damro as an international brands 0.2

MBA General Program (Week End)-2013/2015

Semester IV – First half

Group Assignment

International Marketing Strategy for Damro

Mr. D. H. K Kevitiyagala (2013/MBA/WE/59)

Ms. N. R. C Nagahawatte (2013/MBA/WE/77)

Mr. K. L S Lalithya (2013/MBA/WE/68)

Mr M. L. M Rikaz (2013/MBA/WE/91)

Lecturer: Prof. Sunanda Degamboda

Course: MBAMK622-International Marketing

Postgraduate & Mid-career Development Unit

Faculty of Management & Finance

University of Colombo

MBAMK622-International Marketing Page 0

Table of Contents

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

1.1 Product Offering.............................................................................................2

2. Strategic Focus of the Company.........................................................................3

3. Global Market Analysis for furniture products................................................3

4. International Business Environment for Damro products...............................5

4.1 Political Environment.....................................................................................6

4.2 Socio-Cultural Environment..........................................................................6

4.4 Economic Environment..................................................................................6

4.5 Technology Dimensions.................................................................................7

5. Damro as in domestic competition......................................................................8

6. Competitor analysis for international furniture Industry...............................9

7. Damro Operation as a Global brand................................................................11

8. Recommendations to strengthen the entry mode to Global Market................13

9. Conclusion...........................................................................................................14

11. Reference.........................................................................................................15


1. Introduction

Established in 1986, Damro has come a long way from its humble beginnings. It’sIts current

vision is to be among the world's largest furniture manufacturers offering a diverse range of

modern and traditional furniture. It has expansion plans for over 150 Showrooms globally,

while already there are over 50 showrooms in India.

According to Damro, their basic success depends on the ability to produce high quality

furniture at affordable prices with outstanding customer service. The driving force behind

Damro Furniture Pvt. Ltd., Mr. Damitha Ramanayake hails from a remote part of the Western

Province of Sri Lanka. He stepped into to the furniture business 30 years ago. From the

beginning, he drove Damro to be different from other furniture manufacturers of Sri Lanka,

making Damro an affordable but durable furniture manufacturer, rather than targeting luxury

customized furniture. Damro’s cost driven strategy of furniture manufacturing demands for

economies of scale in furniture manufacturing with simple low cost designs. Damro was

capable of delivering a higher level of customer service from their state of the art outlets both

locally and overseas.

Damro was able to cut down its raw material and operational cost to a great extent by using

locally available raw material and low priced timber and locating the mass scale factory in

Nittambuwa, a remote part of the Western Province of Sri Lanka. Once they expanded their

outlets locally and after Damro became a household brand during the last twenty years. They

began their international operations by starting an outlet and franchise operation in Chennai,

India. This operation expanded so rapidly that within few years, it expanded to Karnataka,

Andhra Pradesh and other southern and northern states of India. With more than 50

showrooms and more than 1000 franchises, operations have also expanded to Australia and

Damro is aiming high for their future and plans to expand to the Far East in recent future.


1.1 Product Offering

Damro has vast verity ofvariety of product range staring from low cost furniture to high end

electrical equipment. It can be categorized under below main segments.

Product Categories Products

Furniture Sofa, Tables, TV stands, Wardrobe

Plastic Furniture Tables, Chairs ,

Office FurnitureMetal safes, Office cahirschairs & tables,

upboardscupboards

Robber products Mattresses, Carports

Electrical & electronic items TV, Radio, Washing machines , Irons

2. Strategic Focus of the Company

Damro is a Sri Lankan, company that own their own manufacturing facility. Mainly the

product portfolio includes furniture, bedding furniture, other plastic chairs and furniture for

home and office. It also manufactures wooden furniture, catering to a wider customer

base. The company has developed its activities in India and other Asian regions. Since 1987,

Damro had early success and extended to more than 100 showrooms across the world, now

have 40 showrooms Island wide. Damro success in past is its ability to produce high

quality furniture at affordable prices with exceptional customer service.

Damro has a workforce of 1500 employees and has an organized process of manufacturing

to distribution and marketing. Its structure and efficient production processes combined with

technology, enables them to produce at a lower cost hence achieving a competitive advantage

in the market. They manufacture according to current trend of needs in the market with high

quality and lowest possible cost. The company ensures sourcing of best quality raw materials

from selected suppliers’ island wide. Damro has an established distribution channels, thus

eliminating the middlemen to further lower the cost. The combination of factors seems

impossible to achieve, but Damro has ensured it through carefully established processes and

procedures combined with world class technology.


