Read the opening case, Vellus Pet Cosmetics and answer the following questions:
(a) Why is it important for firms such as Vellus to seek international markets?
(b) Vellus could enter major overseas markets via a joint venture with pet cosmetic firms in those or by establishing a wholly owned subsidiary. Justify the most appropriate mode of entry Vellus. (Hint: consider the advantages and disadvantage of both modes of entry and highlight any applicable theory.)
(c) How important do you think the assistance provided by the Department of Commerce has been for Vellus Products' future?
(d) Firms such as Vellus benefit significantly from exporting, but so do regions and countries. In what ways can a region or a country benefit when firms within them begin exporting?
VELLUS PET COSMETICS
Vellus Products was founded in 1991 in Columbus, Ohio, by Sharon Doherty to sell shampoo for pets. Doherty's original insight was that shampoos for people don't work well on pets because the skin of most animals is more sensitive than that of humans and becomes easily irritated. Because of her experience showing dogs, she knew that most existing pet shampoo left dog hair unmanageable and lacking the glamour needed for a dog show. Working with her nephew, who had a PhD in chemistry, Doherty developed salon-type formulas specially suited to dogs and cats.
Doherty booked Vellu's first export sales in 1993 when a Taiwanese businessman, who had bought the shampoo in the USA, ordered $25,000 worth of product, which he wanted to sell at dog shows in Taiwan. Before long, Doherty was getting calls from people around the world-most of whom had heard about Vellu's products in dog shows-and a thriving export business was born.
As the volume of enquiries built up, Doherty realised she needed to gain a better understanding of foreign markets, export potential and financing options, so she contacted the US Department of Commerce's Commercial Service office in Columbus. ‘As business has grown, I have gone from ordering country profiles to requesting customised exporting and financing strategies tailored to maximise export potential', she says. By 2013, Vellus was exporting to 33 nations, although the bulk of the firm's international business operates through distributors in Sweden, Finland, Britain, France, Germany, Australia, New Zealand, Canada and Iceland, where the products are marketed at pet shows, exhibitions and via the internet. The company has registered its trademark in 15 European countries, and international sales account for more than half the firm's total. ‘I credit the Commercial Service for helping me to expand my exports, as it would have been much more difficult on my own', Doherty says.
In 2010, Vellus was the recipient of the prestigious US Department of Commerce US Commercial Service ‘Export Achievement Certificate' for accomplishments in the global marketplace. Reflecting on her international success, Doherty has some advice for others who might want to go down the same road. First, she says, know how you are dealing with. Relationships are important to successful exporting. Doherty says she gives advice and guidance to her distributors, sharing her knowledge and helping them to be successful. Second, having being duped by a man who falsely claimed he knew the pet market, she advocates doing background checks on potential business partners. ‘Gather as much information as you can' she says. ‘Don't make any assumptions; the wrong choice can cost your business valuable time and money'. Third, Doherty believes it is important to learn the local culture. Vellus products are adapted to best suit different grooming techniques in different countries, something she believes has helped to make the company more successful. Finally, Doherty says, enjoy the ride! ‘I love exporting because it has enabled me to meet so many people from other cultures.