bachelor thesis - sales strategy, innovation living

Final Bachelor Project - Sales Strategy of Innovation Living for the Bulgarian Market

Martin Malakov, CPR: 1110923003, Program: ISM, Team: Z, Semester: III

Tutor: Torben Sorensen, Hand-in Date: 09.01.2017

Author: Martin Milkov Malakov

/Date of Birth: 11.10.1992/

PBA of International Sales and Marketing Management

Tutor: Torben Ibsen Uldall Sorensen

Final Bachelor’s Project

PBA of International Sales and Marketing Management

Business Academy Aarhus

2nd of January 2017

Hand-in Date: 09.01.2017

Number of characters: 96490

Sales Strategy for the Bulgarian Market




Contents List of Appendences ...................................................................................................................... -1

Executive Summary ......................................................................................................................... 0

1. Introduction ................................................................................................................................ 1

1.1. Problem Formulation ....................................................................................................... 1

1.2. Report Structure ............................................................................................................... 1

2. Methodology ........................................................................................................................ 1

2.1. Research Objectives ......................................................................................................... 2

2.2. Research Paradigm .......................................................................................................... 2

2.3. Approach .......................................................................................................................... 2

2.4. Method.............................................................................................................................. 2

2.5. Strategy............................................................................................................................. 2

2.6. Time horizon .................................................................................................................... 2

2.7. Theory and models .......................................................................................................... 2

2.8. Sources ............................................................................................................................. 3

2.9. Quality assessment .......................................................................................................... 4

3. Literature Review ................................................................................................................. 5

3.1. Market Definition ............................................................................................................. 5

3.2. Growth Matrix – H. Igor Ansoff ....................................................................................... 5

3.3. International Growth – why do businesses choose to pursue it? ................................. 6

3.4. Entry Strategies – how do businesses expand internationally? .................................... 6

3.5. Export – Direct and Indirect ............................................................................................ 7

3.6. Distribution Channels ...................................................................................................... 7

3.7. Developing a sales strategy ............................................................................................ 8

3.8. Cultural Dimensions, affects and considerations ....................................................... 13

4. Innovation Living’s Business Model ................................................................................. 16

4.1. Customer Segments ...................................................................................................... 17

4.2. Value Proposition ........................................................................................................... 17

4.3. Channels ......................................................................................................................... 18

4.3.1. Distribution Channels ............................................................................................ 18

4.4. Customer relationships ................................................................................................. 18

4.5. Revenue Streams ............................................................................................................ 18

4.6. Key Resources ................................................................................................................ 19

4.6.1. Human resources ................................................................................................... 19

4.6.2. Intellectual resources ............................................................................................. 19

4.6.3. Physical resources .................................................................................................. 19

4.6.4. Financial resources ................................................................................................ 19

4.7. Key Activities .................................................................................................................. 19

4.8. Key Partnerships ............................................................................................................ 19




4.9. Cost Structure ................................................................................................................ 20

5. External Analysis ............................................................................................................... 20

5.1. PESTLE ............................................................................................................................. 20

5.1.1 Economic factors.............................................................................................................. 20

5.1.2 Social factors: .................................................................................................................. 22

5.1.3 Legal factors: ................................................................................................................... 22

5.2. Porter's Five Forces ........................................................................................................ 23

5.2.1. Supplier Bargaining Power - Moderate 5/10 ........................................................ 23

5.2.2. Buyer Bargaining Power - High 8/10 .................................................................... 24

5.2.3. Threat of Substitution 1/10 .................................................................................. 24

5.2.4. Threat of New Entry 8/10 ...................................................................................... 24

5.2.5. Competitive Rivalry - High 9/10............................................................................ 25

5.2.6. Attractiveness of the furniture Industry 4/10 ...................................................... 25

5.3. ADL Matrix...................................................................................................................... 26

5.4. Analysis of the Competitors in Bulgaria ....................................................................... 26

5.4.1 Local Competition ........................................................................................................ 27

5.4.2 Foreign competition on the Bulgarian furniture market ........................................... 27

5.5. Organizational Customer’s Analysis ............................................................................ 29

5.6 Market Trends and Demand for Design Danish Furniture in Bulgaria ............................ 30

5.7. Bulgarian Culture according to Hofstede’s Six Cultural Dimensions ............................ 30

6. Insights Based on the Conducted Semi-structured Interviews ....................................... 32

7. SWOT – is market penetration the way to go? ................................................................. 33

8. Segmentation, Targeting and Positioning .............................................................................. 33

8.1 Segmentation ...................................................................................................................... 33

8.2 Targeting ............................................................................................................................. 34

8.3 Positioning ........................................................................................................................... 35

9. Market Penetration Strategy for the Bulgarian Market - Balanced Scorecard ....................... 36

9.1 Learning and Growth Perspective ...................................................................................... 37

9.1.1 Hire a Sales Representative ......................................................................................... 37

9.1.2 Training Skills and Development ................................................................................ 38

9.2 Internal Perspective............................................................................................................. 38

9.2.1 Develop a sales strategy .............................................................................................. 38

9.2.2 Improve work efficiency ............................................................................................... 39

9.3 Customer perspective ......................................................................................................... 39

9.3.1 Acquire new retailers to act as authorized dealers in Bulgaria; ............................... 39

9.3.2 Build long-term relationships ...................................................................................... 39

9.4 Financial perspective .......................................................................................................... 39

10. Conclusion .............................................................................................................................. 40

Bibliography..................................................................................................................................... 1




List of Appendences

Appendix 1 – Project Description;

Appendix 2 – Questions for Semi-Structured Interviews;

Appendix 3 – Essence of the Held Interviews Relevant to the Assignment;

Appendix 4 – Contact Details of the Interviewees;

Appendix 5 – Sales Figures Table from Innovation Living;

Appendix 6 – Innovation Living’ Sales Prices for Retailers;

Appendix 7 – Strategy Map & Balanced Score Card;

*Appendences are uploaded as separate documents and are not included in this document.




Executive Summary

Innovation Living is a Danish Design Furniture Manufacturer since 1972. Innovation

specializes in producing compact, functional and comfortable sofa/beds for small living

spaces. It has production facilities in Denmark and China and sells its products globally.

However, most of the revenue in Europe comes from Western Europe. Even Though

Innovation operates in some parts of Eastern Europe, the markets there are considered new

and are yet to be developed and the full potential of them to be reached. This report will

combine market research with the best sales theories from modern academic literature and

will suggest how to increase the sales in the Bulgarian market in the future.

The report first presents a Literature review. In the literature review there are different

relevant for the research definitions included. Moreover, concepts and models supporting

the later on given recommendations are described, so that the researcher’s knowledge base

is supported.

Further, an internal analysis of Innovation Living is made through the business model canvas

in order to receive a better understanding of the company’s structure and current situation.

The business model shows that the company is financially healthy and that it has the

necessary structure, experience and current activities that will support a penetration of the

Bulgarian market.

The external analysis made examines the country profile of Bulgaria, the competitive

landscape and consumer behaviour. It also looks at the cultural considerations. Even though

the social and economic situation in Bulgaria is not that “pink” at the moment, the outlooks

for the near future are positive and also there are other pluses like low taxes and cheap

labour that makes the market attractive. The poverty in Bulgaria might be high, but as

Innovation Living is targeting a niche of people with higher income, it is not a factor that

matters, as there are still many affluent people in the Bulgarian society. In terms of

competition, it is highly saturated market in general, but there are still not that many

resembling offerings and room to grow.

The field research indicated that retailers have interest to and do work with foreign

importers, but that they would prefer to communicate with a native representative.

Overall the analysis point out that there is market for Innovation Living, but the company

will have to do more aggressive sales. The cultural differences between Bulgaria and

Denmark are quite big that is why it is proposed for the company to enter the market

directly with its own sales force. Innovation Living will have to search for and hire a

Bulgarian sales rep that will be responsible for the company activities in Bulgaria. The

company has this practice for its UK and Benelux markets. It will also take advantage of its

newly built production facilities in Ukraine.

In the long-term the experience in the Bulgarian market can be further used to enter or

enhance current activities in other similar Eastern European markets.




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1. Introduction

Innovation Living is a Danish Design Furniture Manufacturer since 1972. Innovation

specializes in producing compact, functional and comfortable sofa/beds for small living

spaces. It has production facilities in Denmark and China and sells its products globally.

However, most of the revenue in Europe comes from Western Europe. Even Though

Innovation operates in some parts of Eastern Europe, the markets there are considered new

and are yet to be developed and the full potential of them to be reached. This report will

combine market research with the best sales theories from modern academic literature and

will suggest how to increase the sales in the Bulgarian market.

1.1. Problem Formulation

How can Innovation A/S improve its sales in Bulgaria?

1.2. Report Structure

The report will be following the structure below: (See figure 1.1);

Figure 1.1: Structure of the report

Source: Own Production;

2. Methodology

This chapter follows Richard Brook’s eleven step model of research design to plan and

present the methodological background of the research. (Brooks, 2013); (See figure 2.1);

Figure 2.1: The eleven step model of research;

Source: Brooks;

Methodology Literature

Review Situation Analysis

Strategy Conclusion




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2.1. Research Objectives

What is the current situation of Innovation Living both from internal perspective in

the organisation, and from external perspective assessing the furniture industry and

the Bulgarian furniture market?

How Innovation Living can improve its overall competitiveness in Bulgaria?

Who are the most attractive potential customers of Innovation Living in the Bulgarian

market?

How the distanced Bulgarian market could be managed most effectively and by

whom?

What strategic objectives Innovation Living could implement in order to improve its

market position in Bulgaria?

How Innovation Living can measure the performance on the Bulgarian market?

2.2. Research Paradigm

The report will follow a critical realism paradigm. It is about observing the cause and effect.

The sales at EEU are low, what would happen if a new sales strategy is implemented? This

question is followed from the paradigm and related to the case of this report. How can the

ongoing business process to be improved? The Critical Realism paradigm will help to get

better insight of what has to be improved.

