 750 EUR 3.000 EUR Deposit venue Warehouse 1 12 months 4.500 EUR 54.000 EUR Advertising Billboard(s) 40 120 days 50 EUR 10.720 EUR** Flyer(s) 50.000 5 times 1.400 EUR 7.000 EUR Taxes V.A.T 1 once/year 19 % / sales 61.206 EUR Duty Tax 1 once/year 8 % / value of goods 10.572 Total costs 320.258 EUR *20% of the sales made in each shop will add to the rent **The cost for printing one billboard is 118 EUR and the renting price of the billboard is 50 EUR/day ***The V.A.T and the duty tax is influenced by the amount of sales , respectively the value of the boots.
  42. 42. 41 IBMS 2, Project term 8 Revenues The products that Izi-Fes will export to the German market represent fashion boots intended for the high-end of the market. These boots are divided into 4 main categories :  Tall  Midi  Mini  Another 59 unique models The first three categories can be customized selecting from 16 leather types and colors and 3 Kilim carpet designs. Because these categories are based on the customization made by the customer via the website of Izi-Fes, www.izi-fes.com, this will not apply in the shop in shop strategy proposed by our firm. We advise Izi-Fes for the first year of presence in Berlin, to commercialize only the 59 unique models. Each of one of the 4 stores selected will receive 59 pairs, one of each model, seven sizes each. The sizes selected will be the most common sizes for women between 18 and 35 years old , that represent the target market of Izi-Fes in Berlin. This sizes are : 35 , 36 , 37 , 38 , 39 , 40 and 41. Store name Number of models Nr. of pairs / model Nr. of sizes / model Price / model Expected income KaDeWe 59 1 7 195 EUR* 80.535 EUR Galeries Lafayette 59 1 7 195 EUR* 80.535 EUR Quartier 59 1 7 195 EUR* 80.535 EUR Voo Store 59 1 7 195 EUR* 80.535 EUR Total 322.140 EUR *The production costs for one pair of boots is 80 EUR. This is the price the manufacturer in Fes, Morocco is selling the finished pair of boots to Izi-Fes Netherlands. So from this represents another cost that must be taken into account by the company. According to this projected sales Izi-Fes will acquire 0.36 % market share from the original 457.922 persons representing the target market.
  43. 43. 42 IBMS 2, Project term 8 Profit and Loss projection After seeing what costs are implied by the expansion campaign and also the projected revenues, we are optimistic that Izi-Fes will succeed to break-even from its first year of doing business in Berlin. Financial projection Amount Revenues 322.140 EUR Costs Profit / Loss 320.258 EUR (+) 1.882 EUR This is the realistic financial projection for the business operations of Izi-Fes conducted in the German market. There is a unknown chance that some extra-costs will arise at a certain point (temporary work force needed, distribution costs, delays in delivery, etc.) for which we advise the management board of Izi-Fes to take into consideration and to prepare an additional budget (5.000 EUR – 10.000 EUR) for emergency situations.
  44. 44. 43 IBMS 2, Project term 8 Reference list 1. Berlin Fashion Week (2013) About. Available at: http://www.fashion-week-berlin.com/ (last accessed: 2 June 2013) 2. Berlin Partner (2013) “Fashion Schools” [Online]. Available at; http://www.fashion-week- berlin.com/en/get-in-touch/fashion-schools/ (Accessed 24-06-2013). 3. Buergin, R. (2011) ‘Poor but sexy’ Berlin economy outstrips Germany as whole, DIW study shows, ‘Bloomberg’, 11 August [Online]. Available at: http://www.bloomberg.com/news/2010- 08-11/-poor-but-sexy-berlin-economy-outstrips-germany-as-a-whole-diw-study-say.html (last accessed: 30 May 2013) 4. Business studies online (2009) Promotion (Online) Available at: http://www.businessstudiesonline.co.uk/AsA2BusinessStudies/TheoryNotes/2874/PDF%20Non %20Print/07%20The%20Marketing%20Mix%20-%20Promotion.pdf (Accessed 5. (Accessed 19 June 2013) 6. Carter, M.(2013)Major Methods of Advertising and Promotion (Online)Available at; http://managementhelp.org/marketing/advertising/methods.htm (Accessed 18 June 2013) 7. Central Intelligence Agency (2013) The World Factbook: Germany. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html (last accessed: 30 May 2013) 8. DE Statis (2009) ‘Germany’s population by 2060: Results of the 12th coordinated population project’, DE Statis [Online]. Available at: https://www.destatis.de/EN/Publications/Specialized/Population/GermanyPopulation2060.pdf? __blob=publicationFile (last accessed: 30 May 2013) 9. Deckers Outdoor Corporation (2013) “2012 Annual Report”. [Online], Available at: http://www.deckers.com/investors/financial-reports (Accessed: 20 May 2013) 10. Derek, J. (2012) 6 Simple ways to monitor your competitors online (Online) Available at: http://www.ragan.com/Main/Articles/6_simple_ways_to_monitor_your_competition_online_4 5760.aspx# (Accessed 24 May 2013) 11. Duty Calculator (2013) “Import duty & taxes for Carpet” [Online]. Available at; http://www.dutycalculator.com/dc/175727/home-garden/home-accessories/carpets- rugs/import-duty-rate-for-importing-carpet-from-iran-to-germany-is-8/ (Accessed 28- 05-2013).
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