Gift Market 3 2 example essay topic

Introduction 1.1 Purpose and Objectives of this studies The purpose and objectives of this studies is to ascertain the viability of the company to venture into international trade namely Japan as a result of overwhelming response that the company receive during the Malaysian Trade Fair in 1987. Because it has been 15 years since the fair, it is important for the company to conduct this study to gauge the relevance and marketability of its products compared to 15 years ago. This study will cover the economic, demographic and cultural factors related to the trade as well as the analysis of the market that Japan has to offer. 1.2 Company's Background Kelantan Traditional Craft & Antiques (ETC) was first established in 1978 as a partnership entity founded by the late Tuan Yaacob Bin Tuan Hassan and his sons.

The company principal activity was in cottage industry producing Silverwares to be supplied to handicraft outlets in Penang, Johore, Langkawi and Kuala Lumpur. The company opened it first outlet in Kuala Lumpur in 1986 The headquarters is located in Am pang with its factory in Kota Bharu, Kelantan. It has 4 retail outlets in Kota Bharu and 3 retail outlets in Kuala Lumpur. The hard work and commitment of it managers has made this company become one of the leading suppliers of gifts product especially Kelantan Silver. Kelantan Silver has been the major contributor to our income due to its unique characteristic which is 100% handcrafted by skilled silversmith.

At this moment, there are only 3 main players in the industry and none of them had ventured into overseas market. In 1989, we ventured into corporate gifts market by supplying products to companies such as Petronas, MAS and Mitsui Corporation of Japan. 1.3 Product Description Kelantan Silverwares is the main product the company offers. With its distinctive features such as unique design and 100% handcrafted Kelantan Silverwares has been very popular among tourist visiting Malaysia especially Japanese Tourist. Meanwhile, Kelantan Silver has also beginning to gain corporation attention because of its features that is traditionally link to Malaysia. Below is among the popular product category that the company produces.

Table 1.1 Product Categories Product Category Description Targeted Market Cosmetic Jewellery SS Silver Brooch, Pendants, Necklaces, Bracelets, Rings, Earrings SS Price range: RM 8.00 - RM 10.00 SS Teenagers Corporate Gift SS Silver Tray, Kris, Rose Bowl, Pen Holder, Ash Tray, Cigarette Box, Letter Opener, Tea Sets Price Range: RM 200 - RM 12,000.00 SS Corporations. Household Items SS Salad Server, Rice Server, Cake Server, Candle Stand, Napkin Ring, Tea Spoon, SS Price range: RM 12.00- RM 250.00 SS Family. Source: Product Catalogue, Kelantan Traditional Craft & Antiques 1.3 Management Experience As a producer, distributor and retailer, we are represents by a section of skilled and experience employees in the production, sales and marketing. It includes of 10 masters silversmith, 10 junior silversmiths, 1 production manager, 1 marketing manager and 7-branch retail manager.

Below is a brief profile of the senior manager in the company: MANAGING DIRECTOR: Tuan Is hak Bin Tuan Yaacob formerly is a banker. He was invited by his brother Tuan Ismail to spearhead the company venture into Japanese market because of his experience in Banking. MARKETING DIRECTOR: Tuan Ismail Tuan Yaacob, the eldest son of the late Tuan Yaacob. Tuan Ismail has been with the company since its establishment in 1978. He has a vast experience in marketing and has been the main figure in the company's survival. FINANCE DIRECTOR: Naz leen Bin Dad is a graduate with Master in Finance, University Kebangsaan Malaysia.

He is formerly a remisier with Hwang-DBS Securities. PRODUCTION DIRECTOR: Tuan Fatima h Tuan Yaacob, the eldest daughter of the late Tuan Yaacob, She has been with the company since its was establish in 1978.2. Country Selection 2.1 Growing Market Opportunities One of Japan's greatest attractions for foreign investors is the sheer size of its market. Japan has the second-largest national market in the world after the United States.

Japan offers highest value in return and lowest value in risk as compared to 4 other Asians nations such as Singapore, Thailand, Brunei and Indonesia Table 1.2 Country Selections COUNTRY Japan Singapore Indonesia Thailand Brunei Variable Weight 1. Acceptable (A), Unacceptable (U) factors a. Allows 100-percent ownership - A A A A A b. Allows licensing to majority-owned subsidiary - A A A A A 2.

Return (higher number = preferred rating) a. Size of investment needed 0-5 4 3 2 2 3 b. Direct costs 0-3 3 2 3 3 2 c. Tax rate 0-3 3 2 3 3 2d. Market size, present 0-4 4 2 2 2 2 e. Market size, 3-10 years 0-3 3 2 2 2 1 f.