2.3. Approach

The approach that the research follows is a deductive approach. (Brooks, 2013) A set of

assumptions are made based on the researcher’s inside information from Innovation Living

and the company experience with the Bulgarian market and other markets the company is

operating in. They will be proven throughout the report, either right or wrong, and will be

considered when recommendations are given.

A1: Having direct presence in the market will increase the company’s success in the market

in terms of attracting more partners

A2: Expanding the number of distribution channels in the market will result in bigger reach,

thus attracting new customers and overall increase in sales.

A3: Having a native sales representative will help the company to overcome the culture

barriers and will also contribute with inside knowledge of the market and consumers.

2.4. Method

The choice of data method gathering is through a multimethod qualitative study, as semi-

structured interviews will be conducted both in person and phone.

2.5. Strategy

The strategy of the research is chosen to be a case study as the goal is to receive a rich

understanding of the research topic. (Brooks, 2013);

2.6. Time horizon

The time horizon of the research is a cross-sectional as it was conducted in the range of few

consecutive months – three months in Denmark.

2.7. Theory and models

An internal analysis of the company and its operations will be made using the canvas

business model. The strategy will be analysed based using Porter’s Genic Strategy Matrix,

The Anssoff Grow strategy matrix, the Value Strategy, Degree of Internationalization

For conducting a meaningful external analysis a PESTLE will analyse the market environment

in Bulgaria. Implementation of the Porter's Five Forces Industry analysis will be define the




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attractiveness of the industry and be a solid base to assess the level of competition within

the furniture industry. Gather relevant data through desk research to collect valuable

insights of the Bulgarian furniture market such as market indicators, trends, consumers.

Competitor Analysis will be made to find out the direct competitors, benchmark Innovation

Livings competences and product features with firms from the competition. Evaluate the

competitive advantages of the domestic competitors and the international firms penetrating

the market. Focus on delivering more customer satisfaction than the competitors and gain

market share.

ADL Matrix is applied to determine the current place of Innovation Living in its relatively new

Bulgarian market.

The Hofstede 6 Cultural dimensions analysis is used to evaluate the both the Danish and

Bulgarian culture and to compare them, pointing the essential cultural differences that have

to be considered when doing business;

B2B Customer Analysis is critical for Innovation Living success on the market. Identifying

well established retailers with reputation and strong position on the market, also

understand their buying behaviour, the buying process and also the preferences when

relating to a new supplier.

Essential part of the report is devoted to sales. Theory and models related to sales

techniques, sales planning, and consultative sellers vs transactional sellers. The Spin Model

is also included. The process of salesmen recruitment is explained. A competence profile of

a sale agent, aligned to fulfil a demanding role at Innovation Living as a foreign sales agent.

The strategy map framework is used to create a workable market penetration strategy of

Innovation Living for penetrating the Bulgarian market. All the four perspectives are of a the

strategy are developed and aligned to the specifics of the market and the company

operations in order Innovation Living to reach its potential in Bulgaria.

The Balanced Score Card is used for measuring the performance of the company while

implementing the new strategy. In order the strategy to deliver the desired outcome, the

targets specified in the balance score card has to be fulfilled.

2.8. Sources

The sources used in this research are both primary and secondary sources. The secondary

sources consist of academic journal articles, international publications and academic books.

The primary sources used are the public company information, the information acquired

during the 3 month internship within the sales department. Field research in Bulgaria was

executed, during which a sufficient amount of data was collected. Activities undertaken

during the field research are company and showrooms visits, observing both the businesses

and consumers shaping the industry and the supply of furniture, more precisely sofa/beds.

Taking into account the price/quality, customization and functionality;

Five semi-structured interviews with individuals involved in companies operating as resellers

in Bulgaria were performed. The goal was to get valuable information from companies which

are potential customers of Innovation Living In Bulgaria and are part of its target group. (See

Appendices 2,3,4);

The research could have been more extensive by conducting more interviews, but due to the

time frame and the nature of the contacts, it was not possible to gather more.




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2.9. Quality assessment

The reliability and validity of the research is assured by using mainly five star academic

journal articles, reliable online sources and research conducted by verified institutions. The

primary data gathered also adds up to the reliability of the outcome of the research.




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3. Literature Review

Validating the potential of a specific foreign market is one of the elements when expanding

to foreign markets. Introducing a product to a new market also comes with the need of

taking difficult decision - how should the company market their product. (Erin Anderson).

First to start more broadly by defining the word “market” will be given.

3.1. Market Definition

Market: “Markets include mechanisms or means for (1) determining price of the traded item,

(2) communicating the price information, (3) facilitating deals and transactions, and (4)

effecting distribution. The market for a particular item is made up of existing and potential

customers who need it and have the ability and willingness to pay for it.” (Business

Dictionary, 2013);

The four points that are outlined in the above definition of market should be taken into

account in the forming of a strategy not only when a new business is developed, but also

when a company wants to enter a new market or penetrate the one that is already operating

in.

To make it more specific a definition of a business market will be given:

Business markets: “Markets for products and services, local to international, bought by

businesses, government bodies, and institutions for incorporation, for use or for resale. The

main differences between business marketing and consumer marketing are the nature of the

customers and how they use the product. “(Hutt Speh, 2014)

Having defined what markets and business markets are it is relevant to take a look how an

already operating company within a B2B market can grow.

3.2. Growth Matrix – H. Igor Ansoff

According to the Ansoff Matrix developed by H. Igor Ansoff, found in the article “Strategies

for Diversification”, there are four strategies that companies can use to grow and each on

carries a higher risk.(See figure 3.1);

Figure 3.1: Ansoff Growth Matrix;

Source: Mind Tools, 2016;

Market penetration carries the lowest risk, making it the safes of all the options. The growth

here consists of expansion of the sales in a market that the company already operates in.

Product development is a bit more risky as it involves the introduction of a new product in

an already penetrated market.




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Market development consists of introducing an existing product to a new market, which

increases the risk.

Last but not least, Diversification is the riskiest one as it consists of introducing a untested

product to a completely new market the knowledge for which is not sufficient.

It will depend on the company goals and current capabilities to choose the best fitting

growth strategy. As many of the barriers in the last 20th

century related to international trade

fell, many business began to pursue global strategies in order to gain competitive

advantage. Magdalea Kakol);

3.3. International Growth – why do businesses choose to pursue it?

The most common reasons for companies going international are growth or expansion.

International strategies may benefit the business by helping to diversify it and expand it.

(Katarzyna Twarowska). Going global also reduces the uncertainty of the local and national

markets (demand upturns and downturns for example.) Hence, the company does not need

to rely only on the current market that it is in. (Elmuti D., Kathawala Y.2001);

There are two main approaches to going international – through an international strategy or

a global strategy. (Yip G. 2002);

International strategy is basically working through international subsidiaries that act as they

were local companies and have minimum coordination from the parent company. Global

strategy on the other hand, consists of a wide variety of business strategies that have a high

level of adaptation to local business environment,(Ktarzyna Twarowska) It is basically a

general strategy that can be easily manipulated to fit different local environments when

necessary.

3.4. Entry Strategies – how do businesses expand internationally?

To go back to the beginning of the literature review, when expanding a business to a

foreign market, one of the biggest challenges and decisions to be taken is how to enter the

market. There are several types of entry strategies that are summarized under two major

types and differ by the level of risk involved: (Terpstra V., Sarathy R. 2001);

1) Non-equity mode – includes export and contractual agreements;

2) Equity mode – includes joint venture and wholly owned subsidiaries

(Terpstra V., Sarathy R. 2001);

Figure 3.2: Entry Strategies

Source: Hutt Speh, 2014;

The entry technique that is the least risky and has the least market control is Import and

Export. (See figure 3.2) On the other side of the spectrum are the Direct Investments that

usually constitute of acquisitions (also referred as Brownfield) or to build its own facilities




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(known as Greenfield investment). Direct investments carry the highest risk, but also the

highest market control and expected ROI (return on investment) (Terpstra V., Sarathy R.

2001);

There are six types of entry strategies on the spectrum that all differ in risk, market

involvement, resources required, legal complications, competitive aspect, access to market

knowledge and potential ROI. The entry strategies are as follows: (Terpstra V., Sarathy R.

2001).

Exporting and importing

Licensing

Franchising

Joint Ventures

Strategic alliances

Direct Investments

For the purpose of the report and to stay relevant, only the Exporting entry strategy will be

further discussed.

3.5. Export – Direct and Indirect

As clarified earlier, this strategy is the least risky and the most commonly used one. It is the

process of selling goods or services produced in one market to other markets. ,(Ktarzyna

Twarowska,2013). Two types of exporting exist – direct and indirect.

Indirect export involves other agents to market the products to the foreign market, while in

direct export the company becomes directly involved in marketing its products to the

foreign market. (Hutt Speh, 2014);

Exporting is a good strategy when a company doesn’t have sufficient amount of resources

to make a significant commitment to the market, wants to minimize the risks related to

politics and economy and also is not that familiar with the requirements of the market and

the culture. (Hutt Speh, 2014);

The question that a company can ask at this point is, should the product be distributed

through a company-owned distribution channel or it would be more efficient to outsource

distribution to an independent organization?

3.6. Distribution Channels

Channel of distribution, also referred to as a marketing channel, is:

“A group of individuals and organizations that direct the flow of products from

producers to customers.” (Hutt Speh, 2014);

Most of these marketing channels have the so called marketing intermediaries (or middle

man) that are divided into two types – agents and brokers. (Hutt Speh, 2014)

In the case of this report, the company already collaborates with middleman to sell its

products.(Innovation Living, 2016) Therefore the report will not focus on discussing this

aspect of the distribution channels, but it will look further how the company can more

adequately approach and attract more middleman to collaborate with.

Back to the question – owned salesforce or independent organization?

The former option, an integrated channel, gives the business more control than the latter,

the independent organization. Having an ownership over the salesforce provides the entrant




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with full control, but it also brings responsibility, commitment and attendant risks. (Ahmed

1977).

