Dankotuwa Porcelain

MARKET AUDIT

1.0 Executive Summary

The purpose of this report is to evaluate the socio-cultural aspects of the United Kingdom in order to analyze the possibilities of sending a selected product by Dankotuwa Porcelain Sri Lanka. The selected product is a 93 unit's table ware set named “Platinum String”.

“Platinum String” range is not marketed in Sri Lanka and it is perceived as a premium quality export objected product set. At the start concentration will be put towards to target only in the UK starting from London. Social classes are highly valued in the UK and special attention is given towards day today living standards therefore home appliances and other home accessories are given a higher priority.

Dankotuwa porcelain is the most reputed ceramic product manufacturer in Sri Lanka especially when it comes to ceramic products such as table sets. This socio-cultural analysis covers up many areas such as day today life styles, social institutions, educational backgrounds etc.

2.0 Socio-cultural analysis
2.1 Company overview and History

Dankotuwa Porcelain is a supplier of quality ceramic products to buyers in a domestic context and an international context since 1984. Products range from casual tableware to superior designs such as gold and platinum designs in a vast variety of shapes and designs to suit different social backgrounds. With a strong shareholder base of approximately 3000, Dankotuwa generates an annual turnover of Rs 1.5 Bn. With the long term vision of becoming a “world class tableware” producer the company moves with a strong brand image and customer base throughout the world.

2.2 Product and the country concentrated

A complete table wear set named “Platinum String” comprising of 93 pieces is selected to be exported to the United Kingdom. This set includes ten dinner plates, one large serving plate, one tureen with cover, one cake stand, sauce boat and stand, one cake plate, six small cups and sauces, six soup bowls and plates, six bowls, six larger cups with four saucers, six medium cups with six saucers, five coffee cups, one coffee pot, one tea pot, two sugar bowls, one water jug, two cream jugs, seven small plates, one bowl and five medium plates.

The concentrated country will be United Kingdom and even though UK consists of three main parts, Great Britain (formally Scotland and England), Northern Ireland and a number of smaller islands surrounding at the start of this exporting project Dankotwa will only focus on Great Britain. More details of the country are discussed below.

3.0 Historical background of UK

With a combination of three crowns, Kingdom of England, Scotland and Ireland United Kingdom was created in the beginning of the 17th century. After the eruption of world wars UK's economic developments came almost to a halt. By the end of the 20th century UK gained phase through many incidents such as revenue generated through oil and especially by being a member of the European Union. However with the recovery from 1992 recession UK experienced an extended period of growth which assisted them to regain economic and political power. UK holds to a majestic culture with the consistence of prestigious living standards and Nobel English men.

4.0 Geographical setting and climate

Geographically UK is situated between North Atlantic and Northern Sea with a land area of approximately 250,000 sq KM. The climate is generally temperate and it usually has an average annual rainfall of 80 inches. Temperature wise it has ranged from a minimum of -27° to a maximum of 38.5°.

5.0 Social Institutions

Nuclear and extended family can both be seen at UK where the nuclear family consists of parents and children and the extended family consists of grandparents, uncles, aunts and cousins. Recently a larger participation level of females can be identified in the labour market and with the evolvement of time issues such as late marriages, living together and increase divorce can also be seen in society. According to Borden, G, A. (1991) p.78 women comprises 40% of the workforce. The legal age to marry is from age 16 and many couples choose to live together for sometime before getting married.

Successful education is a must for British people and governments assist the nation by providing many opportunities for education such as by proving a number of education institutes such as schools, colleges and universities. Education is a free and a compulsory requirement for the age group of 5-16. Education is delivered in two stages, primary education (from age five to eleven) and secondary education till they reach age eighteen. UK has been successful in maintaining a literacy rate of 99% over the history.

Political and legal system plays a massive role in the economic stability and countries wellbeing in UK. Political system consists of a constitutional monarchy where the monarchy is reputed as the head of state and the executive powers are moved on to a prime minister. The essential arms of the system can be taken as the legislature, the executive and the judiciary. Major political parties are Conservative party, Labour party, Liberal Democratics and Democratic Unionist Party. The tax system is maintained in two stages which are the central government and local government. Income tax, value added tax, corporation tax are main methods of tax generations for the central government and local government revenues are generated from government funds, council tax and different business rates. Legal system is a combination of statutes and common law in UK and the government acts as the governing body of the country. House of Lords acts as handling criminal and civil cases and minor offenses are dealt by magistrate courts.