Market share, immediate potential, 0-2 years 0-2 1 1 1 1 1 g. Market share, 3-10 years 0-2 2 1 1 1 1 Total 20 13 14 14 12 3. Risk (lower number = preferred rating) a. Market loss, 3-10 years (if no present penetration) 0-4 1 2 4 3 2 b. Exchange problems 0-3 3 3 2 2 2 c. Political - unrest potential 0-3 0 0 3 2 0d.

Business laws, present 0-4 2 2 3 3 2 e. Business laws, 3-10 years 0-2 1 1 2 2 1 Total 7 8 14 12 7 Source: Malaysian International Trade Industry 2.2 Economic Factors After the collapse of the inflated-asset "bubble" economy, the Japanese economy fell into recession in 1992. Temporary income and bonuses of household heads fell in both nominal and real terms for four consecutive years from 1992. As a result, the living expenditure in 1995 declined for three consecutive years in real terms and two consecutive years in nominal terms for the first time since the current annual survey started in 1963.

The decline was especially large in expenditures on food and on education and recreation. However, social expenses (including gifts of cash) increased for the first time in four years since 1991, to an annual total of yen 370,000 (representing 8.8% of living expenditures). The 1996 figures are expected to show a revival of consumption stemming from rising real purchasing power due to falling commodity prices, and increased temporary income and bonuses resulting from improved corporate earnings. 2.2. 1 Scale of Economy Japan's GDP (Gross Domestic Product) grew steadily from 1965 to 1990, making Japan the country with the second largest GDP in the world.

In addition to GDP, another common indicator of a country's economic growth is GNP (Gross National Product). While GDP measures the total production and consumption of goods and services in a country, GNP also takes into account all factor incomes of residents earned outside the country and excludes factor incomes earned in the domestic market by foreigners. In recent years most countries have adopted GDP rather than GNP as the primary measure of economic activity. Chart 1.1 Real Gross Domestic Products Amid the persistent gloom, one bright spot is foreign direct investment in Japan, which reached $28.3 billion in the fiscal year ended March 31, 2001, up by over 31% from the previous year's $21.5 billion.

Chart 1.2 Foreign Exchange Trends Source: JETRO Chart 1.3 Interest Rate Trends Source: JETRO Although foreign exchange trend, particularly Japanese Yen tends to fluctuate rather frequently, this will not affect the profitability of our operations. Japanese Yen has a tendency to appreciate against US Dollar and this will translate to higher Ringgit value. Meanwhile, interest rate tend to be stable as shown by the above chart. This will be beneficial to the company in the long term. 2.2. 2 Price Compared to other countries, cost-of-living expenses in Japan have been rather high, particularly in such areas as housing and educational expenses. In recent years, however, prices of some goods and services have fallen in Japan's deflationary economic environment.

As a result, the gap in cost-of-living expenses with other countries has narrowed, and Japan has actually become cheaper in some categories of such expenses. Table 1.3 Trend of Consumer Price Indexes Source: JETRO 2.2. 3 Consumption Trends According to the Government of Japan's "Family Income and Expenditure Survey", there has been a decline in the gross income, disposable income and consumption expenditure of salaried workers for the past two years, a sign that Japan's long recession is hitting people's pocketbooks. Japan's household savings rate remains among the highest in the world, however, and is often cited as an impediment to a consumption-led economic recovery. Chart 1.4 Salaried Worker's Household Budget 2.2. 4 Labor, Employment Japan's unemployment rate, after staying rather low for a long period, began to climb gradually in recent years as a result of the country's long economic slump.

Because people seldom change jobs in Japan, the labor market tends to be relatively rigid. This is also one of the reasons for the relatively slow rise in unemployment rates. Another noteworthy fact is that Japan has a somewhat lower rate of women's participation in the labor force than other industrialized countries. Although this is changing, the Japanese economy still does not provide sufficient job opportunities for women. Chart 1.5 Employments 2.3 Demographic Factors 2.3. 1 Population Chart 1.6 Populations by Age and Sex (1995) As depicted by the above diagram, Japanese society is aging, and people are having fewer children, and this is bound to have an impact on the gift industry.

Specifically, as society ages, there will be an increase in the number of funeral and memorial service gifts, get-well gifts, and thanks-for-visiting-while-sick gifts, while fewer children will invariably mean fewer bridal gifts and fewer new baby gifts. Nevertheless, personal gift-giving overall can be expected to increase. 2.4 Cultural Factors Japanese culture has a long established custom of giving gifts of cash or merchandise to express thanks, congratulations, or sympathy, and the receiver is generally expected to reciprocate. The traditions of gift giving in the mid-year (chugen) and the year-end (seibo) remain the pillars of Japanese gift-giving culture even today.