There are several factors that would influence the choice, as each one of them depending on

the situation would weigh the scale to one side or the other: (Erin Anderson, Anne T.

Coughlan, 1987);

Service requirements

Government pressure – using local agents when available

Product category age

Task-specialized knowledge and relationships

Transactional Costs

Market knowledge

Strength of patents

Competitive behaviour

The country in question

It is more likely a business to choose an integration of the distribution when:

- There is a greater level of transaction-specific assets in the sales force

- The less mature the product category

- The higher the service level associated with the product

- The less prevalent legal restrictions

- When there is an integrated distribution channel already in place

- The importance of the product is high – is it the core one for the business?

- The more important the trade secrets

- The more competitors have integrated distribution channels in the foreign market

- The more similar the culture of the home market is to the culture of country being

entered. (Erin Anderson, Anne T. Coughlan, 1987)

When the company decides to operate through an integrated salesforce, even if that involves

hiring a local sales representative, it will need to create a sales strategy that will be in line

with its marketing plan, will be complied with the business plan and will support the overall

strategic plan of the company. (JWPM Consulting, 2013)

3.7. Developing a sales strategy

A sales strategy has to be very detailed and specific otherwise it is simply a marketing plan.

It has to be clear who is doing what, when and where and most importantly, it must have

targets. A sales plan is:

“An operational plan that identifies how the annual sales revenue budget will be achieved by

aggregating sales budgets by customer, territory, and sales representative and listing the

week to week activity required to achieve the sales budgets.”

The sales plan is organized around a list of revenues sources and the customers should be

grouped the following way: (See Table 3.3);




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Table 3.3: Customer Grouping;

Existing customers The 80/20 rule usually applies that is

80% of revenue is derived from 20% of

customers. The sales representative

should be able to make a judgement

about how much each customer is

expected to buy in over a year.

Identified new customers Create a list of the sales target for a year

from which 25% might become customers.

As yet not identified new customers Allocate an allowance in for growth as yet

not identified future customers

Major projects Depending on the type of company, make

an allowance for major project revenue.


Setting up a sales plan serves as a great management tool to help forecast the annual sales

revenue, to achieve face-to-face visits, to identify how many sales reps are needed and what

the purpose of each sales visit would be. (JWPM Consulting, 2013);

The content of good sales plan content should contain the following aspects:

- Sales strategy

The company needs to create a general statement for the sales strategy that will reflect the

strategic direction of the organisation.

- Sales Model

There are many ways to structure the sales departments. One of the most common models

used is “every man for himself”. On the selling spectrum there are two types of sales

approaches - transactional or collaborative (William Walker, 2016) Depending on the type of

business, customers and goals, the sales model can be transactional oriented or relationship

oriented (collaborative) which will influence the level of sophistication, the number of

employees involved and the amount of time in the sales process.

Transactional selling approach

Simply put, a transactional sale is a short-term sale in which the buyer knows already exactly

what he needs. (John Tabita, 2012)The main decision criteria are price, features and

availability and the significance of the sales person very often diminishes. The person selling

will know the product and its price, but it won’t be required to convince the purchaser.

(William Walker, 2016);

Consultative selling approach

Consultative selling approach is also referred to as strategic, solution, complex, relationship

and even enterprise selling. (Ed Warner, 2009) It is long-term oriented, usually more than

one decision maker is involved and the focus is put on the value. The questions is not what

the customer is buying, but why. Not like in transactional selling, here the salesperson will

need to be very well educated about the product or service in question. Moreover, to know

more about the customer, what are the goals of the customer’s business and the results that

need to be achieved. When the customer is not very certain about exactly what he/she

needs, the salesperson becomes a coach that helps the customer to establish goals and

objectives and create an action plan that will deliver results. (William Walker, 2016);




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The table below presents an overview of the differences between transactional selling and

consultative selling: (See table 3.4);

Table 3.4: Transactional vs. Consultative Selling;

Source: John Tabita, 2012

As consultative selling requires higher level of knowledge about the customer and what

he/she are aiming for, there are models that can be used to enhance the sales person’s

techniques.

The SPIN selling model was developed by Neil Rackham in 1998, after conducting a vast

research for 12 years about how large sales were made. One of the biggest findings is that

in sales calls it is the buyer who does most of the talking, which on its hand happens by

asking the buyer questions. But it is not about asking any kind of questions, the sales

person should ask certain type of questions and follow a certain flow. (See Figure 3.5);

Figure 3.5: SPIN Selling Model

Source: Strategic Learning, 2013;




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SPIN stands for:

-Situation (questions) - to find out facts about the existing situation of the customer.

-Problem (questions) – to find about what problem the buyer is experiencing in this

current situation.

-Implication (questions) – to make the customer think about the consequences and

effects of the current problems.

-Need-payoff (questions) – to make the buyer focus on the solutions and the value of

the proposed solution.

What the creator of the SPIN selling model himself recommends is that a sales person

should always stay flexible and adapt the speech and the questions according to the specific

situation. It is not always necessary to follow the order of the SPIN questions in a strict

order. (Hutt Speh, 2014);

Another article introduces a concept that serves as an enhancement to the SPIN selling

model, called Social Style model. The model enhances SPIN in three main ways – the sales

person applying a certain style to the selling situation, recognizing and managing the

buyer’s style behaviours and practicing versatility.

Practicing style awareness improves sales people abilities to ask the right questions thus

achieve better success rate and versatility supports all aspects of client management and

selling situations. (Hutt Speh, 2014);

- Territory plan

It is important to segment the sales territory so that the resources and time are allocated

effectively to maximise the sales outcome. The sales territories can be segmented by

geography, industry, customer type, product type and customer size. The choice made can

have a huge impact over sales outcomes.

Figure 3.6: Sales Opportunities Grid

Source: LaForge and Carvens, 1982




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Figure 3.7: 7 step process

- Significant sales opportunities

Each sales plan for the year should have identified and contain the so called “largest”

opportunities for the business and a more detailed plan should be prepared to capture

them. The matrix on the previous page gives an overview on how to allocate the sales

resource depending on the PCU opportunity. (See figure 3.6);

- Sales Budget

The sales budget should contain considerations for at least 12 months and sales targets for

sources of sales growth.

- Sales Activity Plan

A plan for the activity of each sales rep should be prepared that will match the goal of

achieving the targets in the Sales Budget.

- Sales Tactics

Sales tactics may include different considerations such as new initiatives designed to

increase the effectiveness of the sales activity. As well, cultural considerations, which are

very important when conducting sales in foreign markets?

- Resource plan

This plan provides a detailed month over month budget of the sales department expenses:

number of sales reps needed, support staff, equipment purchases, etc. Under this section an

outline of the recruitment plan can also be included, if new sales reps need to be employed.

The recruitment process consists of 7 Steps: (See Figure 3.7);

Determine the number of sales employees needed

Identify the unique skills, knowledge and personality

required for the job

Attract a sufficient number of candidates

Produce one interview process that accurately reveals qualifications

Provide employment for one or more candidates

Introduction of new employee for the job

Follow-up on performance in the job

What should be taken into consideration for sales force composition and number?

What preparations should the company make?

How does a company get sufficiently applications?

What sources are there for a company to make use of in order to find possible

candidates?

What tools can a company use?

Considerations about the interview process

How can interview process look like?

What the company must take into consideration when a candidate is offered a job?

What the company must take into consideration when a new employee to be

introduced in the job?

What needs to be followed up? Source: Own Production




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- Sales incentives

Create a scheme of incentives for the sales representatives and the costs should be

considered in the resource plan.

Incentives can take different forms. Apart from the fixed salary and pension, the company

can also offer a variable salary such as: provision, bonuses, paid company car, EBIDA or

stock options.

There can also be other benefits like free phone, health insurance, massage/fitness or it can

be reverences related to the work like parental leave or care taking days. (Jobber &

Lancaster) Also career development aspects such as company paid courses, coaching,

teambuilding and etc.

Related to the compensation, for the sales reps it is very common practice to receive a form

of a variable salary next to the fixed one. It is also referred to as performance based

remuneration. When developing a plan about performance based remuneration, it has to be

decided upon the period, goals, measurements, information access, the size of the bonus,

when it is paid and termination details. The periods can be monthly, quarterly, yearly or

individual for a very specific target. (Jobber & Lancaster)

- Training plan

The training plan in general should be ongoing for any sales department. It will contain all

the training activities planned, participants, cost of the training, schedule and impact on

other related activities.

- Operations plan

This plan contains everything related to working space, equipment needed to conduct the

tasks, software etc. This plan also can contain expenses and other capital discussions.

- Selling expense summary

The total costs for each month are summarized and listed.

Having discussed how to organize a salesforce, it is also very important to take a look at the

cultural factors and considerations that the new sales reps will need to take into account if

expanding to a foreign market.

3.8. Cultural Dimensions, affects and considerations

Culture, cultural differences and the influence of national cultures play an important role in

International Business (IB) field and over the last three decades have been widely studied.

The research paper by Reis, Ferreira, Santos and Serra (2013) examine different cultural

models and present the definition of culture given by Hofstede (1980):

“[t]he collective programming of the mind which distinguishes the members of one human

group from another, … the interactive aggregate of common characteristics that influence a

human group’s response to its environment”.

As well, Gould and Grein (2009) state that:

“[c]ulture consists of explicit and implicit patterns of historically derived and selected ideas

and their embodiment in institutions, practices and artefacts; cultural patterns may, on one

hand, be considered as products of action, and on the other as conditioning elements of

further action”.