One of the key advantage of Damro is economies of scale. They significantly reduce costs

through mass production based on the claim. Damro plastic chair product category has a

higher demand. The company’s economies of scale are achieved through the product range

resulting in cost reduction, increased revenue, reduced investment and improve innovation.

Maintaining high quality of the product is another key strategy of the Damro. Therefore, each

organization must disclose employee buy-in quality that actually enhances the overall

business society. Damro designs their products designed based on International

Organization Standardization (ISO) 9000.

3. Global Market Analysis for furniture products

Furniture industry has changed with changing lifestyle, disposable income, economy growth

and new waves of property development in many continents have contributed demand for

furniture and in turn the growth of the furniture industry as whole. The industry consist of

unique characteristics such as regionally centralized competition pattern under the cluster

effect, combination of organized and non-organized sector, vary in use of technology, diverse

nature and a broad product range and regional variation in purchasing power and consumer

expectations as well

The analysts forecast the Global Furniture market to grow at a CAGR of 3.53 percent over

the period 2014-2017. One of the key factors contributing to this market growth is the boom

in Real Estate industry. The Global Furniture market has also been witnessing the production

of eco-friendly furniture. However, the shortage of timber supply could pose a challenge to

the growth of this market. (Research and Markets, 2014)

As per suggested by Research and Markets (2014) the Indian furniture industry is estimated

around Rs. 350 billion and 85% is fulfilled by unorganized sector and expected to grow at

20% a year. The similar growth trends are predicted in Brazil and Russia as well. Indian

furniture market consists of 35% Institutions and 65% home market. The organized furniture

market mainly depends on imports and it is amounting to 85%. The Italy, Germany, Spain,

China, Korea, Malaysia, Indonesia, Philippines are main exporters to India. The potential in

India is very high and similarly it attracts lot of global players as well.

Key driving forces in the demand for Furniture include elasticity, economic scenario,

infrastructure, demographic variables and distribution of wealth.


Elasticity: The average elasticity for furniture has been found to be 1.5 i.e. if the

income increases by 1, the demand for furniture is going to rise by 1.5 and vice versa.

Economic scenario : consumers' confidence in the economy of the nation, growth of

the Gross National product, the purchasing power and level of unemployment.

Infrastructural considerations – Eg; level of investments in housing

Demographic variables - marriages, household formations, births taking place and the

composition of age class.

Distribution of wealth – it has been found that demand for furniture would be higher

in countries where wealth is more evenly distributed than in countries where wealth

has a tendency to be concentrated.

IKEA is known as a world renowned furniture brand for low prices and innovative products.

It has expanded globally to be the largest retail chain with 300 stores.

4. International Business Environment for Damro products

The furniture sector as a whole is a one of the most basic industry, if the industrialised

countries are considered. The furniture sector generally represents between 2% to 4% of the

total production value of the manufacturing industries (Furniture Manufacturer, 2013). World

leaders in export market of furniture include Italy, China, Germany, Canada and United

States. China and Italy is in close competition as China competing with mass manufactured

low price strategy with slowly deteriorating sleek expensive designs from Italy to the global

market.

Manufacturing hub of furniture is quietly shifting to Asia particularly to China. This change

of world furniture manufacture to Asia and China first started in the 1980s and the nineties of

the last century. In the year 2004, the total output of China's furniture was roughly valued at

about US$33.7 billion with exports touching US$10.353 billion, nearly 31% of the total

output. China has mainly concentrated on North American and European countries for

furniture exports. The top 5 exportation countries for Chinese furniture were: United States,

Japan, United Kingdom, Germany and Russia.


With BRICS (Brazil, Russia, India, China, South Africa) and MINT (Mexico, India, Nigeria

and Turkey) countries emerging to be the world leaders in economy, world trade is not only

dominated by cost and quality of products but also by Investments, FTAs, hedging, counter

trade, foreign exchange, use of scarce resource and capabilities, building core competencies

and best practices, infrastructure and efficient supply chain also plays key role in defining

success in global market. As the wealth is shifting from US and Europe towards Asia, it

offers plenty of opportunities for Sri Lanka in exports, especially for growing market of

furniture trade.

