The market expansion opportunities for a European manufacturing company in a foreign European country: the case of an Italian air conditioning company, RHOSS S.p.A and the market opportunities in the UK

MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
VI
ANALYSING THE RESOURCES OF THE COMPANY: CHAPTER 2 – THE CASE STUDY 
OF RHOSS S.p.A.  
In this chapter, the resources of RHOSS are analysed following the theoretical guides highlighted in 
the first chapter. Core competencies, distinctive capabilities, vision, mission statement and strategy 
objectives of this Italian firm, are all disclose in this part of the paper. Michael Porter�s five forces 
analyses are then organised to study the interactions between the company and its natural 
environment: the Italian market. This particular study is meant to give the basis for a comparison 
with the SWOT analysis that later in the paper will examine the potentials interactions of the 
company with the British market.  
 
THE POTENTIAL BUSINESS ARENA: CHAPTER 3 - THE UK MARKET OF AIR 
CONDITIONERS  
The chapter is based on the theoretical framework discussed in the first part of the paper: marketing 
intelligence as preparation for export planning. Marketing intelligence is meant to gather and 
elaborate those information that are vital for a particular company in a particular moment. 
Therefore, the study of the British market has been conducted keeping in mind the resources of an 
Italian medium size company that has to face a completely different reality from the usual business 
environment. Market segmentation is the very first act. Climate, distribution of wealth, population 
and typology of housing are all the analytical elements that helped to define the South East of the 
UK as the potetialy most profitable market segment for residential air conditioners. However, 
segmenting and targeting potential customers is not enough if the levels of demand are not strong. 
To study the demand of residential air conditioners, two surveys have been put into action: a 
potential customer survey and an expert survey.  The results of the surveys show a very low 
potential for residential air conditioning in the segment chosen (the South East) and the following, 
competitor�s analysis highlights an extremely competitive environment dominated by big 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
VII
multinationals and few aggressive local companies. The SWOT analysis of RHOSS with an 
orientation towards the exports to the UK, show a large number of threats and weaknesses. 
 
CONCLUSIONS 
�Can a medium sized European company profitably enter the British market of residential air 
conditioning? To this research statement, on the basis of the case study of an Italian company, our 
answer is negative. The reasons have to be seen both in the nature of the company and in the reality 
of the British environment. The company is too small to compete on large scale against the 
multinationals, UK market leaders; furthermore, the mild climate and the high costs of installing 
and running an air conditioner, at the present stage of the market, do not leave much hope of a mass 
scale growth. For residential air conditioner, in the UK, simply there is no demand. However, the 
research highlighted the opportunities offered by industrial/business air conditioning. In fact, all 
new offices are equipped with air conditioners and the trend of growing economy and working 
population in the South East (and not only), could offer good possibilities to an aggressive SME 
that wants to enter the British market of non-residential air conditioning. 
 
 
 
 
 
 
 
 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
1
INTRODUCTION 
The aim of this dissertation is to understand whether an Italian medium sized manufacturing 
company would have profitable market opportunities exporting to the UK. The study focuses on a 
particular production that is residential air conditioner. The research statement is base on the case 
study of an Italian company, RHOSS S.p.A. and in general can be summarised as follows: �can a 
medium sized European company profitably enter the British market of residential air 
conditioning?�. To find an answer, we developed an analytical research based on the theory that 
strategic thinking is based on strategic analyses. The first chapter explains the theory that stays 
behind the business environment analysis and resources analysis of a company, supported by the 
explanation of the existing links with strategic marketing. 
The second chapter is entirely dedicated to the actual study of the company: the environment 
in which operates, its peculiarities, its products and its existing marketing strategies. The third and 
last chapter is concentrated on the study of the British existing market of residential air conditioners 
and on the study of the possible market segment, the South East, that could offer better 
opportunities for residential air conditioners. Besides, the chapter describes the results of two 
surveys in which potential customers and experts of the market explain their opinions about 
residential air conditioning in the South East. The results of the survey and the information on the 
market are linked to the resources of RHOSS S.p.A. through the SWOT analyses. 
Eventually, the conclusions can only give a negative answer to the research statement. At 
this stage, for a European SME, it is almost impossible to enter profitably the UK market of 
residential air conditioning since the demand is virtually non-existent. However, the research has 
highlighted the opportunities offered by business air conditioning that could possibly be the first 
step to enter the British air-conditioning market. 
 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
2
CHAPTER 1 
STRATEGIC PLANNING AND EXPORT MANAGEMENT:  
THE THEORETICAL FRAMEWORK 
 