14

Companies are not in isolation, and they operate in a physical, technological, economic,

social and cultural space to which they must adapt. (Scott, 2002);

According to Guusinger, (2001) one of the factors that culture can influence are the

international strategic options when operating abroad and can have a strong impact on the

choice of entry mode in foreign markets. (Kogut and Singh, 1988; Tihanyi et al., 2005) From

the research, some companies seem to prefer joint ventures and acquisitions rather than

Greenfield investments when entering culturally distant countries. (Shane, 1993);

Three main cultural models exist:

Edward Hall’s high and low context of culture (1976);

Trompenaar’s seven dimensions of culture (1993);

Hofstede’s Cultural dimensions (1980);

Hofstede’s model analyses the different variables of national culture while Trompenaar’s

model focuses on how culture is created. (Hampden-Turner and Trompenaars, 1997) Hall’s

(1976) model did not advance to an internationally comparable measurement and it analyses

only one single variable (context) in a binary output. (Reis, Ferreira, Santos and Serra, 2013)

All of the models have received certain critique regarding peer review, depth of the model

and simplicity. However, the most commonly used model by academia and professionals

today when trying to analyse the culture of a certain market is Hofstede’s model, thus the

literature review will further focus only on this model. (Reis, Ferreira, Santos and Serra,

2013);

Hofstede’s Cultural dimensions

In his book, “Culture’s consequences: International differences in work-related values”,

Hofstede (1986) presents the results of his empirical study through which he managed to

identify four basic cultural dimensions that are able to explain the variance in the countries’

scores of cultural values. The four dimensions are:

Power distance: the degree to which individuals in a culture accept unequal

distribution of power. (Hofstede, 1980);

Uncertainty avoidance: the tolerance of members of the group to unstructured,

ambiguous situations and whether the members of the group accept or try to avoid such

situations. (Hofstede, 1980);

Individualism – collectivism: defined as the extent to which individuals in a national

cultural setting “prefer to act as individuals rather than as members of groups”. (Hofstede,

1994)

Masculinity-femininity: the degree to which traditionally ‘masculine’ values (e.g.,

performance, competition, success and assertiveness) prevail over stereotypically ‘feminine’

values (e.g., solidarity, care for the weak, cooperation, quality of life, personal relationships

and friendship. (Hofstede, 1994) ;

Together with Bond (1988), in later work, a fifth dimension was included:

Confucian dynamism (also known as long term orientation), which relates to the

culture’s time horizon, and the importance ascribed to the future or the past.

The latest cultural dimension added to the model or the sixth one is:




15

Indulgence the extent to which people try to control their desires and impulses,

based on the way they were raised. (Hofstede, 2016);

The following limitations when applying Hofstede’s framework should be kept in mind. One

of the obvious weaknesses is that the data is relatively old and doesn’t capture the effect of

recent political, economic and technological changes. Moreover, that the creation of the

model is based on data from only one company – IBM. (Pankaj Ghemawat and Sebastian

Reiche, 2011);

As outlined earlier, national culture differences have a reflection in business decisions like

foreign entry modes. But the understanding of national culture can also improve

management practises and Pankaj Ghemawat and Sebastian Reiche (2011) provided the

following findings:

Participative management can improve profitability in low power distance cultures

but worsen it in high power distance cultures

Quick fixes can improve profitability in more short-term oriented cultures but worsen

it in more long-term oriented cultures

Merit-based pay and promotion policies can improve profitability in more masculine

cultures and reduce it in more feminine cultures

Emphasizing individual contributions can improve profitability in more individualistic

cultures and worsen it in more collectivistic cultures

The findings can be used when deciding how to manage a sales rep for a foreign market

(tasks allocations, incentive strategies, etc.) after having made an analysis of the cultural

dimensions of the country in question.




16

4. Innovation Living’s Business Model

Innovation Living is an international furniture enterprise that has established production

facilities in three countries, on three continents, and has employees all over the world. The

company has full ownership over its supply chain until the distribution to the B2C - the

middle man or the retailers, thus it does not deal with the business to consumer aspect. One

of the biggest pluses for the company image are the “Danish design” and “Danish quality

stamp”.

Before an analysis of the Business models is made, it is relevant to take a look what growth

strategies the company is currently employing:

As shown on the figure below there are four types of generic strategy depending on the

Target Market Scope, the cost and the uniqueness of the product or service. Innovation

Living specializes in a niche market, more specifically the sofa/bed segment and serves

mostly customers who live in small living spaces. (Innovation Living, 2016) Based on this,

the generic strategic is determined to be a Differentiation Focus. (See figure 4.1);

Figure 4.1: Generic Strategies

Source: Hollensen, 2010;

As the main discussion of the report is related to the Bulgarian market and there is enough

data to determine the growth strategy according to the Ansoff Matrix. Innovation Living is

already present in Bulgaria with one authorized dealer in Sofia. The company sells products

from its usual product portfolio without any changes. Meaning that Innovation Living is

using the Market Penetration Growth Strategy;

Now, to receive a better understanding of the company’s concept and to see if it has the

necessary resources and capabilities internally to pursue a new strategy, an analysis of the

business model is made.

An overview of the company’s business model is presented on the next page (See figure

4.2);




17

Figure 4.2: Osterwalder Nine Block Business Model

Key partners All major suppliers of parts and materials, logistic partners, dealers and

chains, exhibition/fair executives, Danske Bank, External legal advisor

Key activities Design, production, sales & marketing activities

Key resources Human: Skilled management, Inspired well-known designer, Skilled

experienced experts in all processes of the production

Physical: production facilities/machinery, the building (warehouse,

showroom, offices)

Intellectual: XAL Information user friendly platform, containing data about

customers, procurement, financial data, inventory and transportation

Financial: Liquid/Financially stable company

Value

propositions

Functionality, Quality, Scandinavian Design, Brand Image, Customization,

Comfortability, Flexibility, (In some cases recycled or handmade)

Customer

segments

People of all ages living in small/one room spaces

In BG market: People with high standard of living (with greater disposable

income)passion for imported/ Scandinavian design furniture, High-

end/premium segment/luxury product

Customer

relationships

Personal focused customer relationships mostly aiming to retain existing

customers and less focused on new customer acquisition

Channels Own: Sales force, sales agents partner: dealers, wholesalers

Cost structure Costs related to KA: design, production, marketing & sales

Revenue

streams

Main: sales of furniture

Secondary: Sales of point - sale materials to Dealers

Source: Own production;

4.1. Customer Segments

The product in question is a niche product, with high level of innovation and diversification,

hence it holds a premium price. Therefore, Innovation Living is targeting furniture retailers

that are only distributing furniture in the same price-intervals. It is also important, that the

retailers are picking products that are unconventional and innovative and will attract end

consumers who seek to find unique design and functionality, and are willing to pay a higher

price.

In the Bulgarian market, the company currently operates only through one middle man –

Home Selection. Home Selection focuses exactly on three key aspects: Quality, Functionality

and Innovation. (Home Selection, 2016) It places emphasis on beautiful, functional and

proven quality furniture. The prices in their product range is medium to high.

In order to choose the right B2B customers, Innovation Living has defined a business to

consumer target group – people of all ages living in small/one room spaces, with a higher

disposable income. The company defines these people as young and extremely demanding,

having a dynamic lifestyle that the company’s products can be up to date with.

4.2. Value Proposition

The value proposition constitutes of products that are functional, with high quality, high

degree of customization, flexibility and Scandinavian design.




18

Value Strategy - Customer Intimacy;

According to the Harvard Business Review, Customer Intimacy is one of the three value

disciplines. The other two are operational excellence and product leadership. Customer

intimacy observed as a value strategy refers to companies who continuously tailor solutions

(products or services towards the needs of their customers). This approach could be

expensive but it is the right one when the goal is improving the customer loyalty in the long

term. The focus is on the customer lifetime value, not on a single transaction. The idea is

that employees of Innovation Living strive to fulfil every customer desire, even it doesn't

seem important from their perspective.

The most special about Innovation Living’s products is their functionality. The different

sofas are designed to fit rooms of different sizes and to be adjustable depending on the

customer’s need at that current moment – to sit and read a book, to take a nap, etc.

Customers can also customize and give ideas for sofa’s to specifically fit their needs

through the D.I.Y. – Design It Yourself idea and slogan.

4.3. Channels

Innovation living’s marketing communications consist of both push and pull strategies –

they employ online and traditional marketing.

The company has its own website accessible from everywhere, as well as, it is present on

different social media channels – Facebook, Instagram, YouTube. Through these channels,

Innovation living manages to create brand awareness, also to educate and inspire its end

customers and to support its products through descriptions and video demonstrations.

The traditional marketing of the company consists of attending industry trade fairs that play

a very important role in their brand promotion in the B2B world. It is also creating its own

promotional materials such as product catalogues and brochures.

4.3.1. Distribution Channels

The distribution process flow is conducted through sales agents sourcing potential

wholesalers and retailers.

As mentioned earlier, the company operates through middle man, wholesalers and retailers,

and does not have its own brick and mortar stores. It has built its own salesforce and each

sales rep specializes for a different market. Hence, the company’s entry mode in foreign

markets is through direct export, collaborating with native sales representatives.

4.4. Customer relationships

The company conducts relationship based marketing or in other words, it follows the

diamond relationship model, where it has a personal approach to each B2B customers it

collaborates with. The sales reps act as key-account managers to their established partners.

They have constant communication with them and provide all the necessary information

support and information.

4.5. Revenue Streams

Innovation Living has two revenue streams:

Main: Sales of furniture

Secondary: Sales of promotional materials to Dealers

The company works with fixed pricing. When negotiating with the middle man, Innovation

Living directly sells its product to the distributor and then the distributor earns a percentage

of the final sale to the B2C customer. Here the risk falls on the middle man, as they stack up




19

inventory that needs to be sold. Nevertheless, Innovation Living needs to have certain

activities that support the middleman’s sales activities, so that is a win-win situation.

¨Innovation Living offer not the cheapest, nor the most expensive products.¨ - Quoted from

Jesper Frelund, Chief Executive Assistant;

However, the Innovation Living product prices compared to the price level of similar

products from the same sofa/bed segment in Bulgaria is quite high. Hence, the company

has a premium pricing strategy. Lowering the price of Innovation Products is not an option,

so the Innovation Living products are classified as luxury/premium and the pricing strategy

of the firm will be observed as premium pricing and it targets end consumers with high

disposable income.