Damro has the opportunity to exploit countries having FTAs with Sri Lanka, as it already

utilized the opportunities with India. It is also a part of ASEAN (South Asia Free Trade

Agreement) APTA (Asia Pacific Trade Agreement) Previously known as Bangkok

Agreement and numerous others offering the opportunity to enter the markets of most of the

South Asian countries. In addition as Sri Lanka was the host of the recent commonwealth

summit, it can utilize the prospects available for the country’s export trade in growing

furniture market.

4.1 Political Environment

Damro Furniture’s current markets include India and Australia. India is the largest democracy

in the world. However in corruption and government intervention are often visible in the

system and far too common in businesses. Lower level of FDIs in India compared to China

shows the reluctance of encouraging foreign investments in the country. In addition, strikes,

protests and riots are often visible in any part of the country. For foreign businesses, political

factor of the country is ranked as a high risk.

Australia has a democratic federal system and is politically stable country. There is a high

level of transparency and very low level of political corruption. The state is continuously

involved in improving and protecting national economy. This affects international business

because when taxes and policies keep affecting the economy, it will impact the exchange

rates and currency rate.

4.2 Socio-Cultural Environment

India is a country where diversity, traditions and culture playing a major role in every

consumer decision. It has the 2nd largest population in the world with emerging middle class,

empowered youth with a segment of well-educated and cost conscious consumers. High level


of unemployment and low wage rates has created a vast gap in income distribution thus

majority of the population is considered to be below poverty line.

Australia is a country with diverse peoples living in a relatively young society. However, the

divisions within the nation have an impact in public life, arising from social differences in

race, ethnicity, social class, and gender with mixture of immigrant culture. The most

significant lifestyle differences are affected primarily by variations in climate. There is large

potential to cater for different market segments in Australia amongst vast number of imported

products.

4.4 Economic Environment

India is emerging to be one of the world leaders in economy. They have a significant growth

in GDP for past decade. Due to high population it is often seen as a country with a significant

market potential. However, the income parity is considerably large compared to most

countries in the region. It is ranked at 132nd position in Ease of doing business index far

below most countries with smaller economies. India has poor infrastructure and possess a

greater challenge in finding skilled man power for most industries. According to the FTA

signed by India and Sri Lanka, India provides tariff concessions to Sri Lankan goods. As a

part of BRICS the country is looking at simplifying and reducing the cost of regulatory

process in starting businesses paying taxes and trading across borders.

Australia has a growing economy and is a heavy importer of goods and services. It is ranked

10th in Ease of doing business index portraying its investor friendly economic environment.

AusraliaAustralia is a member of APEC and WTO and numerous FTAs. The country has a

low inflation rate and stable GDP growth favoring positive economic conditions.

4.5 Technology Dimensions

India’s Technology sector is on rise and contributes heavily to countries GDP in terms of

related product and services. It is also a country with heavy private sector investments on R

and D and a popular outsourcing destination for services. Poor infrastructure and supply

chain challenges hinders growth of businesses and has vast amount of underutilized and

unexploited resources.

Australia has a skilled work force comprised of immigrants and has a sound education

system. The country as a whole invests vastly in R &and D and education. It is one of the

most connected countries in terms of IT and businesses are more likely to succeed if they

enable technology and use of IT and e-commerce, mobile banking. Information and


communications technology is a key driver of Australia’s strong economic growth and

innovation.

4.6 Environmental and Legal Factors

India as a defined detailed legal system and government intervention is significant in legal

matters. In addition there are conflicts between state and central policies leading to less

transparency and red tapes.

Australia has a sound and practical structure of financial regulations and institutions that

provides certainty for business and is open to investment without undue delay. Even for

investors and businessmen from other countries Australia’s business law is flexible and

makes the procedure of opening up a business simple and easy to achieve for one and all.

There is a strong, transparent governance system along with business oriented regulation and

insolvency regimes. According to the World Bank a new business can be established in

Australia within two days compared with an average of 20 days in most of the other

countries.

5. Damro as in domestic competition

Sri Lankan furniture industry is mainly focused on three market segments; household

(bedroom & living room, kitchen furniture, garden furniture), commercial (furniture for

hotels, schools, hospitals) and office furniture segments (computer tables, office tables etc.)