1.1 Strategy, the foundations 
 
Strategy in itself, refers to �the pattern or plan that integrates an organization�s major goals, 
policies and action sequences into a cohesive whole. A well-formulated strategy helps to marshal 
and allocate an organization�s resources into a unique and viable posture based on its relative 
internal competencies and shortcomings, anticipated changes in the environment, and contingent 
moves by intelligent opponents
1
�. It has to be said that strategies exists at many different levels in 
any large organization. In the case of businesses, strategies are numerous and can be found at 
different levels: from corporate levels to department levels within divisions. It is important to bear 
in mind that �strategies� are not simply tactics since they have a wide scale of action and are based 
on a continuous implementation, which relies on a permanent feedback from the �place of action� to 
the �place of thinking�. Tactics are temporary or, in Quinn�s
2
 words: �they are the short-duration, 
adaptive, action-interaction realignments that opposing forces use to accomplish limited goals after 
their initial contact�; instead strategy defines �a continuing basis for ordering these adaptations 
toward more broadly conceived purposes�. Strategies can then be considered either as an elaborated 
set of intents that come from a priori statements to guide action, or as the results of actual decision 
behaviour. Most of the times, due to the complexity of the organizations, it is extremely difficult to 
find a complete a priori statement of a total strategy that is actually followed. Nevertheless, the 
                                                 
1
 Mintzberg, H. and Quinn, J.B. (1998), The Strategy Process, London: Prentice Hall, page 3. 
2
 Ibidem, page 5. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
3
existence of strategy can be always observed from �the actual emerging pattern of the enterprise�s 
operant goals, policies and major programs
3
�. 
 
Strategy can then assume different connotations according to the specific level in which it is 
taken into consideration
4
. It could be: 
™ functional strategy, when relating to individual business functions 
such as, for example finance or HR; 
™ business strategy, when relating to individual business units; 
™ global strategy, when relating to competition in global market; 
™ corporate strategy when relating to corporate whole. 
 
Corporate strategy contains in itself all the typical elements of the above-mentioned 
connotations of strategy. In fact, according to K. R. Andrews
5
, �corporate strategy is the pattern of 
decisions in a company that determines and reveals its objectives, purposes, or goals [that can be 
seen as an expression of competition in global market], and defines the range of business the 
company is to pursue [business strategy], the kind of economic and human organization it is or 
intends to be [functional strategy], and the nature of the economic and non-economic contribution it 
intends to make to its shareholders, employees, customers, and communities...�.  
The definition of strategy does not meet a univocal version amongst businessmen and 
academics; consequently on corporate strategy there is not a general agreement on what are its 
purposes and contents. Nevertheless, it is generally agreed that the strategic decisions, that 
contribute to the �pattern� (then to corporate strategy), are effective over long periods of time and 
affect the company in many different ways, focusing and committing a significant portion of the 
                                                 