During the past years class system has changed immensely in the UK mainly due to the reason of many people from different backgrounds had more exposure to higher education and wealth generation. Apart from wealth and education levels social class depends on the geographical areas which they live, accents and even manners. After World War 2 UK was open to migrants which made the society a diverse one. India, Sri Lanka, Africans and people from many Asian countries moved to UK and Indians hold a massive population on the amount of immigrants in UK. Ethnic makeup of UK is diverse, consisting of majority of Whites, Black, Indian, Pakistani, mixed nationalities and other nationals. Majority of the people are Christians and Muslim holds the second place in religion in UK.

6.0 Living Conditions

With the movements towards a multicultural society living condition changed gradually from food and beverages to housing. Housing gradually increased from 1985 which made a massive boom in the housing industry as well as housing appliances therefore concerning this development demand for house hold good such as table ware also increased making it a very profitable product for producers. Therefore the 93 tableware set will have a positive demand in the market.

7.0 Economic Analysis
7.1 Introduction

As “Dankotuwa” a well established exporting business entity which is living up to its name sake in Sri Lanka, is foreseeing the vast opportunity to expand its operations to UK, it is vital to possess knowledge regarding the population, the wealth distribution, and the main industries trade restrictions in the relevant field, foreign investments, and the technology available with regards to engage in business with the prospective country. Since UK is a developed country, a Sri Lankan firm such as “Dankotuwa” porcelain should focus on its opportunities and feasibility for developing their products to keep up about the population, the distribution of wealth, and the principle industries, with its standards.

Through this analysis, the Sri Lankan organization has the opportunity to monitor political stability/ instability which may influence any investment decisions, analyze general economic data that serves as a basis for evaluation of the economic soundness of the country under consideration, gather information relating to channels of distribution, media availability as well as the role of the media.

7.2 Population

Since of 1950s, the population of Great Britain has become more diverse. Large number of foreigners have migrated to Britain, seeking jobs, citizenships

7.2.1 Total

According to the statistics of year 2009 (July EST), the total population of UK is 61,113,205 and London is 7,700,000.

7.3 Age, gender and Distribution

Age structure:

0-14 years: 16.7% (male 5,233,756/female 4,986,131)

15-64 years: 67.1% (male 20,774,192/female 20,246,519)

65 years and over: 16.2% (male 4,259,654/female 5,612,953) (2009 est.)

7.4 Gross Domestic Product

Gross Domestic Product is a measure used to calculate the national income and input of a country. It portrays the total cost of goods and services produced within the country within a year.

7.4.1 Total

According to the statistics shown by the World Bank UK has been holding a comfortable position of 6th place in the world economy with a GDP of US $ 2,645,593 in 2009.

7.4.2 Rate of Growth

GDP - real growth rate: 2.6% (2007 est.), but in 2009 its Estimated -4.3%

Appendix1

7.5 Personal Income per Capital

Per capita income depends on the household size and the total household income. The personal income per capita in UK is $35,400$35,400 (2009 est.)

7.6 Foreign Investment and international trade statistics

Foreign investors decide to go for invest in Great Britain for quite a number of reasons such as market size, entry to European market, UKs infrastructure, the accessibility of competent employees, and the internationally recognized quality standards. They have more investment than another EU country at around 25% of the total.

7.7 International trade statistics

7.7.1 Major Exports

The Great Britain pharmaceuticals business is the world's main earner in this area and contributes 15 of the world top 75 best selling drugs. Also they are the main suppliers of plastics, aerospace products, electrical, alcohol, food, music etc. And they are the world second service exporters including banking, insurance, stock broking, computer programming

Appendix 2

7.7.2 Major Imports

More than 60% of imports UK are finished manufacture goods. Tobacco, food and beverage are major non-manufactured imports, while other major imports include machinery and transport equipment, fuels etc.

Appendix 3

7.7.3 Balance of Payments situation

The current account recorded a deficit of £4.7 billion in the third quarter of 2009 the income surplus declined by £1.5 billion to £6.7 billion

Appendix 4

7.7.4 Exchange Rates

The UK unit of currency is the pound sterling (£). In London we often call one pound (£1). Exchange counters can be found at all banks across the country. Most of the established credit and debit cards are accepted within the UK economy.

Appendix 5

7.7 Trade restrictions, Embargoes, quotas and import duty

Atrade barrier or trade restrictionis a common word that use to describe any government policy or regulation that limitsinternational trade. The United Kingdom has put forward sanctions on types of trade in a number of countries including Liberia, Sierra Leone and Burma. According to Sheffrin, 2003 quotas, like other trade restrictions, are used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy. Quotas are a limit on the number of goods that are allowed to enter a country. All Import duty is calculated at CIF (Cost + Insurance + Freight) value of goods. Other percentages of the duty will be calculated according to the import tax. Import duty for porcelain (HS691110) 12 %.