With the present environment in the country, especially after ending the war, there has been

an increasing demand for furniture in all three segments where tourism industry, child care

and office furniture have an significant increase in demand. Both traditional and modern

business firms in wood furniture industry are competing with each other to capture higher

market share with this growing trend in the industry.

H. Don Carolis and A.T. Cooray and sons are the two companies that dominated the wood

furniture industry up until mid-90’s. But, same as many Sri Lankan traditional business

organizations, these two companies have lost their market share rapidly with the emergence

of new firms to the industry with more innovative, attractive, customized approach to their

product portfolio. Namely, Damro, Singer (Modern homes), Arpico, Alpha and Enex are


among major competitors in the market where Damro has easily captured the market leader

position way ahead of the other competitors. The failure of traditional wood furniture firms is

mainly due to the reasons such as less innovativeness, lack of product differentiation and

business diversification, weak marketing strategies, legal barriers for raw materials, high

production cost and myopia whereas companies like Damro has a more wider view in product

design, business and marketing strategies while integrating more advanced and latest

technologies with their production process to reduce the cost. It is the top of mind brand in

Sri Lankan consumers when it comes to the quality and affordability in all three segments

and Alpha is the most threatening or the only closest competitor when considering the office

furniture category.

Firms like Arpico and Singer are not specialized in furniture manufacturing. They excel in

other products and services such as retail, electronics and home appliances businesses.

Damro, Enex, and Alpha are the firms with their prime business are in large scale furniture

manufacturing. In this context we can’t neglect the impact of small and middle level

manufactures specially in the Moratuwa area. There are a number of small and medium level

show rooms in Moratuwa suburb where traditional wood furniture manufacturing is still very

much alive. But the future of these shops or entrepreneurs is in an alarming situation mainly

due to the competition from aforesaid large scale manufacturing firms and also due to the

reduction of raw material availability and high manufacturing cost (labour, electricity etc.).

Damro has the super brand status in furniture market with their island wide branch network

which offers high quality goods for affordable prices even in cities far away from the capital

while the other competitors are way behind in expanding their branch networks to remote

areas in the country.

6. Competitor analysis for international furniture Industry

Global market is still dominated by traditional furniture making countries and they enjoy

70% market share in the global market. They are able to sustain market share due to their

long established production capacity, advancement in science and technology, solid funds

and rich management experiences. .

The European Union furniture industry accounts for about half of the world's furniture

production and with value is around € 82 billion. Germany takes the lead as the largest

furniture producing country, accounting for about 27% of total EU production. This is


followed by Italy (21.6%), France (13.5%) and the UK (10.4%). The Canadian Furniture

Industry is the 5th largest exporter of furniture in the world (Research and Markets, 2014).

The developing countries like China, Southeast Asia, Poland and Mexico, have built upon

their respective competitive advantages and gradually have covered almost 30% of the world

market. China is leading in front and industry is developing strongly and showing great

potentials (Research and Market, 2014). The major furniture producing countries in South

East Asia are Philippines, Indonesia, Malaysia, Singapore, Thailand, Korea, Taiwan and

India. In the context of global furniture trade, Asia shows healthy signs of growth with

respect to its other international competitors. Asian furniture has always been popular in

developed countries like USA, Europe and Australia. Sri Lanka is not considered any

significant player in the global context.

China has developed industry in large scale and it has emerged as a furniture production hub,

circulation center and as well as exhibition center in the world. This has a huge impact on the

global industry and resulted in restructuring global furniture trade and trading pattern as well.

Further Research and Markets (2014) depicts China contribution on the role of furniture

market in the contribution of the GDP at world level 20% and followed Europe and Germany

with 5% each and then Indonesia with 2.9% and Indian contribution is only 0.5%. Damro

needs to compete with local unstructured players as well as global players like IKEA and

emerging furniture producers in China.