4.6. Key Resources

4.6.1. Human resources

The company consists of 25 full time employees in the administration and one intern. The

team consists of CEO, Designers, Product Managers, Logistic Manager, International and

Area Sales Managers, Marketing Coordinators, Customer Service Team, It-Manager and a

Financial Specialist. It also has its own employees in the production facilities.

4.6.2. Intellectual resources

The company has created and poses a database called XAL that contains information about

their customers, procurement, financial data, inventory and transportation.

4.6.3. Physical resources

The company owns three production facilities and special machinery. It also has an

inventory storage space (warehouse), showrooms, offices and different equipment.

4.6.4. Financial resources

A detailed financial analysis of the company through ratios and financial report analysis

couldn’t be made, because of a lack of information from Innovation Living.

However, according to the company, it currently doesn’t have any liabilities. The flow of

revenue has slightly declined after the world’s financial crisis in 2007, but the company still

earns enough to be profitable and to re-invest back into the business. It recently started

building its own production facilities in Ukraine in order to support its activities in both

Eastern/Southern Europe and some parts of Asia. This will reduce the time to market in

certain countries as well as lower the costs for Innovation living in both production and

distribution.

4.7. Key Activities

The key activities of Innovation Living are as follows:

o Production and Design;

o Marketing and Sales;

o Distribution and Support;

4.8. Key Partnerships

The Key partner for Innovation Living are all the major suppliers of parts and materials that

make the production of the sofa’s possible and the dealers and wholesalers through which

the products are distributed to the end customers.




20

4.9. Cost Structure

The costs of Innovation Living are compounded of both fixed and variable costs. The fixed

costs include salaries, administration costs, operating costs and equipment depreciation.

The variable costs include marketing activities and sales incentives and bonuses.

5. External Analysis

This section of the report includes relevant parts from PESTLE analysis of Bulgaria, Industry

analysis based on Porter’s 5 forces framework, in-depth analysis of the competition on the

Bulgarian Market, both domestic and foreign firms. Competitive benchmarking based on

select criteria. Analysis of organisational customers relevant to Innovation Living;

5.1. PESTLE

Most relevant to the project are considered to be the economic, social and legal factors and

accurate summarized information is provided.

5.1.1 Economic factors

● Bulgaria is the poorest country in the EU;

● Bulgaria has the lowest wages in EU; Based on recent data published by the Bulgarian

Government, the average salary is app.400 EUR, the minimum salary is app. 200 Euros, high

salaries are app. 800-1000 EUR; However the salary rates are higher in Sofia and the high

salaries account for app. 1500-2500 Euros (BG Govern Stats);

● The manufacturing industry accounts for 20.0% of GDP and 20.3% of the workforce is

working in it.

● Disposable income per capita totalled BGN 6,912 in 2015. The real value of disposable

income per capita is expected to rise by 4.0% in 2016.

● Bulgaria’s economic performance was good in 2015. The economic growth is expected to

keep moderate rates and higher wages will continue to boost household spending, thereby

supporting output growth. The country continued to benefit from a modest increase in

foreign investment inflows and a relatively stronger fiscal stance.

● High rates of unemployment;

● Sofia has the most favourable economic climate and provides excellent conditions for

start-up and growing business;

Source: Bulgarian Country Profile, Euromonitor, 2016;

Figure 5.1: Key Economic Indicators of the Bulgarian Economy

2010 2011 2012 2013 2014 2015

Inflation (% change) 2.4 4.2 3.0 0.9 -1.4 -0.1

Exchange rate (per US$) 1.48 1.41 1.52 1.47 1.47 1.76

GDP (% real growth) 1.3 1.9 0.0 0.9 1.3 3.6

GDP (national currency millions) 74,771

.3

80,759

.0

82,040

.4

82,166

.1

83,634

.3

88,571

.3

Birth rate (per '000) 10.2 9.6 9.5 9.2 9.4 9.2




21

Death rate (per '000) 14.9 14.7 15.0 14.4 15.1 15.3

No. of households ('000) 2,996.

1

3,005.

6

3,011.

6

3,017.

2

3,023.

5

3,026.

9

Total exports (US$ millions) 20,570

.9

28,221

.7

26,666

.9

29,579

.4

29,327

.3

25,715

.2

Total imports (US$ millions) 25,472

.8

32,578

.8

32,708

.7

34,308

.3

34,660

.9

29,225

.8

Urban population ('000) 5,337.

0

5,314.

9

5,324.

9

5,307.

9

5,291.

7

5,267.

5

Urban population (%) 71.9 72.1 72.7 72.9 73.0 73.1

Population aged 0-14 (%) 13.2 13.3 13.4 13.6 13.7 13.9

Population aged 15-64 (%) 68.8 68.3 67.8 67.3 66.7 66.1

Population aged 65+ (%) 18.0 18.3 18.8 19.2 19.6 20.0

Infant mortality (deaths per '000

live births) 9.4 8.5 7.8 7.3 7.6 6.6

Adult literacy (%) 98.3 98.4 98.4 98.4 98.4 98.4

Source: Euromonitor, 2015;

Figure 5.2: Real GDP Growth and GDP per capital development in the period of 2010-2016;

Source: Bulgaria - Economy, Finance and Trade, Euromonitor, 2015;

Income and expenditure in Bulgaria

Bulgaria’s per capita gross income and expenditure levels are the lowest amongst

economies in the European Union (EU).In 2015, consumer expenditure per capita amounted




22

to BGN 7,802 (US$4,425). The real value of consumer expenditure per is expected to raise

with 3.4%. Disposable income per capita totalled BGN 6,912 (US$3,921) in 2015. The real

value of disposable income per capita is expected to rise by 4.0% in 2016.

During the period 2015-2030, total disposable income will increase by a cumulative value of

89.8% in real terms – growing at an average annual rate of 4.4%.

As Bulgaria’s political, economic and cultural centre, Sofia gains most of the investment

(public and private) in the country (which results in higher employment rates compared to

the rest of the regions). The city also has the highest concentration of wealthy households in

Bulgaria. This delights the broader South-West region the largest consumer market in the

country, while the region also ranks top in terms of per household average spending;

Source: Euromonitor, 2015;

5.1.2 Social factors:

The country is experiencing a long-term decline in the population of all ages less than 60.

Total population was 7.2 million in 2015, a drop of almost 800,000 since 2000.

● Bulgaria is losing thousands of qualified workers each year through emigration

● 22 % of the population are poor people below the poverty line;

● The availability of skilled labour will continue to be a constraint despite the large pool of

unemployed.

● Aging population is a disturbing factor;

● Productivity growth is critical for accelerating income convergence. Productivity must grow

by at least 4% per year if Bulgaria is to reach average EU income levels. Growth prospects

could also be limited by significant population decline owing to emigration and ageing.

Source: (Euromonitor, Bulgaria Country Profile, 2015);

5.1.3 Legal factors:

● High corruption rates in Bulgaria;

● Competitive tax rate of 10%, the lowest in the EU;

● Member of the EU, EU free trade policies apply;

● No additional regulations regarding the import of furniture;




23

5.2. Porter's Five Forces

Figure 5.3: Porter's Five Forces Industry Analysis Chart

Source: Based on Michael Porter’s 5 Forces model;

5.2.1. Supplier Bargaining Power - Moderate 5/10

In general, there are plenty of suppliers worldwide providing similar materials (wood/iron

frames, textile covers, mattresses and fillings). Definitely, offered products/materials from

various suppliers may differentiate in terms of price, quality, delivery time, order size, origin

of materials, certification and much more. Firms who has better agreements with a supplier

or partner with suppliers, providing them with superior materials gain competitive

advantage and become the preferred choice of the end consumers. The supplier bargaining

power is determined to be moderate. The suppliers can charge as much as they decide for

their products and services as far as their customers agree to pay. In a free market there are

no general limitations to accessing and cooperating with a certain supplier, it all comes to

negotiating more favourable conditions of cooperation. The suppliers might feel pressured

to lower their price, to win a client. Furniture manufacturers who are able to find and

cooperate with suppliers, offering superior products and services on better terms in the long

term compared to the competition gain sustainable competitive advantage, leading to

increased perceived value for the customer, more sales and bigger profits.

Table 5.4: Indicators of the supplier’s bargaining power;

Number of suppliers High

Size of suppliers Vary

Uniqueness of service Not unique

Your ability to substitute Great

Cost of changing Small


02468

10

Supplier'sBargaining

Power

Buyer'sBargaining

Power

Threat ofSubstitution

Threat of NewEntrants

Rivalry amongExisting

Competitors

Porter's 5 Forces Shaping the Furniture Industry

Porter's 5 Forces Shapingthe Furniture Industry




24

5.2.2. Buyer Bargaining Power - High 8/10

The customer is always first, he is the decision maker. Fierce competition between

manufacturers provides the customer with wide range of products to choose from. The

buyer has the power to determine from whom to buy and to decide which offer suits his

needs best.

Table 5.5: Indicators of the buyer’s bargaining power’

Number of customers Medium

Size of each order Vary

Differences between competitors Low, might vary

Price sensibility High

Ability to substitute High

Cost of changing Low


5.2.3. Threat of Substitution 1/10

Thinking logically, there is no substitute to furniture. All the substituting products or

products with similar purpose/designation are also categorized as furniture products. So the

furniture is unique and irreplaceable concept. In other words, the furniture products can be

substituted only with other furniture products. Of course there is a wide range of functions

and model varieties which may have similar usage qualities and one product can replace

another. (Example: Sofa/Bed have the properties and applications both of a couch and a bed

and could substitute both. Also decreases the quantity of occupied space (measured in

sq.m), which makes it. in some cases, a preferred product for small living spaces).