However, as Japanese people become wealthier and their life styles more Westernized, Japanese culture has incorporated additional gift-giving customs such as birthdays, Christmas, Valentine's Day, and Mother's Day. The size of the gift market in Japan is estimated at around yen 10 trillion. Of this total, occasional gifts (for marriage, funerals, etc.) make up about yen 4 trillion, while seasonal gifts (chugen and seibo) account for about yen 1.7 trillion, commemorative gifts (birthdays, Christmas, etc.) account for about yen 1.9 trillion, and corporate gifts (including sales promotions) make up yen 2.3 trillion. Of these gift-giving occasions, commemorative gifts and sales promotions are expected to show the greatest growth, and greatest opportunities for imported products. Corporations continue to cut back on both the numbers and the unit prices of gifts due to weak business performance in the slow Japanese economy. However, personal gift giving is showing signs of recovery, and consumers have begun choosing personalized gift items.

In response, manufacturers in industries such as foods, tableware, and toiletries are developing gift-specific products, developing channel-specific gift sets, and setting up special gift sales teams as part of efforts to aggressively develop the gift market. At the same time, as deregulation leads to more unfettered competition and stiff price slashing continues, sales promotional strategies are relying less on mass media advertising and rebates and more on sales-promotion gifts. As of April 1996, the Law Against Unjustifiable Premiums and Misleading Representation was amended in ways that facilitate larger promotional campaigns and allow more expensive promotional gifts, and this is expected to stimulate larger sales as well as diversification of promotional gifts in the future. We have identified that, in order for foreign companies to enter the Japanese market, they need a thorough understanding of Japanese market trends and the following characteristics will be our benchmark in our marketing strategies: 1) Price the product appropriately as a gift item 2) Establish rigorous product quality control and inspection systems 3) Give careful consideration to product packaging 4) Strictly adhere to delivery deadlines 5) Devote time and energy to selecting a Japanese business partner 6) Describe the unique characteristics of the product and tell the story behind the product 7) Continually develop new gift sets. 3. Market Analysis 3.1 Size of the Gift Market in Japan Virtually any small-sized item can serve as a gift from one person to another.

In Japan today, gifts may be broadly classified into personal gifts and corporate gifts. The category of personal gifts is usually divided into three subcategories: occasional gifts, for which there is no specified date (wedding of birth of a child); seasonal gifts, which are given at definite times of the year (chugen, seibo); and commemorative gifts, which are given on a definite date that regularly occurs (birthdays, Christmas, Mother's Day). The category of corporate gifts may be divided into the subcategories of seasonal gifts between enterprises, business gifts to commemorate job tenure or promotions, and SP (sales promotion) gifts intended to promote sales of a product (novelty premiums, incentive gifts). The total size of the gift market in Japan, encompassing all these categories, is estimated at roughly yen 10 trillion. Table 1-4 presents a breakdown of this total by gift-giving occasion. The single largest category is occasional gifts (about yen 4 trillion), much of which is accounted for by gifts given on traditional occasions that are relatively immune to the ups and downs of the economy.

Table 1.4 Classifications and Market Size of the Gift Market in Japan 3.2 Characteristics of Various Gift-Giving Occasions 3.2. 1 Personal Gifts Overall, women have more of a gift-giving mentality than men, and they have more gift-giving opportunities. Moreover, women exhibit a clear tendency to give items they would like to receive themselves. Chugen and seibo gifts are most commonly given by women in their 60's, while birthday and Valentine's Day gifts are most often given by women in their 20's; bridal gifts, Christmas gifts, and Mother's and Father's Day gifts by women in their 30's; and White Day gifts by men in their 20's. The following sections will discuss some of the characteristics of various gift-giving occasions that we have identified, along with recent trends and most appropriate gift items. 3.2. 2 Seasonal Gifts (Chugen, Seibo) Japan has a long established custom of giving gifts in the summer (chugen) and winter (seibo) as a symbol of thanks to those to whom one is indebted for favors (parents, extended family members, supervisors at work, friends etc.) The custom is family-centered in its essence.

In the past people were expected to deliver gifts to the recipients in person, but nowadays almost everyone utilizes the delivery services of department stores, mass merchandisers, or gift specialty stores, During the chugen and seibo seasons the leading department stores in Tokyo handle millions of gift items each store, and their delivery centers become very busy in delivering merchandise all across Japan. The amount spent for chugen and seibo gifts differs depending on the recipients, such as yen 3,500, yen 5,000, and yen 10,000 classes. The price point is especially important. Products that deviate from the specific price point, either above or below, are unlikely to be chosen as chugen and seibo gifts.

