The Sterling Case Essays

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Sterling Company should consider exporting the finished product to the UK rather than licensing or building its own branch. Compared to Canada, the UK has is a broader embosser market. The UK market sells about 172,000 units per year, where Jordans the leader has 35% market share selling and average of 60,000 units a year. Sterling market share in Canada is 67% with sales of about 59,000 units a year. Sterling sells the same units as Jordan with double the market share. Other than the size of the market, there’s an opportunity as the market as been weakened by heavy price competition and cheap quality of products. Customers have expressed discontentment, however relationships between producers and agents are strong. Based on the above, my suggestion is to direct export the finished product to a sales company (handled by someone within the firm) to market and sell the product in the foreign country. This will allow the Sterling Company to take advantage of the somewhat vulnerable market by establishing their name and product into the UK market. It will also give them full control of production avoiding poor manufacturing and quality. Instituting a good product in the market is the key to a successful business; it will allow Sterling to penetrate the market (Jordans and Bolson’s market share). Once the product is established, Sterling will have the option to expand and build a subsidiary in the UK (if strategically profitable). Buying a subsidiary at the moment will be time consuming and costly. For sterling to build their own plant they need to make and initial investment of about $508K - $50K in equipment, $60K for admin support, rent and salaries (2 employees), assuming same cost per unit as Canada ($6.64) the variable cost will be $398K (6.64*60,000 units). Not only the subsidiary is costly but it limits 60,000 units per year, which is about the same quantity as the Jordans are currently producing. On the other hand, if the finished good is imported Sterling will be able to produce from 168,000 to 250,000 (at a higher cost due to labor) units from their London, Ontario plant. According to the statistics provided in the case on exhibit 2, the UK expects a yearly increase of 200,000 lawyers and Incorporations. Sterling will be able to meet the increase in demand through exports.
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