Table 5.6: Indicators for threat of substitution

Substitute performance No substitution to furniture

Cost of change -


5.2.4. Threat of New Entry 8/10

In the furniture Industry, the threat of new entry is high. A lot of new firms continuously are

being opened. Small investments of capital are required to buy wood and textile processing

machinery. It is not a necessity to operate complex technologically advanced machinery in

the process of furniture manufacturing. Old machinery, even a manual tools are used to

reduce costs. The administration also processes documentation smoothly without need of a

complex software. Rarely sophisticated CRM systems are used, only by large organisations

who can afford. Furniture manufacturing business can be launched with relatively small

capital. Most of the new entrants are local small firms. Economy of scale is determined to be




25

medium to high, mainly because materials are cheaper when purchased in bigger volumes;

also the efficiency of the logistics is increased, leading to lowering of the transportation

costs per unit.

Table 5.7: Indicators of threat of new entry

Time and cost of entry Small

Specialist knowledge Small to medium

Economies of scale Medium to high

Cost advantages Medium to high

Technology protections Small

Barriers of entry Small


5.2.5. Competitive Rivalry - High 9/10

There is high degree of competition within the furniture industry. Huge number of

competitors. The market is very price sensitive, meaning that a change of price, causes a

drastic change in the demand for products. The quality of materials and assembly can vary

depending on suppliers and the expertise of the work force. The furniture industry is not

characterized with high customer loyalty, often the customers are purchasing furniture from

different retailers and manufacturers. A firm which is able to provide a product with the

same perceived benefits cheaper, most likely is the preferred choice of the customer. The

industry is characterized with fierce price competition and could be described as Red Ocean.

Table 5.8: Indicators of the rivalry among competitors;

Number of competitors High

Quality differences High

Other differences High

Switching costs Medium

Customer Loyalty Low


5.2.6. Attractiveness of the furniture Industry 4/10

Overall the furniture manufacturing industry is not very attractive scoring overall rating of

4/10, because of the high level of competition among opponents, the price sensitivity

influencing the demand. On the other hand it is safe industry because there are no




26

substitutions and companies with skilled salesforce can achieve high results being able to

satisfy the customer´s demands.

5.3. ADL Matrix

Using the ADL Framework are considered two main factors: the competitive position of

Innovation Living in the Bulgarian Furniture Market and the stage of industry life cycle. The

Industry is considered as mature. The meaning of mature in this case is that the industry is

already grown and it has well established customer base, the market and the market share

are stable, there are a lot of competitors and are focused to differentiate one from another -

exactly what it is happening within the furniture industry. However the Innovation Living

competitive position on the Bulgarian market is tangible, meaning that the company has

small insignificant market share, also it is present only in Sofia. The firm strives to

differentiate its products from the others and retain on the market. In order Innovation

Living to keep its market share and to pursue growth, it has to improve its competitive

advantage and to put more effort on sales and acquire new customers. Based on internal

information from the company, at this moment there are not enough people in the sales

department, which results in inability to acquire new customers. The currently hired sales

people at Innovation only manage to serve existing customer and are unable to negotiate

with potential customers.

Unfortunately, this is a weakness and could have a negative effect to the company

performance and sales figures, it can even result in withdrawal of the market. Further in the

report this problem is to be solved. Innovation Living needs to be active and to stabilize its

position on the market. (See figure 5.9);

Figure 5.9: ADL matrix

Source: Wilson, Richard M.S and Gilligan, Colin, 2005;

5.4. Analysis of the Competitors in Bulgaria

Competitor intelligence acquired based on the analysis will contribute to developing a new

strategy for Innovation Living by identifying the competitive advantages of the competition

and how Innovation Living can steal market share.

The competition of Innovation Living consists of other furniture manufactures supplying

directly or indirectly sofa/beds to the end consumers in Bulgaria. They are divided in two

categories: Local Competition and Foreign Entrants.

¨Market sources of furniture for Bulgaria are dominated by foreign, mainly of European

origin firms. Share of national production out of total consumption is 25%. Share of imports




27

out of total consumption is 75%, which means Bulgaria depends on imports.¨ (Furniture

Manufacturing, 2015);

5.4.1 Local Competition

¨There are more than 2300 wood processing and furniture manufacturers in Bulgaria,

which sell both on the domestic market and export internationally. 77.5% of them are micro

firms with 1 to 9 employees. There are only 10 macro enterprises accounting for 0.4% and

they employ more than 250 people. The rest are small and medium firms with 10 to 250

employed personnel.¨

The competition faced by Innovation Living consists of all companies selling sofa/beds as

part of their portfolio on the Internal Market.

In general the products produced by local firms are not homogeneous from customer

perspective. They have similar product ranges. Most local firms do not specialize in a niche

market like Innovation Living, but have broader product portfolios. A usual Bulgarian

manufacturer of commercial furniture offers all types of furniture to be used in all the

rooms, excluding bathroom and restroom furniture. These competitors are mainly B2C

oriented, but the larger ones sell both B2B (sales through retailers and resellers) and B2C.

Ergodesign, Videnov and Irim are well established companies owing a big part of the market

share of the domestic production.

Competitive advantages of the local firms over Innovation Living

● Lower Costs of manufacturing;

● Lower costs of transportation;

● Cultural similarity with the Bulgarian consumers;

● Shorter time to market;

5.4.2 Foreign competition on the Bulgarian furniture market

Companies from Denmark, Sweden, Germany, Italy, Poland, Ukraine and more countries are

already present in Bulgaria, distinguishing from the local competition. Due to the lack of

design, bad quality and similarity of products offered from the local competition, the

consumers seek alternative, especially from customers with higher income and the demand

for imported furniture is growing. The number of foreign companies on the Bulgarian

furniture market is growing. Ikea, Jysk, Cotta, Boconcept are only few market entrants.

Owned Showrooms, Distributors and resellers are commonly used to reach the consumers.

The table below illustrates the customer perceived benefits categorized as order winners

and order qualifiers.

Table 5.10: Order Winners and Order Qualifiers for Sofa/bed Purchase from end consumer

perspective;

Order Winners: Order Qualifiers:

Quality; Comfort;

Design; Customization;

Functionality; Time to market;

Uniqueness;

Source: Own Production, based on primary and secondary data;

In the table below are shown companies which are competing with Innovation Living in the

Bulgarian Market. All companies involved in it, produce and sell products under the category

of sofa/beds. The table provides competitive benchmarking. All criteria are ranked on the

scale from 1 to 10. (See Table 5.11);




28

Table 5.11: Competitive Benchmarking of firms in the Bulgarian Furniture Market

Innovation

Living

BO

Concept

IKEA Irim Ergo

Design

Cotta

Headquart

ers:

Denmark Denmark Sweden Bulgaria Bulgaria Germany

Product

range on

the BG

Market:

Sofa/Beds

only

Furniture

for home -

for the

living,

dining

room,

bedroom

Everything

for home

not limited

to furniture

All types of

furniture

for home,

office and

gardens,

hotels

Beds,

Furniture

for

bedroom,

sofa/beds,

mattresses

Furniture

for the

living and

dining

room

Point of

sales:

1 partner

showroom

(Home

Selection

showroom

in Sofia)

1 Owned

Showroom

in Sofia

only

(Boutique);

One brand

store in

Sofia

100 +( in a

lot of

stores

across the

country)

Available in

most cities,

also online

7 (Only can

be

purchased

in AIKO

stores)

Sales

Volume of

Sofa Beds

1 2 3 8 7 8

Time to

market:

7 (app. 3

weeks for

ORL)

7 (4 weeks

in not in

stock)

1(only

products

in stock are

for

purchase)

5 (2 weeks) 6 (3-4

weeks)

1 (only

products

in stock are

for

purchase)

Price of

Sofa/Beds

Sofa/Beds:

8 10 5 3 8 7

Degree of

customizat

ion:

6 4 3 10 7 2

Quality: 8 8 6 6 8

Functionali

ty of

sofa/beds:

9 7 6 10 7 8




29

Uniquenes

s of the

design of

the

product on

the

Bulgarian

market:

10 8 7 2 9 6

Brand

Recognitio

n in

Bulgaria:

1 4 9 9 6 5

Level of

Customer

Awareness

in Bulgaria:

2 4 9 9 6 5

Source: Own production, based on field research and company websites;

Results show that Innovation Living performance is satisfying and in some measurements

are superior compared to companies with longer presence and greater market share. The

Innovation Living product lines are competitive and have the potential to sell well in

Bulgaria. The product features such as design, quality customisation and uniqueness make

them attractive to consumers and stand out from competition.

Investing in marketing campaign, will improve the low level of customer awareness and

brand recognition; the existing concept offered by Innovation Living - Shop in Shop is a

good marketing tool but not enough.

Acquiring of new B2B customers is a must and more points of sale on strategic locations

across the country will enable the sales growth and improve the accessibility and consumer

awareness. The fact that Innovation Living is only accessible only in one showroom of a

private design store in Sofia is the main obstacle of weak sales. The company has to act

more offensive, gain market share and strengthen its presence on the market.

The outsourcing of Innovation Living production in the new facility in Ukraine will decrease

the time to market.

Innovation Living has to invest in marketing and business development activities to develop

the market and attract resellers with credible image and reputation.

5.5. Organizational Customer’s Analysis

This section of the report deals with analysis of the organizational buyers. Main area of

focus is B2B Customers of Innovation Living in the Bulgarian market and their characteristics

including assessment of their buying behaviour, involved individuals, and the buying

situation.

Briefly, Innovation Living only works with B2B customers. The goal of the management is to

develop long-term relationship with small number of customers in a specific market, in

order to keep its status of design brand, which cannot be purchased everywhere. Innovation

Livings selectively acquires new customers and does not sell to anyone.




30

All customers of Innovation are only companies who resell Innovation Living products for

profit. They don’t use the products in any other aspect in the business.

Most important factors influencing the buying decision for resellers are profit margins of

selling third party products, sales volume, payment options, delivery terms, volume of order

quantities.

In most cases a moderate rebuy situation will occur. As the orders will differ in models

ordered and quantity, depending on season, time of the year, end consumer needs and etc.;

Direct procurement is the main method, because it is common for small firms and the

decision is made individually in the organisation.

