Afghan Handmade Rugs Company: International Strategy Essay

Introduction

Afghan handmade rugs are traditional textiles for covering a floor that is produced on looms with the use of natural dyes. The carpet industry in Afghanistan employs more than one million people from the country’s rural areas (BACCI, n.d.). The aim of this paper is to develop a brief of a core international strategy for the production of handmade Afghan rugs.

Business Definition

The company will focus on the design and production of Afghan hand weaved rugs for both domestic and international markets. The company plans to shift from targeting private customers to corporate customers as soon as it acquires international brand recognition.

Customer Needs to be Addressed

The business will meet the demand for Afghan handmade floor coverings that have skyrocketed over the last few years. While in 2005 handmade rugs accounted for 23 percent of the U.S. rug imports, in 2011 the shipments from Afghanistan amounted to almost 50 percent of the total number (Leahy, 2012). The existing customer demand allows us to increase the export of Afghan hand weaved and hand-knotted carpets by five times up to $40 million annually (Leahy, 2012).

Technologies Used

Carpet looms of various sizes, carpet scraping and drying machines, miscellaneous hand tools (Chaudhary & Saha, n.d.).

Customer Segments Served

The business will cater to the demands of three customer segments: hotels, corporate offices, and private individuals.

Products Offered

The business will offer several types of products: felted wool carpets, fabric woven carpets, and knotted carpets.

Geographic Scope

The company’s manufacturing facilities will be located in Afghanistan with the United States and Canada being the countries where the products will be sold.

Strategic Thrust

The company identifies supply chain management as a strategic thrust that has to be addressed over the medium term (3 years) in order to gain a competitive foothold in the market. In order to streamline the chain management process and gain more control over inventory, it will use the aid of modern technologies and software such as FlashView. The program will allow reducing operational costs by providing supply managers with the ability to digitally organize inventory as well as manage and track shipping data with ease (FlashGlobal, n.d.).

Direction

The company intends upon growing the size of its business as well as the scope of its operations.

Rate

In the first year, it will open one facility in rural areas of Afghanistan, adding one to two new locations during the next three years.

Performance Priorities

• 1^st: Market share.
• 2^nd: Revenues.
• 3^rd: Profitability.

Financial Targets

1^st

Increase market share to 5 percent of the total number by utilizing strategic thrust and smart hiring practices during the first year of operation.

2^nd

Increase revenue of the business to $10 million by extending the geographic market area and entering into profitable sales agreements with corporate clients such as hotels and corporate offices during the third year of operation.

3^rd

Increase profitability to $ 700, 000 by effectively managing costs of production, procurement, and distribution during the third year of operation.

Sources of Competitive Advantage

The main sources of competitive advantage in order of importance: access to lower cost of production, alignment of offerings with the key needs of consumers, and sales force effectiveness. The company will explore the availability of favorable environmental conditions such as the availability of cheap sheep wool and a low cost of labor, thereby gaining an overall cost advantage. The effectiveness of the sales force will be achieved through synthesizing data derived from the most recent marketing research into a comprehensive selling strategy.

Strategy Elements

Technology

The production of handmade rugs is a highly labor-intensive process that is not open to a significant level of automation due to the nature of the handicraft industry. Therefore, for the optimization of the production, the company will utilize a systemic approach based on ergonomic principles that will help to lower its costs without decreasing the quality of products.

Manufacturing

Manufacturing process necessitates the use of the following tools and machines: carpet looms of various sizes, carpet scraping and drying machines, miscellaneous hand tools (Chaudhary & Saha, n.d.). The main manufacturing processes include developing designs, dyeing of yarns, weaving on looms, cutting, washing, drying, and packaging (Chaudhary & Saha, n.d.).

Product Line

Felted wool carpets, fabric woven carpets, and knotted carpets.

Pricing

The pricing will vary depending on the following factors: size, material, and color. Price per square foot will amount to $35-45 for middle-end products and $55-75 for high-end products.

Selling Approach

The company will take a wholesale selling approach and offer its products to retailers at 2.5X of the production costs.

Marketing Communications

The business will use its own sales force that will target major retailers in the United States and Canada.

Distribution

The company will distribute its products to retailers.

Customer Service

The business will hire a Customer Support Team that will provide its customers with service before, during, and after they make a purchase. Customer service will be available online, over the phone, and in branches in the United States and Canada.

Value-Adding Activities

• Development—Afghanistan.
• Procurement—Afghanistan.
• Raw material processing—Afghanistan.
• Final production—Afghanistan.
• Distribution—Afghanistan, the United States, and Canada.
• Customer service—the United States.

Competitive Strategy

Alrug, the Oriental Rug Merchant, and the Afghan Rug Shop are the main competitors of the company (Leahy, 2012). The business is going to avoid head-to-head price competition with Alrug and will compete on the level of personal relevance to its customers. In order to differentiate itself from the Oriental Rug Merchant and diminish price sensitivity, the company will use the original price structure. The Afghan Rug Shop will be restricted to its current segment of buyers and will not be allowed to attract hind-end

Conclusion

The paper has helped me to better understand the process of developing a brief of a core international strategy for the production of handmade Afghan rugs. It has also honed my research skills and strengthened my understanding of the process of carpet manufacturing.

References

BACCI. (n.d.). Afghan Carpet. Web.

Chaudhary, H., & Saha, S. K. (n.d.). Devices and machines in handmade carpet manufacturing. Web.

FlashGlobal. (n.d.). FlashView. Web.

Leahy, R. (2012). Understanding the market for Afghan rugs. Web.