ARC Consulting used a well-proven approach based on 3 key steps to find the ideal partners for the client:

• Step 1: Preparation and Search
  • Use the data from the market research and further in-depth mapping of the industry to define pool of potential partners to contact
  • Prepare partner evaluation framework including questionnaire, knock-out criteria and interview questions
  • Contact potential partners and look for their responses
• Step 2: Partner Evaluations and Screening
  • Evaluate and benchmark the identified types of partners based on responses
  • Build a long-list of potential partners
  • Conduct in-depth interviews with potential partners and filter to a targeted short-list.
  • Organize a specific workshop catered to the short the listed partners
• Step 3: Partner Approval
  • Design customized negotiations agendas for each partner
  • Initiate contact and conduct negotiation meetings
  • Agree and finalize Memorandum of Understanding (MOU) with the right partners

The most important activity was to find a distributor in the south region of China. An initial pool of 64 distributors was identified to be worth consideration (office furniture distributors, in Guangdong province, properly registered company) and after first round phone interviews and emails to check on their professionalism and interest in working with our client, the list was narrowed down to 22. From the 22, a short list of 10 was selected based on their explicit interest to cooperate and right capabilities to support our customer.

The 10 short-listed distributors were then visited and rated against the following weighted criteria:  Sales channels, logistics, warehousing, assembly, installation, after-sales, investment capabilities and attitude. A key challenge found was that distributors with complete set of capabilities and that met the specified criteria well were usually already attached to leading brands, so their dedication for a new brand would be limited. In contrast, less developed distributors that did not have the hindrance of other principals, did not have the same market presence and capabilities.

ARC Consulting finally recommended 2 of the short-listed distributors for the client to consider seriously and sign MOUs.

For the other regions in China, ARC Consulting made many contacts with different stakeholders in the value chain to promote the brand of our client. In summary:

• Over 70 senior managers at MNC project management companies (ie. Cushman & Wakefield, CBRE, Savills, Colliers, etc.) were contacted and presented with information about our client. Their contact information was provided to the customer for further discussions.
• Discussions with 30 design and turnkey companies were conducted to understand their potential fit as a sale partner for the customer. The conclusion was that although not as important as the PMs, they are significant influencers in the purchasing process and thus it is important to keep them in sight when following-up with construction projects. The contact information was shared with our customer to build their database and network.

As deliverable for this second phase, ARC Consulting carried out a partner search and evaluation project to give our customer a good understanding of the options available to them. 2 highly qualified distributors were recommended to the customer to cover south China, and integrated contact information of different stakeholders from other regions is shared with the customer that contributed to build up their database and network.

The overall project was split into 4 phases as follows:

This summarizes the first part of the project, Business Plan Development, which consists the following steps to answer the questions “Why, How and Where” to expand market presence:

• Step 1: Research Preparation
  • Prepare the research scope and focus together with the Client
  • Liaise with current resources and leverage past in-house experiences
  • Develop a research framework and assign team responsibilities
• Step 2: Data Gathering
  • Qualitative and quantitative research and data gathering within the outlined focus areas
  • Data sources: Competitor analysis/best practices, Government departments and organizations, academics, field research, previous in-house China retail/franchise knowledge database, published reports, ARC Consulting network
• Step 3: Analysis and Reporting
  • Analyze collected data to gain fact-based input and conclusions
    1. Market segmentation and stakeholder analysis
    2. Value chain analysis
    3. Potential analysis (cost/benefit)
    4. Brand positioning analysis
    5. Lead time analysis- what are the customers’ expectations?
    6. Price analysis
    7. Mapping of potential obstacles and barriers
    8. Evaluation of legal set-up options
    9. Resource requirements and internal support
    10. SWOT analysis
  • Review analysis output with the client
  • Prepare a market expansion plan for the client

The outcome of the project was a coherent and fact-based business plan tailored according to the client’s internal capabilities and adequate to serve the market under existing characteristics.

The service sector in China is growing beyond Tier 1 cities (Beijing, Shanghai, Guangzhou) and this fuels the market growth for new and modern office buildings (14.5% CAGR from 2003-2013).  Emerging focus on sustainability has brought along new environmental regulations that have driven a steady stock increase to 3-Star and LEED certified buildings. The total furniture market in China is estimated to be 15 billion euros in 2013 with 12.5% (1.9 billion euros) in office furniture.

To give more granularity to the market potential in China, individual provinces were rated by the following criteria:  Amount of LEED buildings, Growth of LEED buildings, Amount of Grade A buildings, Growth of Grade A buildings, Number of HQs of China “Fortune 500” companies, Competitive presence and Degree of Service Industry.  The ratings showed that 22 provinces had the fundamental requirements for an attractive market and the highest potentials were found in Guangdong, Shanghai, Beijing, Jiangsu and Zhejiang.  It is recommended to first concentrate efforts on these 6 territories.

The analysis of stakeholders in the value chain showed that, although every participant had influence to some degrees, the final decision was heavily weighted on the end-user.  Target end-user groups for high-end furniture in China can be divided in 4 groups:  large SOEs, large private companies, private SMEs, and Sino-foreign cooperative schools.  Doing a deep-dive into the end-user groups with face-to-face meetings, interviews and surveys indicated that the highest potential groups are SOEs and large private companies.

The competitive panorama showed that the low and mid-range furniture categories were most crowded with many local suppliers in these segments.  But since the client’s main target segment is high-end furniture, only 7 key competitors were identified to be relevant. The ARC Consulting team detailed out each competitor’s compiling information like: general information, number of sales offices, number of distributors, global and China geographical coverage, key value selling propositions to the market, and historical turnover data.

With the completion of phase 1 of the project by ARC Consulting, the customer gained a comprehensive understanding of the market and had the necessary information to make a decision. After several meetings and discussions, they ultimately decided to proceed market penetration plans and asked ARC Consulting to continue supporting with phase 2. Phase 2 of the project is the implementation phase and clear action plans were drafted to make the expansion plans a reality for our customer.