3
 Ibidem. 
4
 Lawton, T. (1999 b), �Defining and Justifying Corporate Governance�, Course Handout.  
5
 Mintzberg, op.cit., page 47.  
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
4
resources of the company. The result of a series of strategic decisions is the definition of the central 
character and image of a company, its individuality in the eyes of its members and various publics, 
and the position it will occupy in its market. Of this �pattern of decision�, in an established 
corporation there may be some aspects that are unchanging over long periods of time; examples 
could be the commitment to high technology, quality or simply good labour relations. However, 
there are even aspects that need to be changed according to the contingency such as: product lines, 
merchandising, manufacturing process etc. The importance of the �pattern� can be then articulated 
in the idea that �interdependence of purposes, policies and organized action [are] crucial to the 
particularity of an individual strategy and its opportunity to identify competitive advantage
6
�.  
According to Lynch
7
, there are three core areas of corporate strategy:  
1. Strategic Analyses: involves the study of the organization, its objectives and 
mission. More specifically, it refers to the examination that stakeholders, and in 
particular senior managers, conduct on the relation between the company and its 
environment, as well as analysing its resources. 
2. Strategy Development: this area focuses on the strategic options that have to be 
developed and subsequently selected to allow the company to be successful. 
The strategy has to be built on the peculiar skills of the organization and on the 
relations with the outside environment (suppliers, customers, distributors and 
government); for many organizations, this means, that they have to develop 
advantages over competitors that are sustainable over time. 
3. Strategy Implementation: The options that have been selected, need to be 
developed, surmounting all the difficulties connected with motivation, power 
relationships, government negotiations etc. 
                                                 
6
 Ibidem.  
7
 Lynch, R. (1997), Corporate Strategy, Maidstone: Pitman Publishing, page 17. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
5
Generally speaking, it has to be said that these three core areas are not strictly sequential but 
they are mutually linked together; however, for reasons of clarity, in literature, they are studied 
separately. As mentioned before, amongst commentators there is a fundamental disagreement over 
the way that corporate strategy may be developed; because of the complexity of the subject, in the 
past there have been arisen differing views on the content, process and nature of corporate strategy. 
However, for the present, the overall distinctions can be summarized in two main approaches: the 
prescriptive approach and the emergent approach. The former expresses the idea that corporate 
strategy is essentially a linear and rational process that basically goes from a certain starting 
situation and then develops new strategies for the future. The latter, expresses the position of those 
commentators that claim that corporate strategy emerges �adapting to human needs and continuing 
to develop over time
8
�. Therefore, this approach sees corporate strategy as a strategy whose final 
objective is not clear and whose elements are developed and adapted during the course of the 
process. Both of them have a way to link the above-mentioned three core areas.  
The prescriptive approach takes the view that the three areas are linked together 
sequentially; therefore it is possible to use the analysis area to develop the strategy that is then 
implemented. On the other hand, the emergent approach, takes the view that the three core areas are 
fundamentally inter-related. Nevertheless, this approach regards the analysis area as being 
distinctive and in advance of the other two elements that are linked together, because the �trial and 
error� method does not distinguish between the strategy development and implementation phases. 
                                                 
8
 Ibidem. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
6
 
Fig. 1.1 Prescriptive and emergent approaches to the three core elements
9
 (Source, Lynch, 1997) 
a) The prescriptive model 
 
 
 
b) The emergent model 
 
 
 
 
 
 
As we can see from figure 1.1, both of the main approaches to the study of corporate 
governance focus their attention primarily on the starting point of the process that is the strategic 
analysis
10
. The analytical phase of the above seen approaches can be divided in three main parts: 
• Analysis of the Environment � examining the world outside the organization (economic, social, 
political, industrial, etc.); 
• Identification of Vision, Mission and Objectives � developing and reviewing the direction of 
strategy and the more specific objectives; 
• Analysis of Resources � exploring the skills and resources available within the organization. 
                                                 
9
 The schemes are simplified for clarity reasons; in reality both models have more then one feedback between the end 
and the beginning of the process.  
10
 To be extremely precise, it has to be said that in some occasions, the first core area, the strategic analysis, could not 
be the prominent. For example, it could happen that a small company, started with nothing (and then lacking of the first 
core area) is, instead, capable of a  set of good business ideas and skills (the second core area). Therefore, imposing a 
strict artificial sequence on this process would not reflect reality. However, the doctrine, assumes, with a good margin 
of certainty, that this situation would be the exception rather then the rule. 
Strategic Analysis 
 
• Environment 
• Resources 
• Vision, mission and 
objectives 
 
 
Strategy 
Implementation 
Strategic Development 
 
• Options 
• Rational selection 
• Finding strategic route 
forward 
• Considering strategy, 
structure and style 
Strategic Analysis 
 