IKEA is planning to enter in to Indian market big way with a plan investment of 1.5 billion

Euro investments to set up 25 stores in two phases. It has committed 30% local sourcing as

well. It will attract more global players to India. German company Nobilia, which used to

market its products through Indian retailer H&R Johnson under the Johnson Kitchens brand,

now wants to sell the products under its own name and establish its brand. Another German

brand Hettich recently announced its intent to invest Rs 500 crore in India over the next five

years to set up manufacturing facilities and for training and research and development. Global

players want to establish the local presence before IKEA established in India. We have local

dominant player in Indian market such Godrej, HomeCenter, Sleek International, Nilkamal,

Durian, Style SPA, and major retail player like Big Bazar offering low cost standard products

(Furniture Manufacturer, 2013).


http://timesofindia.indiatimes.com/topic/Godrej

http://timesofindia.indiatimes.com/topic/Invest

7. Damro Operation as a Global brand

Globalization has given producers an opportunity to participate in the global economy. In

both high- and low-income countries, a growing number of firms are targeting external

markets to gain economies of scale and scope as well as further technological expertise. This

has increased competition, in both domestic markets (from imports) and external markets.

Thus, for companies and national economies, globalization offers opportunity and threat. In

order to take advantage of the opportunities presented by globalization and to minimize the

dangers of competition, firms need to innovate. The pressures of competition have become so

intense that merely improving the rate of innovation is not enough. If sustainable income

growth is to be achieved, firms need to ensure that their innovative rate is faster than that of

their competitors. They face a moving frontier of “best practice”. Damro has succeeded in the

global market mainly due to their product innovation, where they have followed Localization/

adaptation based on the behaviour of the foreign market. Damro have initially modified

current design or packaging of products and have designed all the promotional materials in

their native language, where they have used more than 5 languages in different states of

India.

Global marketing is the process of focusing an organization`s resources on the selection and

exploitation of global market opportunities consistent with and supportive of its short and

long-term strategic objectives and goals. There are numerous market entry strategies that a

business can adopt when setting up offshore. Each has differing levels of risk, legal

obligation, advantages and disadvantages.

The global operation of Damro is mainly comprises of Direct exporting with showroom

managed directly by the company and franchising, where a special form of licensing is issued

to the franchiser makes a total marketing program available including the brand name, logo,

products and method of operation in foreign countries. Resources for most companies are

limited, often requiring a trade-off between product expansion and geographic expansion

strategies. Resolving this question is necessary to achieve a concentration of resources and

efforts in areas where they will bring the most return. Damro is very vigilant in making the

decisions about global markets, where they are very much concerned about the market

segment, customer preferences, and available resources and always plan to achieve the

maximum out of the market opportunities.


Through their own outlet chain, Damro has able to win over the customers in most of areas in

India, via high quality furniture at affordable prices with outstanding customer service. The

Indian customers are very much focused on the value for money. Therefore, the company

always tries to customize the products, based on customer preferences and they are capable of

delivering what the customer want within considerable time period. In Australia, Damro has

recorded continuous growth in profits mainly due to the personalized service, after sales and

their online presence.

In direct exporting, the firm becomes directly involved in marketing its products in foreign

markets, because the firm itself performs the export task, rather than delegating it to others.

Damro have an export department responsible for tasks such as: Market contact, Market

research, Physical distribution, Export documentation and Pricing etc. This approach to

export requires more corporate resources and also entails greater risks. But Damro is

benefited via greater control, better market information, economies of scale and Development

of expertise in international marketing

Through Franchising, Damro has experienced a rapid market expansion using the intellectual

property of the franchisor, and the capital and enthusiasm of a network of owner operators.

Further, Damro is very much concern about selecting each franchisee, based on their

financial stability, performance and quality of products & service and Damro has appointed

an exclusive territory for each franchisee. Damro supports them with group advertising

programs, initial and ongoing training and offer assistance with equipment specification, site

selection and premises fit-out and signage.

But Damro, as a furniture manufacturer basically compete on a cost driven strategy have a

disadvantage when entering into the high value branded furniture market which is dominated

by customized furniture manufacturers. The Damro brand is still not able to reach this upper

middle class market and most of the upper middle class consider Damro as a cheaper and low

quality option of furniture. This image does not sufficiently fit with the new rich and middle

class demands of Asia. Therefore the company’s challenge is to change the market perception

via new marketing strategies and should move forward with the innovation.


8. Recommendations to strengthen the entry mode to Global Market

Damro should consolidate their presence in India by strengthening the franchise network and

working on long term brand building exercise. The global players are investing heavily on

Indian market and Damro ability to compete with them head on is suicidal mission. Damro

need to find a segment in lucrative and high growth potential market and position them on

suitable niche player segment. They can use the low tariffs of Indo-Sri Lanka Free trade

agreements to consolidate the position in India.