In Bulgaria, currently Innovation Living the only customer is Home Selection a designer

furniture store in Sofia, which is an authorized dealer of Innovation Living's products. The

customer has the following characteristics:

Company size: Small (1 to 9 employees);

Order Size: Small (Total revenue for 2016 of 55 130 DKK ); (See Appendix 5);

Position of the decision maker within the organization: CEO/Owner;

Buying situation: Moderate rebuy;

Communication: Direct (with the sales coordinator based in Denmark);

Associated resellers are Interior design studios and designer stores. Wholesalers

specializing in furniture sales in Bulgaria are: Videnov, Mondo and AIKO.

5.6 Market Trends and Demand for Design Danish Furniture in Bulgaria

¨A recent survey conducted by Alpha Research for the Bulgarian Chamber of Commerce

concluded that price had been a decisive factor driving furniture consumer preferences in

Bulgaria. Logically the competition on the Bulgarian market for furniture and design was

mainly focusing on price rather than quality of the products. Nevertheless, the survey

identified a new trend; the group of consumers buying new and expensive furniture is

growing, the group predominantly consists of young professionals with a high social and

economic status who are residents of Sofia or other larger cities.¨ - Source: Furniture and

Design Sector in Bulgaria, 2015;

Retailers selling imported design furniture accounted for essential growth with dynamic

rates. The import of design furniture has increased by 300%. Due to increase of disposable

income, more innovative products, matching customers’ expectations and the better leasing

schemes. A lot of foreign brands producing exclusive, designed furniture expanded in

Bulgaria. The most revenue comes from Sofia and the big cities. Great demand comes from

young enthusiastic people with a high social status and disposable income above the

average. Additional demand for quality designer furniture is created by the tourist industry,

which intensively grows. The growing demand for furniture and design in Bulgaria makes

Danish Furniture Design Brands even more popular for the customer and the fact that

Danish producers have the image and reputation for great designers for ages together with

the expertise of furniture manufacturing and the high quality materials used, create

excellent opportunities for the Danish companies to achieve sustainable, sizable growth in

the Bulgarian furniture market; (Furniture and Design Sector in Bulgaria, 2015)

5.7. Bulgarian Culture according to Hofstede’s Six Cultural Dimensions

For this analysis, Hofstede’s website (https://geert-hofstede.com/bulgaria.html) was used as

a source of information. (See figure 5.12);

https://geert-hofstede.com/bulgaria.html




31

Figure 5.12: Bulgaria Cultural Profile


Power distance

As Bulgaria scores very high (70) it means that people in that country accept a hierarchical

order in which everyone has a pre-defined place and it doesn’t need to be further justified.

Centralization is normal and subordinates are told what to do.

Individualism

With a score of 30, Bulgarian society is regarded as collectivistic where close long-term

commitment to the member group is very important. Loyalty is paramount and it goes above

most other social rules and regulations. In this type of societies, offence often leads to

shame and loss of face. Relationships between employees and employer can often turn as a

family link like.

Masculinity

Bulgarian society with a score of 40 is considered more a feminine one rather than

masculine. In this societies the focus is on “working in order to live”, strive for consensus

from the management, valuing equality, solidarity and quality in the working live. Conflicts

are resolved by negotiation and compromising, and incentives such as free time and

flexibility are favoured.

Uncertainty Avoidance

The score of for uncertainty avoidance is very high (85) thus people in Bulgaria prefer to

avoid uncertainty. This constitutes in being intolerant to unorthodox behaviour or ideas.

Time is money in this society, there is inner urge to be busy and work hard, precision and

punctuality are the norm and security is an important element in individual motivation.

Long Term Orientation

The score of 69 for Bulgaria makes it a pragmatic culture, where people believe that truth

will vary based on situation, context and time. There is ability to adapt traditions easily to

changes, tendency to save and invest and perseverance to achieve results.

Indulgence

Bulgarian society has the tendency to cynicism and pessimism or a Restrained culture (low

score of 16). There is no much focus on leisure time and gratification control on the desires.




32

Figure 5.13: Bulgarian culture vs. Danish culture

Source: Hofstede, 2016;

The figure above compares the cultural dimensions of the Bulgarian and Danish society and

it can be seen there are almost the total opposite of each other. Hence, Innovation Living

will have to consider adding a native sales representative to the team, as he/she will possess

the necessary understanding of the market and the skills to communicate effectively with

Bulgarian business partners. (see figure 5.13);

6. Insights Based on the Conducted Semi-structured Interviews

Generally 5 retailers from the Bulgarian Market were interviewed. 4 of them are small to

medium size and only AIKO is a whole seller. 2 of them (Acherno and Trinex Design) are

Design Studios, meaning that they are not only retailers but also consult and digitally

visualize interior design concepts.

Language preferences: Eventough some of the participants use English, it is recommended

to have someone speaking the local language and has knowledge of the culture. This makes

a lot easier the negotiation with new customers especially.

Order sizes, excluding the wholesaler are small to medium and the kept inventory is low.

Those boutique and design specialized firms offer customization and allow the end

consumer to order a product which is not in stock and they take it over to supplier.

All firms are present online, but not all sell online, especially those with premium pricing

offer personal selling.

The product range is wide but as Innovation Living carefully selects new dealers and

requires certain level of price/quality to be met, the same is with those specialized retailers,

they carefully select they partners.

For more extensive information gathered from the interviews see Appendix 2, 3 and 4;




33

7. SWOT – is market penetration the way to go?

The Information in the table is based on the internal and the external analysis conducted in

the project until this stage. It illustrates the Strengths and the Weaknesses originating from

the company internally. The Opportunities and Threats are external factors related to the

Bulgarian Furniture Market and the Industry that Innovation Living has to assess before

planning further actions.

Table 7.1: SWOT Matrix

S W

O T


8. Segmentation, Targeting and Positioning

8.1 Segmentation

The Industry Innovation Living is targeting are Home and Garden Retailers industry and

more specifically, the Homewares and home furnishing stores. In Bulgaria, the Homewares

and home furnishing stores performs the best in 2015, growing by 4% in value terms.

(http://portal.euromonitor.com.ez-eaa.statsbiblioteket.dk:2048/portal/analysis/tab)

Between the two industries there have been differences in price positioning. While the Home

and Garden Retailers are firmly entrenched at the low-end of the price spectrum, Homeware

and home furnishing stores fall under three distinct price groups:

Very high Quality – Danish stamp

Scandinavian Designer

New production facilities in

Ukraine – shorter time to market

and lower costs

Wide product range

Customization of products

Brand Image

Price level – high for the

Bulgarian Market

Only one point of sale in BG

No actions towards raising

customer awareness

Not much experience in the

market

No knowledge of the culture and

the behaviour of the consumers

Lack of human capital, needed to

research, aquire and serve new

customers

More and more Bulgarian

customer look for innovative

solutions and Danish design

Still a decent percentage of the

people have a higher income

The economic and social factors

are having positive outlooks

Retailers look to work with

foreign importers

The costs of expansion and

operations in the country are low

The market is highly saturated

and there are a lot of indirect

offerings

Cultural differences – the cultural

barriers are very high between the

two countries

A large part of the population is

within the range of low to medium

income

Opportunities can be found only

in large cities, which limits the

potential of the market

http://portal.euromonitor.com.ez-eaa.statsbiblioteket.dk:2048/portal/analysis/tab




34

- Low-end

- Mid-end

- High-end

The big furniture retailers in Bulgaria, both foreign and domestic, tend to fall in the broader

category, Home and Garden, making them more in-direct competitors. Moreover, most of

them are operating in the low-end, mid- end price ranges, as their product ranges are quite

extensive and have different “collections” targeting different customer groups.

Hence, Innovation Living will be looking for smaller, more niche furniture retailers that work

with carefully picked suppliers and have a certain vision that will fit the company’s products.

In the Bulgarian market there are currently 80 medium and 450 small retailers of furniture.

The density of furniture shops and showrooms is high, due to relatively low costs related to

showrooms (such as rent, electricity, staff salaries)

However, it is also relevant if they are working with imported furniture and not a very large

percentage of them sells imported furniture. The retailers who do, are usually located in the

big cities and import high-end products. (Innovation Living, 2016)

The company’s aim for the Bulgarian market is to become a premium dealer and expose

Innovation Collection, thus the company wants to target Interior Design Consultancies and

Boutique Furniture Importers in the following cities: Sofia, Varna, Plovdiv, Burgas and

Turnovo.

The smaller retailers usually have a small purchasing team or the decision maker is directly

the Owner of the store. As the products are more expensive and the order volumes are

small, communication plays an important role in keeping relationships, thus the buyer-seller

relationships will not be transactional.

8.2 Targeting

In the Bulgarian market there are currently 80 medium and 450 small retailers of furniture.

The density of furniture shops and showrooms is high, due to relatively low costs related to

showrooms (such as rent, electricity, staff salaries).

However, not a very large percentage of them sell imported furniture. The retailers who do,

are usually located in the big cities and import high-end products. (Innovation Living, 2016)

The company’s aim for the Bulgarian market is to become a premium dealer and expose

Innovation Collection, thus the company wants to target Interior Design Consultancies and

Botique Furniture Importers in the following cities: Sofia, Varna, Plovdiv, Burgas and

Turnovo.

Below a list of companies in Bulgaria from the chosen segment is presented. They are

selected as possible customers with high potential: (See Figure 8.1);




35

Figure 8.1: Targeting

Sofia ● Acherno

● Grandecor

● Casadecor

● Mirookki

● Jelanie

● Mebelipro

● Furnish Furnish.bg, also in city of Varna

● Perfecta mebeli /СБС Скандинавия/ - Only Representative of

Stressless and Ekornes in BG

Varna ● La Cassa lacasa.bg Interior Design Solutions- main

partners from Italy, but possible cooperation with

Innovation Living

● Best-furniture.bg - Design Imported Furniture

● Keys // Improter possible only for a small range of the

products offered by Innovation Living

● Bulmarket

● mebelibg

Burgas ● Mebeliverona

● Valdo

● Trinexdesign

● harlexmarket


The procurement is usually direct. The larger chains have a procurement team that is

responsible for the whole correspondence. In the smaller companies often the owner or the

CEO is the decision maker and it is easier to conduct negotiations for future cooperation.