7.8 Inflation Rates

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. In U.K there has been a steady increase in the inflation from 2003 - 2009 from 2.1% to 3.6%. The years 2004 & 2005 recorded the lower of 1.4% during this time period.

Appendix 6

7.9 Exports/ Imports agents

With regard to an import/export agent, we will have our own Dankotuwa office at London the capital of The Great Britain and our own small scale warehouse which will operate as the import/export agent between our distributors with our head office in Sri Lanka. This is because we feel that it is important have the direct physical involvement activities in The Great Britain; to show the importance and recognition the company have towards their consumers

8.0 The market
8.1 Geographical region

The United Kingdom is a sovereign state located at northwestern coast of continental Europe with one of the strongest economic system in the world. It has been very popular place for many migrants from many parts of the world as it is a leading financial, commercial and industrial nation with low inflation and unemployment rate and. UK has very diverse with wide variety of landscapes. The UK has career prospects and excellent job opportunities in many different parts of employment. It's also a very attractive tourist destination, with one of the main attraction being its very rich historical and cultural heritage.

Dankotuwa products will be initially launched in London, the capital of England and then throughout the United Kingdom. London is the heart of UK as it's a foremost global city and one of the world largest financial centers in Europe. It influences in political, educational, fashion, finance, arts and culture in general contributes to its global position. England has one fifth of the population where around 40% in major places of London. It has an official population of 7,556,900 within the London by making it the most popular municipality in the region of Europe (“Expat focus”n.d).

For ceramic goods, UK has many different specialized goods with many outdoor and street markets. In UK Camden market is one of the top's attractive place virtually everything is sold here like cloth, food products, ceramics goods, ethnic arts etc. In UK half of the top 100 companies and over of 100 Europe's companies are headquartered in central London making it as land mark of Europe.

8.2 Forms of transportation and communication available in that region

UK has the one of the greatest transportation system in the world with best infrastructure in the whole region which uses advanced technology for day to day operation. It has a safe mode of transporting goods which will be a great advantage for us since our product is fragile products. It has its own dense and extensive public and private internal transport network and in addition to that providing a focal point for the railway networks and national road.

United Kingdom has a one of the advanced telecommunication system in world. Today there are several companies which provide this service such as cable, Vodafone and wireless etc. British Telecom is the major landline service provider in the UK as well as in London. It also provides mobile and broadband internet service throughout the country. There are many companies that offer internet services along with phone services in London such as orange, virgin, three, Vodafone etc which are top leading communication provider in London. Telecommunication charges in London are generally high which depends on which telephone company and package is used.

Also black cabs,red telephones boxes, to be found all over the city with on a daily basis collections. Thus UK has preeminent communication system which would make the communication system for Dankotuwa easier and faster.

8.3 Consumer buying habits

The most important aspect in the marketing analysis is consumer buying habits. Currently in UK there is a porcelain demand among household especially at London. Consumers prefer tradition artistic form of design in the product as it gives attractive looks when placed. Local customer buying pattern is highly influenced by the product features and the designs such as silver or gold mix products, Persia black etc which are associated with rich culture.

As per Travel & Tourism Competitiveness Index (2009), tourism in London has been identified as one of the improving travel and tourism place in UK with diverse set of cultural people. This is a great advantage for the company as different pattern of product would be demanded by different ethnic group. As the porcelain industry is at growing stage, porcelain demand could expect to grow in future. And due to ragging tourism in London porcelain products will have a greater market in the country.

8.4 Distribution of the product

In UK, Retail outlets are more diverse ranging from small corner shops to mass super markets. Our products are distributed to major super markets in order to maintain the standard of the product. And in modern days consumers are more convenience to purchase all they need in one place such as super market. Therefore Dankotuwa will be initially market via major super markets, where the most London people visits to buy ceramic products. There are many super markets such as Harrods, Heals, Mark & Spencer etc to name few (Departmental stores”,n.d).

Harrods in London is a prestigious departmental store with seven floors of luxury covering everything from cloths to toys, pets, home décor, porcelain etc. it one of the heavy purchasing point for many customers, therefore company is expecting to give more concentration for this type of outlets which widely spread in city.

Heals & Son is an well-known department store offering an extensive variety of furnishing fabrics, beds, rugs, home storage solutions', and all home accessories available under one roof.