The different market conditions required different approaches to enter the market and

consolidate the business. Damro may able to find low cost labourlabor and manufacturing

cost in India. Damro should explore the possibilities of setting up joint venture or alliance

with local strong retailer in India to compete against global players. Damro will be able to

overcome tariff barrier and import restriction by having manufacturing facilities in India. The

most developed markets like Australia will be more concerns on green principals of using

less energy and preventing environment damages. The developed countries and customer in

these territories are more concern of ethical practices and social responsible behaviors of

organization; therefore we need to build the company image based on these fundamentals.

Damro’s ability to be successful in highly demanding Indian markets with characteristics of

bargaining for every transaction, seeking value for money and higher level customer services;

could be explored with neighboring countries such as Bangladesh, Nepal, Pakistan as well.

Bangladesh has well a positive mindset towards Sri Lankan products and services and has

rapidly growing low middle income groups as well. The Labour and manufacturing cost is

relatively low and exploring manufacturing facilities in Bangladesh could be part of Damro

market expansion strategy.

Damro need to focus on well planned and targeted marketing activities to optimize the

marketing expenditure. They do not have luxury of huge marketing budget allocation or not

in a position to take head on the global players with huge budget backed by above line media

advertisement. Damro should focus on building highly interactive website with simple and

secure online experience and it should give a global brand company feeling for browsers.

They should facilitate the multi-language in Indian market, if it they see the potential.

Damro should make use the Sri Lankan Free Trade agreements (FTA’s), bilateral agreements,

APTA (Asia Pacific Trade Agreement (Previously known as Bangkok Agreement) and


rriendlyfriendly countries to explore the possible expansion to new markets. This will enable

Damro to be competitive and provide the ability to enter these markets as well.

Damro success is based on simple limited range of products with unique market features,

such modular base, and simple assembly process and backed by excellent services. Damro

should focus on new Product innovation based on environmentally friendly raw materials and

process. Damro modular base unit has enable them to export the products cost effectively as

well.

9. Conclusion

The Furniture industry has got enormous potential and still dominated by unstructured

players. The Damro changed the Sri Lankan market dynamics with standardized product with

affordable price and after sales service. Damro has got the taste of the global market with

Indian and Australian expansion. In order to sustain and expand the presence, they need to

create an identity for Damro in global context. The Damro has got limited resources compare

a global competition and should use a more effective way expand the business. The

understanding of the global market, behaviours of different global customers, influence of

culture, religion and beliefs of customers is critical to success in global market. Further they

need to continuously monitor the moves of competition and ability to foresee the potential

threats and address the benefits of company is at most critical to Damro to succeed in global

markets. Damro has got unique ingredients to be successful in the international markets and

company should explore the potential based on the resources availability and actual potential

of target market.


11. Reference

Furniture Manufacturer., (2013). Furniture Manufacturer. Furniture Manufacturer.net.

Available from: < http://www.furnituremanufacturer.net/furniture-manufacturer/ >[Accessed

26 Nov 2015].

Furniture Manufacturer., (2013). Fix up wood Furniture. Furniture Manufacturer.net.

Available from: < http://www.furnituremanufacturer.net/furniture-manufacturer/ >[Accessed

26 Nov 2015].

Research and Markets., (2014). Global Furniture Markets 2014-17. Research and

markets.org Available from: <

http://www.researchandmarkets.com/research/69892q/global_furniture >[Accessed 29 Nov

2015].

Australian Trade Commision., (2015).Investment Stategies. Australian Trade commision.

Available from: < http://www.austrade.gov.au/International/Invest/Opportunities/Materials-

science-and-technologies >[Accessed 29 Nov 2015].


http://www.austrade.gov.au/International/Invest/Opportunities/Materials-science-and-technologies

http://www.austrade.gov.au/International/Invest/Opportunities/Materials-science-and-technologies

http://www.researchandmarkets.com/research/69892q/global_furniture

http://www.furnituremanufacturer.net/furniture-manufacturer/

http://www.furnituremanufacturer.net/furniture-manufacturer/

damro as an international brands 0.2

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