8.3 Positioning

Figure 8.2: Positioning Map





36

The positioning map above shows how Innovation Living are currently positioned in the

Bulgarian market compared to their competition. The two factors chosen for comparison are

Price level and Functionality, as these are assumed to be two of the closest related factors

that are looked at by end customers.

The only competitor outperforming Innovation Living in these two criteria is Irim.

Nevertheless, Innovation Living still has the two perceived advantages – Scandinavian design

and quality. The company shouldn’t try to reposition, but it should increase the awareness

of the brand and strengthen its current position. The current obstacles for Innovation in the

market are its low customer awareness and brand recognition, thus this is what the

company should focus on improving.

9. Market Penetration Strategy for the Bulgarian Market - Balanced Scorecard

The main goal for Innovation Living is to expand its presence in Bulgaria and to increase its

sales in the market. Hence, the company will adopt a market penetration strategy. (See

Literature review) As described in the literature review, this strategy is the least risky of all

four Ansoff growth strategies. Innovation Living is going to achieve this increase through

hiring a sales representative for this market.

The strategy is formed as a balanced scorecard that will serve as a tool for Innovation Living

to apply the strategy and to be able to track and measure the performance thus reaches its

overall goal. (See table 9.1) (Hutt and Speh, 2014) All of the objectives set in the balanced

scorecard are based on the S.M.A.R.T. goals model - Specific, Measurable, Attainable,

Realistic and Timely. (Hutt and Speh, 2014) Depending on the objective the targets are set

to be monthly, yearly or one-time based. The strategy is created for one year period.

Figure 9.1: The Balanced Scorecard


*** In case the picture is hard to read, look at it in Appendix 7;




37

9.1 Learning and Growth Perspective

In order to achieve the overall goals in the internal and customer perspectives, Innovation

Living needs to set the necessary foundations of the strategy. (Hutt and Speh, 2014);

Figure 9.2: Learning and growth perspective

Source: Cut from the Balanced Score Card;

9.1.1 Hire a Sales Representative

Currently, Innovation Living doesn’t have any representatives in the Bulgarian market and all

of the communication with potential B2B customers occurs mainly through email and phone.

There is also the cultural barrier as Danish and Bulgarian people are quite different in their

cultures.

Thus, Innovation Living will have to hire a sales representative to perform the sales activities

of the company related to business development, customer acquisition and maintenance of

customer relationships in the Bulgarian market. Order processing, sales visits, sales

presentations, contracting, research of new potential customers are some of the tasks

associated with the position.

Innovation Living will have to search for someone with the following competences: (See

figure 9.2);

Figure 9.3: Desired Competence Profile of a new Sales Agent


It is very important the sales-rep to be a native Bulgarian, with sales experiences in the same

or similar industry and to have a professional level of English, in order to be able to

communicate with the Danish team. It will be valuable if the person has experience living or




38

working abroad that lead to multi-cultural awareness and ability to work with much different

people.

More specific requirements to a successful candidate would be:

Educated to a degree level (Bachelor) in economics or relevant field;

Proficient level of English, Bulgarian; other Eastern European language skills are

considered as an advantage; (Serbian, Macedonian, etc.);

Proven B2B sales experience in the furnishing sector, outstanding sales record;

Sufficient level of IT skills (Microsoft Office, Windows, IOS);

Money motivated; (It is a commission-based sales role with fixed salary.)

Driving Licence;

It is computed that this will cost the company roughly DKK24, 684. The calculation is based

on assumed hiring process of 2-3 weeks and allocation of hours of one of Innovation

Living’s employees that will deal with this task. The allocated hours are 96 working hours,

which means 3 working hours per day out of 7 that are valued on average of 256 DKK per

hour. The calculation does not include payments for job-search platforms or LinkedIn

accounts.

9.1.2 Training Skills and Development

After having hired a salesperson, Innovation Living will have to invest time and resources for

the education of the sales rep about the product and company.

The typical process for training new agents will be implemented. This will include a visit of

the headquarters of the company in Denmark, teambuilding with the rest of the team and a

visit to the production facilities. Detailed presentation of all products and their features and

the promotional material offered to dealers. Training of new sales agents is usually handled

by Morten Lind – the CEO of Innovation Living. The costs were calculated including the

salary of the sales rep, plane tickets, food and hotel to be approximately 25,000 DKK for a 2

week stay. No additional pay is allocated to Morten, as this is part of his work duties.

9.2 Internal Perspective

The internal perspective presents the processes within the company that are delivering the

value. (Hutt and Speh, 2014). In the case of Innovation Living and the purpose of the

strategy, the internal processes are focused around the sales activities aspect.

Figure 9.4: Internal Perspective;


9.2.1 Develop a sales strategy

Innovation living have to develop a sales strategy for the Bulgarian market, in order to have

a clear overview of how it will achieve its overall goals.

The sales strategy goal is to acquire 5 new retailers within the first year (it is also placed as

a goal in the customer perspective).

The sales model used will be the value-added model (Brooks, 2016). Incentives will be added

on to the basic product as a mean of making up the differences in the customer perceived

value versus price. These incentives will be under the form of key account management

from the sales rep, meaning that he/she will provide support to the retailers when needed,




39

availability and access to necessary knowledge, education about the products and how they

should be displayed.

The territory plan will include only the big cities, as there is where likely B2C buyers are

located, thus retailers as well – Sofia, Varna, Burgas and Plovdiv.

The resource plan for one year will consider sales rep salary, gasoline, vehicle insurance and

maintenance, business expenses such as dinners, and unexpected expenses that can be

calculated as 10% of the total monthly expenses.

The sales tactics will mainly include cultural considerations and it is one of the reasons for

hiring a native sales rep. The sales will take the consultative approach.

9.2.2 Improve work efficiency

Currently the activity of the company in the market is very low. After hiring the sales rep, it

will be important that the work efficiency is improved and there is a set target of potential

prospects contacted per month. It is assumed to be realistic to have reached out to at least

5 retailers per month.

9.3 Customer perspective

Having hired the sales representative, educated him and having created a detailed sales

plan, the company will focus on the two main goals that are the main driver for achieving

the goal in the Financial Perspective.

Figure 9.5: Customer Perspective


9.3.1 Acquire new retailers to act as authorized dealers in Bulgaria;

Innovation living will aim to acquire at least 5 new retailers in the first year; This will be

measured through the number of acquired partners yearly and monitored by the number of

contacted retailers per month.

9.3.2 Build long-term relationships

The second part of the customer perspective is to aim towards building long-term

relationships with the retailers that have showed overall positive results. This goal doesn’t

have a specific target, as it will vary depending on the results.

For Innovation Living it will be very important to maintain its relationships and build brand

reputation in the market.

9.4 Financial perspective

Figure 9.6 Financial Perspective


With all of the objectives outlined in the three other perspectives, Innovation Living will be

aiming at increasing its overall sales from the Bulgarian market. The set target is to increase

the yearly revenue coming from the market with 100% for 2017 and a positive yearly growth

rate to be measured on yearly basis in future.




40

Innovation Living will be able to measure the impact of the strategy by tracking the sales

coming from Bulgaria and the number of new B2B partners acquired. A break-even analysis

would be possible to make only after the first year has passed, in order to have a real view

of the costs involved. However, it will be possible to clearly see the ROI (Return on

Investment) as it will be directly related to how many sales were made through the newly

acquired distribution channels.

Financial Considerations

Sales figures for the Bulgarian market provided by the management of Innovation Living (see

Appendix 5);

Table 9.7: Sales figures for the Bulgarian market

Sales (in DKK) 2014 2015 2016 Total:

BG - 10758 55130 65889

Source: Innovation Living;

As there is only one customer in the Bulgarian market /Home Selection/ with one point of

sale in Sofia, he generates all the income from the market. Bulgaria is a relatively new

market as Innovation Living’s first sales are accounted in 2015.

Based on the sales pricing of Innovation Living products for retailers (see Appendix 6) an

average price per sofa/bed is calculated to be 6000 DKK per unit. The revenue for 2016

resembles a total sale of app. 9 sofa/beds. (9 units X 6000 DKK = 55000 DKK total income).

The goal is to double the revenue for 2017 in Bulgaria the total sales should amount to

111000 DKK, to consider the goal to be reached, keeping the same average price per unit of

6000 DKK.

11000 DKK total income = 6000 DKK price x 18 units sold;

10. Conclusion

How can Innovation A/S improve its sales in Bulgaria?

Overall the Industry is characterized with intense competition and moderate attractiveness.

Favourable economic conditions on the Bulgarian market and it was derived that end

consumer has the greatest decision power. The demand for foreign demand furniture is

increasing in recent years and the imports account for 75% of the total furniture sales in

Bulgaria. The end consumer has great power and has wide variety of choices of available for

sales sofa/beds on the market.

Innovation Living has competitive edges and has the internal resource to stand out from

existing competitors. The wide product range, brand image, quality of products,

functionality and design are the perceived benefits which are considered important for the

consumers.

By this date Innovation Living has only one customer in Bulgaria and one point of sale of its

products. The company’s current presence in the Bulgarian market is very low and the only

way to increase its sales coming from that market is by penetrating the market further. At

this stage a less costly option would be to hire a sales representative for the Bulgarian

market. This option will be more efficient for the company than to send one of their current

sales reps, because of cultural considerations as well knowledge and experience in the

market.




41

The company will need to go through a selection and hiring process and then to further

train the new employee. It will also be important to create a clear sales plan and set targets

that will make sure that the overall goal is achieved.

The company has to grow the number of sale points and acquire new customers in order to

reach the full market potential and also to promote its brand to raise customer awareness.

This investment will have a positive ROI in time, depending on different variables such as

the performance of the sales rep, as well as, the right choice of new retailers to work with.

The company can also use the new experience gained in the Bulgarian market and further

apply it to achieve sustainable growth in other resembling markets in Eastern Europe.




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