Mark & Spencer is a prestigious leading high street department store selling a selection of home furnishings, quality clothing, flowers, food and drinks, and other gifts.http://www.qksrv.net/image-1111002-8406126

Fenwick is an independent department store grouped with a range of eight stores across UK. They range from full line department stores to more focused fashion and accessory offers.

Dankotuwa will be distributing its product to these outlets mentioned above by having its own distributor channels in London at the early stage and will be moving to other out let in time been.

8.5 Advertising and promotion

Launching a product involves consideration of all the elements of the marketing mix and that combination of price, promotion and place, or distribution, which will optimize the chance of success (Michael Baker & Susan Hart, 2007).

The main objective of the promotional campaign would be to create awareness among the target audience and make them sensitive to the product. So for the purpose of achieving the objectives, TV advertising, billboards, magazines and news papers ads,and sales promotions will be used. Since our regular advertising method is in the form of website, magazine, billboards and news paper, Dankotuwa will be using the same pattern in London to reach target customers. We would bring feature appeals for the customers who want experience the dominant features of Dankotuwa products.

Some of the sales promotions customarily used for promoting our products are Coupons, premiums, bonus pack and event marketing which will be detail explained under promotional mix.

9.0 Financial Details
9.1 Notes

1. Cost of buying a set of “Platinum String” from Dankotuwa Porcelain is Rs.60,000/=.

2. Selling price for set of Platinum String to the UK customer is Rs. 100,000/=

3. For calculation purpose it is assume that ₤ 1 = Rs. 200/=

4. Cost of shipment of goods are calculated as following,

Rs.

Cost of Purchase 12,000,000

Rent 300,000

Insurance 278,600

Handling Charges 180,000

Telephone 36,000

Shipment chargers 347,222

Container chargers 60,000

Salaries 720,000

Total 13,981,822

5. Insurance cost per shipment is 2% of cost of shipment.

6. Custom chargers are 5% of cost of shipment of goods.

7. Depreciation is calculated at 25% per annual in striate line basis.

8. Packge size of one unit of “Platinum string” is 1 square meters.

9. Container chargers per 1m3 is Rs.300/=

10. To send a 20 foot container to UK it cost Rs.60, 000/=. (Container has 34.56 square meters space) and take 20 days to reach the destination.

(Following terms and conditions has been agreed with Dankotuwa Porcelain)

12. To purchase 200 units of Platinum Strings with in the year 2010

13. Purchase of one unit is agreed for Rs.60, 000/=

14. One month credit period to settle the payments.

15. Two months credit period is given to the customer to settle the payment from the dispatching date of the goods.

16. Payments for the goods are done by letter of credit with the buyer monthly for the shipment.

9.2 Income statement

Rs

£

Sales

20,000,000

100,000

Cost of sales

12,000,000

60,000

Gross profit

8,000,000

40,000

Salaries

720,000

3,600

Rent

300,000

1,500

Electricity

60,000

300

Telephone

36,000

180

Insurance

278,600

1,393

Container chargers

60,000

300

Shipping Chargers

347,222

1,736

Handling chargers

180,000

900

Distribution

600,000

3,000

Customs

699,091

3,495

Depreciation

82,500

413

Advertising

2,400,000

12,000

Profit Before tax

2,236,587

11,183

Tax @ 30%

670,976

3,355

Net Profit

1,565,611

7,828

9.3 Balance Sheet

Balance sheet for Year 2010

Rs

£

Fixed Assets

247,500

1,237.50

cash

1,289,087

6,445.44

debtors

4,000,000

20,000.00

Total assets

5,536,587

27,682.94

creditors

900,000

4,500.00

capital

2,400,000

12,000.00

Tax payable

670,976

3,355

Retain Profit

1,565,611

7,828

Total Liabilities

5,536,587

27,682.94

Please refer to Appendices one and two for prepared cash budgets in SL Rupees and Sterling Pounds

10.0 References

Borden, G, A. (1991), Culture organization: an approach to understanding intercultural communication (2nd edition). Upper Saddle River, NJ: Prentice Hall.

Telephone Information (London). [n.d] retrived january 02, 2009, from http://www.whywaitforever.com/london/phone.html

United Kingdom (expatriate). [n.d] retrived December 28, 2009, from http://www.expatfocus.com/expatriate-uk-overview

London, First 4 (Departmental stores). [n.d]. Retrived December 27, 2009, from http://www.first4london.com/directory/Retail/Department_Stores/

http://www.pwc.co.uk/eng/publications/recent_UK_economic_developments.html

https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html

(http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf)

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