The gift not only needs to be pleasing to the recipient, but also needs to fall visibly within the appropriate price zone (so it is apparent, for instance, that the recipient has received a gift in the yen 5,000 class). A telling recent example is that of a domestic brand of whiskey that once was priced in the yen 5,000 range and was popular as a yen 5,000 class gift item. After the price was cut to yen 3,500, gift purchases fell off conspicuously. Thus, surprising and sometimes unexpected phenomena in the retail marketplace can occur in the gift market. 3.2. 3 Occasional Gifts Occasional gifts are given for occasions that arise in different stages of life. Traditional reciprocal forms of occasional gift giving (a gift paired with a return gift) remain deeply rooted in Japanese culture.

Certain types of occasional gift-giving, such as bridal gifts, new baby gifts, get-well gifts, often take the form of cash or gift certificates, but reciprocal gifts, such as gifts to members of a wedding party, gifts to celebrate recovery from illness, and reciprocal gifts of condolence usually take the form of merchandise. a. Marriage Gifts Specifically, these items include interior accessories (clocks, photo frames, flowers vases, paintings, decorative plants, etc. As reciprocal gifts to the members of the wedding party, it is common to give an item in the yen 3,000 - 5,000 range along with a confection priced in the yen 1,000 - 2,000 range. In recent times more and more people have started using so-called free choice gift systems in which the recipient can choose any item they want from a catalog and have the item delivered. In 1995 some 784,000 marriages took place in Japan, and since the children of the baby boomers will soon be reaching marriageable age, the marriageable age population will grow to almost 10 million by 2000. The following table lists suitable items for other occasional gift-giving opportunities.

Table 1.5 Suitable Items for Occasional Gifts Source: JETRO 3.2. 4 Commemorative Gifts The following table provides a calendar of commemorative gift occasions and lists suitable gift items for each occasion. a. Valentine's Day Unlike other countries, in Japan Valentine's Day is an occasion when give gifts to men, both boyfriends and others. The majority of Valentine's gifts consist of chocolates.

In fact, roughly half of all chocolate sales for the entire year occur before and around Valentine's Day. Recently both basic type and real unprocessed chocolate have enjoyed popularity even as obligatory chocolate gifts (to bosses and male colleagues). More and more women are giving men's wear accessories along with chocolates, but only to their boyfriends. b. White Day White Day represents a gift-giving occasion unique to Japan. The custom started in the late 1970's as part of a campaign by the Japan Candy Industry Association to encourage men to give gifts of candy on March 14 to reciprocate for Valentine's Day gifts they received from women a month earlier. Nowadays men give a wide range of White Day gifts, including cookies, cake, and other food products, as well as panties, stockings, handkerchiefs, potpourri, fragrances, and stuffed animals.

In 1985 the Japan Body Fashion Association launched its "White Panties on White Day" campaign, as part of which makers put panties in a pouch, or arrange a gift set along with socks in a stylish package atypical of usual underwear packaging. This campaign was very well received, and by the 1995 White Day sales season, some 6.6 million of panties were sold in just three days, representing 6.2% of panty sales for the entire year. c. Mother's Day Mother's Day is the one non-traditional commemorative gift occasion that has put down the deepest roots in Japanese gift-giving culture. Some two-thirds of Japanese women and about half of Japanese men give a gift on Mother's Day (see Table 2-1). The most popular gifts items are flowers, mainly carnations, followed by blouses, aprons, and other apparel items, along with scarves, shawls, and other accessory items. d. Father's Day Father's Day is not observed as widely as Mother's Day, and it has no one symbolic gift item like carnations.

Instead, it features a diverse range of gift items, the most common of which are sweaters, polo shirts, and other apparel items such as neckties, dress socks, handkerchiefs, and other accessory items (watches, wallets, and golf accessories). e. Christmas Christmas in Japan has almost no religious significance or such overtones. Especially after the collapse of the bubble economy, sales of red and green Christmas items (products with Santa Claus or angel motifs, stuffed animals with Christmas themes, napkins, cups, etc.) dropped catastrophically. Increasingly the tendency is to give similar gifts as on other occasions at Christmas time, but with distinctive Christmas wrapping. Christmas gift items include mufflers, scarves, handkerchiefs, and other fashion accessories, food items such as cookies and chocolates, and interior accessories. f. Birthdays Birthday gifts have become established as the single largest personal gift-giving occasion.

