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The Natuzzi Group

1. Case Analysis

Second Developmental Phase 1985-1999

First Foreign Expansion Phase 1970-1985

5. Dicussion

Natuzzi's Relocation Strategy

  • Market Seeking FDI in the U.S. Market

  • Competitive advantage based upon price differentiation, brand name, quality and quick delivery time (FSAs).

  • Strategy based upon local responsiveness

Structure Presentation

1. Case Analysis

2. Moving HQ?

3. Moving R&D and Agglomeration Effects

4. Natuzzi's International Strategy

5. Discussion

6. The Follow-up

  • Consolidation U.S. Market

  • Expanding commercial operations in 5 continents and into 117 countries

  • Internalization: Vertical integration supply chain

  • Expanding downstream activities: Franchise Divani&Divani

  • Product diversification and brand portfolio: Sofast and Decorator Collection

Reflection of a cultural learning process or discrete rational location choices? (Benito and Gripsrud 1992)

1. Which elements of both strategies do you find strong and which elements do you find weak?

2. Design an integration of both strategies

3. What elements can you add to the integration?

4. Be prepared to discuss these questions (assign a presenter in your group)

15 minutes

Problems facing the Natuzzi Group in the New Millenium

The Big Question

Italy: Moderna Collection

Flagship (high-end) furniture collection targeting the European market.

How should the Natuzzi Group strategically tackle this

international competitiveness problem?

International Competitiveness Problem

  • Cheaper leather sofa's made in China entered U.S. Market

  • Quality and delivery time of these products had improved.

  • Sofa's were sold side by side Natuzzi's sofa's

China: Decorator Collection Production

  • Exploit domestic craftsmanship (LB FSA) necessary to ensure high quality standard.

  • Italy's strategic position ensures close monitoring and fast distribution/delivery.

  • Local responsiveness: European preference for modern-styled furniture.

Furnishing accessories collection distributed globally.

  • Exploit China's CSA in terms of labour costs.

  • Agglomeration effects: knowledge outflows from competitors.

  • Policy-induced effects: Chinese government incentives for attracting inward FDI.

Mexico: Sofast Collection

Collection of sofas specifically targeting the US market

CSAs:

  • Exploit Mexico's CSA in terms of labour costs
  • Policy-induced effect: NAFTA
  • Proximity to target market allows for monitoring and quick delivery.

(New) FSAs:

  • Responding to fast changing consumer cycles

Additional:

  • Higher focus, better insights, superior products (CSA-FSA).

Sofast Collection distributed via wholly-owned franchises

The Follow-up

  • 12,000 sale points worldwide, 7 manufacturing plants and 12 commercial offices.

  • Made In Italy: Natuzzi supervises the entire manufacturing process, which takes place in plants exclusively located in Italy and owned by the Group. Leather, wood and upholstery are worked with meticulous craftsman care in plants and tanneries also located in Italy.

  • Designed in Italy: All models are created at Natuzzi Style Center, which boasts a team of 120 creative designers, colour specialists and interior decorators.

  • Sustainability: For the International Year of Forests, declared by the United Nations in 2011, the Company is committed to improve its already advanced principles and criteria of good governance, for the protection and enhancement of trees and forests.

2. Moving HQ?

Push and Pull Factors

Cross border relocation of headquarters in Europe

  • More and more firms decide to relocate their headquarters. Why?

Three degrees of internationalization:

  • Transfer of sales and marketing abroad
  • Development subsidiaries into strong centers able to take international responsibilities of their own
  • The relocation of HQ

Corporate tax rates 1999:

  • Italy: 41%
  • Luxembourg 37%, but special deals.

Natuzzi Profit 1999: 159,6

3. Moving R&D and Agglomeration Effects

3.2 CSA Creation

4.1 Corporate Level Strategy

3.1 Decision-making

Knowledge spillovers

  • FSA exploitation
  • FSA creation

  • CSA exploitation
  • CSA creation
  • Locating with others MNEs versus locating with domestic companies

Relocate HQ to Luxembourg:

  • Alleviate tax-burden
  • Neither geographically nor culturally very distant from home-country

Retain R&D, design and leather production in Italy:

  • Protect Natuzzi's main competitive advantage (LB FSA).
  • Protect competence creation activities (R&D) from appropriation by third parties (knowledge outflows).
  • Maintain quality standard and ensure future availability of highly skilled (experienced) workforce (LB FSA).
  • Increase potential for economies of scale and scope in the region.

4. Natuzzi's International Strategy

Andrea Casciaro

Stein Bouwmans

Laurens Janssen

Lotte van den Enk

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