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Copy of Damar International

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Matt Wheatley

on 23 October 2013

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Transcript of Copy of Damar International

Damar International
A Case Study

Question 1 -
US Expansion Alternatives
Diversification Strategy
Cooperation Strategy
Integration Strategy

Market Penetration
Expand market share by:
Getting existing customers to buy more, or
Attracting competitor's customers

Contradicts Damar's niche strategy
(Grote 2010, p27)

Doesn't suit product nature (durables)

Provoke competitive retaliation
(Wernerfelt & Montgomery
1986, p.1223)
Market Development
Access new customers with existing products:
New target markets, or
Geographic expansion
Reasons to Avoid
Significant financial outlay especially in distribution costs and partner selection (Pidduck 2006, p.267)

May require alteration to financing structure
Reasons to Avoid
Large geographic expansion opportunity in US market
(Barringer & Greening 1998, p.489-90)

Create Barriers to new entrants through networks and distributor relationships
(Johansson & Elg 2002, p.414)
Reasons to Pursue
Product Development
Access existing customers with new products:
New product development, or
Product customisation
(Pleshko & Heiens 2008, p.109)
Damar already sell the full range of traditional Indonesian handicrafts

Value derived from traditional cultural elements (Ravasi et al. 2012, p.232)
Reasons to Avoid
Access new customers with new products:
Damar to extend product range to include handmade French goods (porcelain/silk)
Opportunity to spread risk

Enables Damar to generate a reputation for specialising in traditional handmade goods
Reasons to Pursue
Indonesian success rooted in cultural understanding (Schumann 2010, p.455) and personal relationships

Costly market research in France, to identify suppliers, and in the US (Romaniuk 2012, p.288), to identify target markets
Reasons to Avoid
Creation of tighter linkages with business partners either through joint ventures, strategic alliance or collaborative efforts.
Reasons to Pursue
Reasons to Avoid
Collaborative focus (Dyer & Singh 1998, p.675-676) will enable Damar to
schedule production better and,
understand their ultimate consumer
Potential failures resulting from culture
clashes and strategic misalignment
(Wittman 2007, p.14-15)
Acquiring competitors (horizontal) or supply chain members (verical).
Reasons to Avoid
Lack of direct competitors limit horizontal integration opportunities

Increase in business complexity and cost structure with little economic gain due to lack of necessary capabilities/resources
(Gulbrandsen et al. 2009, p.100)
Reasons to Pursue
Gain control of more elements of the value chain to gain more profit.
Matt WHEATLEY (42456592)
Simon TAM (42607000)
Tsz kit LAM (43441335)

Question 2 -
Indonesian & French Expansion Alternatives
Desired Expansion
The establishment of large scale cottage-industry production
US Market Implications
Significantly increased US market coverage capabilities

Ability to exploit economies of scale and potentially access price sensitive consumers
Expansion Building Blocks
Shifting supplier relationships from a transactional to collaborative basis
(Mehrjerdi 2009, p.130)

Enables Damar to cement personal relationships and exploit economies of learning
Building Blocks - US Implications
Streamlining of Damar's operations with Indonesian suppliers

Reducing the order-cycle time
Enhancing communications
Greater opportunity for product adaptation

Resulting in greater reliability for US consumers in product delivery and greater value through customisation.
Expansion Capability
Sourcing French suppliers of traditional porcelain and silk products via an export/import strategy so as to minimise risk and complexity (Kwon & Konopa 1993, p.62)
Success may be threatened by lack of cultural understanding and potential barriers encountered in the creation of tight relationships with suppliers (due to uncertainty avoidance in France)
US Market Implications
Ability to supply the US market with a completely new product line for traditional French goods

Potential adverse effects for US consumers in the form of delivery reliability due to issues in customs and communications.

May be issues with regard to product adaptation for US preferences due to a strong French culture that is resistant to change (Balle & Gottschalk 1996, p.18).
Who Are Damar?
Small international firm

Owned by Dewi Soemantoro & Ronald Asche

Importer of Indonesian handicrafts to US

Niche Strategy - cultural adaptation

Utilisation of personal contacts

Question 3 -
Exchange Rate Fluctuations
Question 4 -
Shipment Delays
The Impacts
Damar only receive 10per cent of the sale in advance, the rest of 90 per cent not pay until 30days after receive the shipment

Delay in shipment cost Damar have delay on receive the money, cost shortage in cash flow which effect in pay the labour and ordering more product.

Reputation Damage
Look for extra investor
Advantage, get fund more and quicker
Disadvantage, lose some control over the firm

Borrow money from the bank
Advantage, remain control of the firm
Disadvantage, The loan is limited (Richard H 2004), interest payable

Recovery from shortage on cash flow
Regulations and port control (Ruth B, 2005)
New rule and law change all the time
React quick to the new regulation
Keep in touch with the import/export department to get up to date INFO
Other factors to help control
shipment delay
Distribution and logistic management.
Good documentation
Delay management (Ajay D 2009; Natalie B 2012)
Logistic shipment system
Simon TAM
Tsz kit LAM
What causes exchange
rate fluctuations?
Exchange rates fluctuate according to the behaviour of the world economy.

There are many reasons as to why the currency from country to country will increase or decrease.

Many businesses that intervene internationally and export abroad face this problem and is quite common. (Carbaugh & Wassink 1994)

Strategies to overcome effects of
exchange rate fluctuations
Damar International is a company with little capital on hand, so they can’t afford to have contracts or use other strategies to avoid the ‘exchange-rate fluctuation risk’. (Czinkota, 2011)

The most common strategies used by business to avoid the exchange rate risk is by using options or using the concept of forward exchange markets.

Gets a bank to agree to a rate at which it will buy the foreign currency for, the rate is either a premium or a discount.

The right to buy or sell a foreign currency at a pre-specified price on or until the pre-specified date.
The major difference between these two is that by using options you have the right, where as forward market is a contractual obligation to buy or sell.
Forward Exchange Markets
How can Damar protect itself
from these risks?
By securing the exchange rate term, this is called hedging for protecting against currency fluctuations.

Damar is to lock in a specific exchange rate in advance, and whether it goes up or down from either side, the price they set, will be the price they will receive regardless of any economic downturn in exchange rates.
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