Birthday gift-giving is especially widespread among young adults, practiced by about 90% of women in their 20's (see Table 2-1). The most popular birthday gift items among young adults are fashion accessory items, mugs / cups, wine glass sets, alarm clocks, and interior accessories. Exchanging birthday presents has become very common among middle and high school students. Especially popular of late have been relatively inexpensive imported stationery sets that sell for around yen 1,000.3. 2.5 Corporate Gifts a. Corporate Gift-Giving Occasions The purpose of corporate gifts is to create harmonious public relationships and to facilitate business activities.

Accordingly, businesses select their gifts even more carefully and stringently than do individuals with their personal gifts, with an eye toward the funds they must invest and the benefits they hope to receive. Table 2-5 lists the categories of corporate gifts by gift-giving organizational units. Table 1.6 Categories of Corporate Gifts Source: JETRO 3.2. 6 SP Gifts Distribution systems in Japan are undergoing a time of significant change, as deregulation produces more unrestricted competition and price slashing continues. Also, the systems of manufacturer-dictated pricing and interlocking business affiliations are breaking down, rebating is being abolished, and open pricing practices are taking hold.

The power to set prices is shifting from manufacturers to distributors, and sales promotion strategies are relying less on traditional mass-media advertising and rebates and more on sales promotions that are directly linked to in-store sales. The following section examines the categories of SP (sales promotion) gifts and discusses the products commonly used as gift items. a. Novelty Gifts Novelty gifts are small gifts that are given free of charge to all, whether they make purchases or not, in order to build customer good will. Most often they are very inexpensive items (typically under yen 100) that look more expensive than they are, items with abundant space for inserting logos, symbols, or brand names, and items with high impact as advertising media. Products widely used as novelty gifts include writing instruments, tissue paper, household necessities such as detergent, napkins, and wrapping material, and textile products such as towels and handkerchiefs. b. Premium Gifts Items chosen as premium gifts are those with product sales promotion potential.

The characteristics required of premium gifts are trendiest and originality, a sound concept and design, practicality, some unusual or unexpected trait that captures people's attention, emotional impact, and public renown or popularity. Premium gifts may be subdivided into the categories of blanket premiums and exclusive prizes. Blanket premiums: Premiums the purchaser is certain to receive if the product is purchased, the purpose of which is to increase the amount of purchases, as well as to inculcate the habit of making multiple unit purchases and repeat purchases. Exclusive Prizes: Prizes the purchaser becomes receivers as a result of making the purchase, including direct-type prizes (in-pack, on-pack, or near-pack) the purchaser can obtain on the spot, as well as mail-in prizes that required the purchaser to mail a seal or some item affixed to the product. c. Non-Exclusive Prize Premiums Non-exclusive prize premiums are prizes for which everyone is eligible, regardless of whether a purchase is made or not. Candidates are sought through newspapers and other mass-media advertising.

The purpose of these prize promotions is to enhance corporate and brand name awareness and good will. d. Incentive Gifts Incentive gifts are given to distributors or sales representatives in order to build sales motivation. By holding sales contests covering a certain period of time and offering bonuses, merchandise prizes, or free trips, the giver expects to inspire extra sales efforts. With shrinking differentials in product appeal, with sales ability playing a more critical role in determining sales success, and with sales dependent on support at the distribution stage, companies can gain preferential sales support over those of competitors by offering such inventive gifts. The Law Against Unjustifiable Premiums and Misleading Representations regulates the manner in which premiums are offered and the maximum value of premiums to prevent improper customer solicitation. This law was amended effective April 1996 to substantially relax the level of regulation imposed, such as raising the maximum value of non-exclusive prizes from yen 1 million to yen 10 million.

This amendment makes it possible to conduct promotional campaigns with far greater impact than in the past. These loosened regulatory provisions are expected to broaden the scope of sales promotion and enlarge the range of products used as premium goods in the future, and they are expected to expand business opportunities for imported products. 4. Conclusions 4.1 Overall Market Prospects Some hopeful signs for the gift industry as a whole began to appear in early 1996, as we started to see some movement in higher-priced gift merchandise priced at yen 30,000 and higher. In the future we expect more instances of imports and licensed merchandise from Europe and the United States being used as corporate gifts for key customers and clients. When a company gives a gift to key customer, and the customer uses the gift for an extended period of time, which creates a favorable Image for the corporate gift-giver.

There are abundant possibilities in the future for gift wholesalers to bypass importers and import directly from abroad, and for Asians makers to join hands with Japanese makers to develop gift products designed for the demands of the Japanese market. As things are today, finished gift item is imported in such small lots that European and American manufacturers are unwilling to make design changes.