• Environment 
• Resources 
• Vision, mission and 
objectives 
Strategic Development 
 
• Options 
• Rational selection 
• Finding strategic route 
forward 
• Considering strategy, 
structure and style 
 
Strategy 
Implementation 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
7
1.1.1 Strategic Planning 
The second and consequent step of strategic analyses is strategic development that is often 
defined by marketers as strategic planning
11
. It is a fact that all companies need strategies to meet 
changing markets. Each company must find the way that makes most sense given its situation, 
opportunities, objectives and resources. In this field marketing plays an important role providing 
information and other inputs that help defining the strategic plan. Strategic planning is also the first 
stage of marketing planning and defines marketing�s role in the organisation.  According to Philip 
Kotler
12
, planning encourages systematic thinking and forces the company to sharpen its objectives 
and policies, leads to better coordination of company efforts and provides clearer performance 
standards for control. The author also claims that the argument that planning is less useful in fast-
changing environments makes little sense. In fact, the opposite is true: �sound planning helps the 
company to anticipate and respond quickly to environmental changes and to better prepare for 
sudden developments � the best performing companies plan, but plan in a way that does not 
suppress entrepreneurship�
13
.  
Thus, strategic planning involves adapting the firm to take advantage of opportunities in a 
constantly changing environment. It is the process of developing and maintaining a strategic fit 
between the organization�s goals and capabilities and its changing marketing opportunities. From 
this perspective we can see the position of RHOSS and the possible opportunities offered by a 
completely new market, the UK, to a company that traditionally has always dealt mainly with the 
Italian market. However, the aim of this dissertation is not to realize a strategic plan but to define 
the bases for developing a strategic plan. The indispensable base is, without any doubt, information. 
As a matter of fact, it is generally agreed that a company, after having stated a mission and 
objectives, has to gather information on customers, competitors and more in general of the 
                                                 
11
 Kotler, P., Armstrong, G., Saunders, J. and Wong, V. (2000), �Principles of Marketing�, Hemel Hempstead: Prentice 
Hall, pag.70. 
12
 Ibidem, pag.71. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
8
environment in which the firm competes. Next the management decides what portfolio of 
businesses and products are best for the company and how much support to give each one. Then, 
each business and product unit develops detailed marketing and other functional plans to support 
the company wide plan. For instance, IRSAP S.p.A. develops an overall strategic plan at its 
headquarters in Rovigo, below that, each strategic group, such as heating systems, industrial air 
conditioning, residential air conditioning etc. develops subordinate strategic plans. These feed into 
the strategic plan�s national operations. At each level, marketing and other functional plans will 
exist. Thus, within each business unit more detailed planning takes place; the main functional 
departments in each unit, marketing, finance, accounting, buying, manufacturing, personnel and 
others, have to work together to accomplish strategic objectives. However, for the purposes of this 
paper, it is worthy concentrating in particular on the implications of marketing in defining a 
business plan. 
Generally speaking, there is much overlap between overall company strategy and marketing 
strategy. Marketing looks at consumer needs and the company�s ability to satisfy them; these 
factors guide the company mission and objectives. It is clear that most of strategy planning deals 
with marketing variables such as market share, market development and market growth and 
sometimes it is quite hard to separate strategic planning from marketing planning. As a matter of 
fact, some companies refer to their strategic planning as �strategic marketing planning�. It is 
generally agreed that marketing plays a key role in the company�s strategic planning in several 
ways. Firstly it provides a guiding philosophy giving the directions towards serving the needs of 
important consumer groups. Secondly, marketing provides inputs to strategic planners by helping to 
identify attractive market opportunities and by assessing the firm�s potential to take advantage of 
them. Thirdly, within individual business units, marketing designs strategies for reaching the unit�s 
                                                                                                                                                                  
