3. Strategy Formulation in the Marketing Planning Process166 Case 3 Royal Copenhagen A/S Establishing relationships to international consumers with tableware – Royal Scandinavia A/S is the mother company for the international known silver and porcelain trademarks: George Jensen and Royal Copenhagen. The Porcelain trademark can be dated back to 1775 when the Royal Porcelain Factory was founded, and in 2004 George Jensen celebrated its 100 years anniversary. Today, the Royal Scandinavia Group is separated in independent units/companies based upon their trademarks: Georg Jensen A/S, producing watches and jewellery, is globally represented through a large number of retailers and through 100 of its own shops and has a strong market position in Denmark, Japan, Hong Kong and Taiwan. In Scandinavia and Finland, Georg Jensen A/S is a market leader in the Design/Living segment. Royal Copenhagen A/S’s hand painted porcelain is the market leader in Scandinavia and among the leading brands in Japan and a number of other Asian countries. This case is mainly based on the Royal Copenhagen A/S The Company Royal Copenhagen A/S (RC) has through a number of years shown a negative balance on its accounts, and in the worst period even lost approximately USD 100 mill. each year. A turn-around of the company was achieved partly by changing the productions routines at home in Denmark and partly by moving some of the production to Thailand. (the famous RC ‘Flora Danica’ – see picture to the right: According to Royal Copenhagen, the Blue Fluted design is the company’s oldest and has been produced since 1775. This was the first service to be made at the Royal Danish Porcelain Manufactory, and to this day it is still known as Service No. 1.) In the latter years RC has placed a great emphasis on the Japanese market, which today accounts Kapitel_3.indd 166 03.08.2010 12:48:04 Uhr Case 3 167 for 37% of RC’s total turn-over. The company has developed a unique market position in Japan after having exported to the country for 40 years in such a way that 70% of the Japanese consumers are familiar with the RC brand, says RC Director Peter Lund. Around the turn of the millennium RC strengthened its position further on the Japanese market, and established a 100% owned sales subsidiary with a Japanese Director. Also a number of Danes are employed in the subsidiary. In the following years new 100% owned sales subsidiaries were established in Taiwan and Korea. In 2004 it was decided to move some of the production from Denmark to Chiang Mai in Thailand. Here RC and a local Porcelain manufacturer, Pardas, have formed a Joint Venture with about 100 employees producing RC’s more standard porcelain products. The more prestigious filled, complex and classical products are still produced in Denmark. During the 80’s and 90’s RC has also establish sales subsidiaries in Germany, Italy, UK and USA. Previously these markets were managed either directly from Royal Copenhagen A/S export department or via local sales representatives. Today RC’s main markets are Japan, Taiwan, Italy, USA and the Nordic Countries. Germany and UK are no longer growth markets. The Products RC produces tableware, collectibles (plates and ornaments) as well as figurines, vases and gifts. The creating processes of the various products are very complex and detailed, and a common denominator is that all products are hand painted in complex patterns or different motives. The products come in white, blue, black, red, yellow and green with hand painted patterns/motives in another colour(s). Each item undergoes a long process of moulding, casting and biscuit firing before the painting, glazing and final firing, involving skilled craftspeople at each turn. The parts are moulded and assembled by hand. If one of the modellers or moulders makes a single mistake, he or she will have to start all over again. Learning the difficult and detailed craft normally takes up to 3 years in Denmark. In Thailand, however, it has been possible to train the local craftspeople in only 30 weeks. One explanation being a very high degree of motivation as Thai workers consider it very prestigious to work for Royal Copenhagen in Thailand and at the Kapitel_3.indd 167 03.08.2010 12:48:05 Uhr 3. Strategy Formulation in the Marketing Planning Process168 same time Thailand has a tradition for old and beautiful Thai writing and lines in their artworks. Royal Copenhagen’s products are of high quality, high price and are considered very luxurious. RC’s products have become collectors’ items for people around the globe, and have – according to RC director Peter Lund – become a global brand. Japan As mentioned earlier RC have had a great success on the Japanese market. Contrary to a decade with negative growth in the Japanese economy, RC has succeeded in increasing its turnover on the Japanese market with 6–7% during the last 5 years. The Japanese economy is now showing a positive trend and during the last 6 months of 2009 the retail sector sale has steadily expanded. It is primarily luxury goods which are in demand. The consumer places emphasis on high quality and if the product can relate to a story even better. The Japanese are much interested in Danish design, and have substantial knowledge of Danish products. Furthermore, Japanese culture is characterised by an important gift-giving tradition, and Peter Lund informs that it is prestigious to give a Christmas plate, a mug or any other collectables from RC. When selling the expensive and prestigious porcelain from RC, the consumer is at the same time given an artistic and fairytale land experience. This is done by retelling the stories about Denmark, H.C. Andersen, the Royal Family, and the detailed craftsmanship behind each product. The products are at the same time marked as ‘Danish design’. RC sells today to the Japanese market via its Japanese sales subsidiary, partly directly to customers through its own shops (5) and shop-in-shops (37), partly through wholesalers to department stores. Questions 1. What is the target customer group for Royal Copenhagen’s tableware? 2. Evaluate whether it would be possible for Royal Copenhagen A/S to introduce a global product strategy? 3. Why has Royal Copenhagen A/S chosen to market its products on the Japanese market as ‘Danish design’, and associating them with stories of Denmark and the Danish Royal Family? 4. 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Marketing Mix in the MarketingPlanning Process Learning Objectives After studying the section about product and service decisions you should be able to do the following: define the term product and product levels• discuss the differences between services and goods• explain the different product differentiation strategies• explain the different product stretching strategies• After studying the section about pricing decisions you should be able to do the following: discuss the importance of pricing decisions to the individual firm• explain the major steps in pricing decisions• explain how the product life cycle can affect the price decision• understand the advantages with a differentiated price strategy across • segments After studying the section about distribution decisions you should be able to do the following: explain how distribution patterns affect the aspects of marketing• list the functions, advantages, and disadvantages of various kinds of • middle men explain the different stages in the design of channel structure• understand how distribution channels can be managed internationally• After studying the section about communication decisions you should be able to do the following: distinguish between theories of how advertising works• explain the steps in developing an international advertising campaign• describe the targets and objectives of public relations• discuss the objectives and methods of sponsorship• explain the reasons for the growth in product placement and its risk• Kapitel_4.indd 171 03.08.2010 13:01:28 Uhr