Question

Case - ABC Jean Company (ABC) is a US firm that sells custom designed blue jeans. A key selling attribute is that the ABC jeans fit well due to a unique phone app that uses artificial intelligence to calculate body measurements from a cell phone picture. Your US tag line is "Right fit, Every Time.” The digitized customer measurements are sent to an unrelated Chinese manufacturer (XYZ) company. Their software translates the measurements and produces the customized jeans which are sent to ABC's New York City Warehouse. ABC branded jeans are then sent to ABC owned stores in Toronto, Canada, Mexico City, Mexico, and to U.S. stores in New York and Los Angeles. ABC's president, Joe, is seeking to expand its blue jeans operations to include a European city in 2021. A previous study has identified the top two candidate cities are Milan, Italy and Berlin Germany. Joe wants to act quickly while there are few competitors with similar technology. Joe has many questions and concerns that need to be resolved before ABC can proceed. These include but are not limited to: 1. Which market should ABC choose (Berlin, Germany or Milan, Italy)2; 2. What organization form should ABC choose to enter this market2: 3. How could ABC gain important future demand information regarding the acceptance of its jeans in the chosen market?: 4 Should ABC target the same customers with the same value proposition as it does in the US? 5. What marketing services could ABC obtain from outside vendors to more quickly market its.jcans in the selected European country? 6. How might ABC create an efficient and cost-effective supply chain in getting jeans from China to Europe? 7. Given the likely possibility that the US will place an additional 20% tariff on Chinese exports in the next two months, where should ABC seek a second manufacturing location? 8. How should ABC increase the efficiency of its cash management process and improve profits via creative internal pricing? 9. What potential areas of price escalation occur during your kcans journey from China to the shelves in a European store? 10) Who should run the European store? As the International Marketing Manager you are charged with this task. In answering the below questions, provide your company specific analysis including alternatives considered and tools you might use (could use hypothetical numbers that support your position) that ultimately help Joe in making his market decisions on country selection, mode of entry, marketing channels, physical movement of goods, etc. Joc only has two hours before he gets on a plane so use this time efficiently to answer all his questions in your briefing memo. To simply your analysis, disregard Covid-19 complications in your answers below.

How might ABC create an efficient and cost-effective supply chain in getting Jeans from China to Europe? What type of organization might help ABC in the shipping process and what function could they perform? Cite advantages and disadvantages of shipping directly from China or shipping through New York? Which would you choose and why?

Answer 1

ABC should follow Hub and Spoke model like than in New York, in connecting places like Canada, Mexico, LA, etc. The same can be done for Europe by selecting a city that is closer to other potential markets as well. Thus, Jeans can be procured from China to a hub in Europe which can further be distributed along the potential markets in different cities. This approach reduces the overall cost of maintaining the warehouse in each city or in multiple locations. A centered inventory or warehouse, which is strategically placed, can help in providing supplies to the market at lower costs.

ABC can take the help of Inbound Logistics company from transporting jeans from China to Europe. Being a customized product they can take advantage of specialized logistics companies that provide a shared service. This will help the company in lowering the cost. These companies can supply the clothes to Europe hub and from there companies truck or outsourced service can take these clothes to respective markets.

Europe would be closer to China than New York, hence it is advantageous to ship directly from China. Company must conduct market research to understand the business and prospects. After analyzing markets and neighborhoods, it would be advantageous to set up a hub in a European city and shipping directly from there. Its disadvantage can be increased cost, the company would have to establish a warehouse, which in initial days can be expensive to maintain.

Shipping through New York can give the company the advantage of understanding the market in Europe, prior to establishing a setup there. This can eliminate establishment cost. The disadvantage of it would be increased logistics cost as supplying from New York to European city would be costly as compared to from China

I would choose the former, that is shipping directly from China as that would reduce cost. After analyzing the market well, it would be efficient for the company to set up in Europe as it will help in its expansion, distribution strategy, amongst other things.