13
 Ibidem. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
9
objectives. In conclusion marketing helps to assess each business unit�s potential, set objectives for 
it and then helps it to achieve those objectives.   
Usually, the strategic plan includes several components: the mission, the strategic audit, 
SWOT analyses, portfolio analysis, objectives and strategies
14
: all of these feed from and feed into 
marketing plans.  
The mission, states the purpose of the company: a clear mission statement has been 
associated to an �invisible hand� that guides people in the organization so that they can work 
independently and yet collectively towards overall organizational goals. However, company�s 
mission needs to be turned into strategic objectives to guide management, for this reason it has to be 
formulated in a way that leaves space for a proactive action to each business unit. Entering new 
foreign markets to increase sales is the typical objective that follows a general mission statement. In 
other words, the mission states the philosophy and direction of a company whereas the strategic 
objectives are measurable goals.  
The strategic audit covers the gathering of the vital information that a company needs in its 
attempt to formulate a plan. These information are the intelligence used to build the detailed 
objectives and strategy of a business; this intelligence has two parts: the external and internal audit. 
The external audit or marketing environment audit
15
, examines the macro environment and task 
environment of a company, while the internal audit examines all aspects of the company. The latter, 
includes the primary activities that follow the flow of goods or services through the organization, 
included in Michael Porter�s value chain
16
: inbound logistics, operations, outbound logistics, sales 
and marketing, and after-sales services. Moreover, it extends to the support activities on which the 
primary activities depend: procurement, technology development, human resource management and 
the infrastructure of the firm. These go beyond traditional marketing activities but marketing 
                                                 
14
 Ibidem, page 73. 
15
 Ibidem, page 78. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
10
strategy depends on all of them. Internal audit also includes financial statements, the balance sheet 
and the operating statement. The operating statement (also called profit-and-loss statement or 
income statement) is the more important of the two for marketing information. In fact, it shows 
company sales, cost of goods sold and expenses during a specified time period. By comparing the 
operating statement from one time period to the next, the firm can spot favourable or unfavourable 
trends and take appropriate action.   
The SWOT analysis, designs the critical strengths, weaknesses, opportunities and threats 
from the strategic audit. This analysis distils these data to show the critical items from the internal 
and external audit; the number of items is not large for forceful communications and they show 
where a business should focus its attention. In the case of a company that wants to explore its 
opportunities in a new market, the SWOT analysis is a good instrument to make managers 
anticipate important developments that can have an impact on the firm. It is important to focus only 
on the main features of a company and a market, those related to critical success factor; the 
strengths or weaknesses are relative not absolute.  
The business portfolio is the collection of businesses and products that make up the 
company. It is a link between the overall strategy of a company and those of its parts; it is clear then 
that the best portfolio is the one that fits the company�s strengths and weaknesses to opportunities in 
the environment. Management has to valuate the current business portfolio of the company and 
decide which businesses should receive more, less or no investment and implement growth 
strategies for adding new products or businesses to the portfolio. The very first thing to do is to 
identify the key businesses making up the company: these are strategic business units (SBU). An 
SBU is a unit of the firm with a different mission and objectives that can be planned independently 
from other company businesses. We will see, later in the paper, that this is the case of RHOSS air 
                                                                                                                                                                  
16
 Porter, M. E. (1980), Competitive Advantage: Creating and Sustaining Competitive Performance, New York: Free 
Press. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
11
conditioners, SBU of IRSAP. The next step in business portfolio analysis calls for management to 
assess the attractiveness of its various SBUs and decide how much support each deserves.  
 The next step, after the analysis we have seen so far, is the actual development of strategic 
decisions. Philip Kotler
17
 summarises �the possible ways of achieving sales and profit growth� with 
the concept of strategic focus. The strategic focus identifies two routes to profitability (fig. 1.2): 
productivity and volume growth and companies can direct their strategies essentially following the 
two routes.   
 
 
Figure 1.2 Growth strategy: strategic focus 
 
(Kotler, et alia (2000), �Principles of Marketing�, Hemel Hempstead: Prentice Hall) 
                                                 
17
 Kotler et alia, op.cit, page 88. 
MA European Business - Dissertation in European Business Strategy 10/09/2000  
Fabrizio Biscotti   Dr. Steve McGuire 
 
12
 
1.1.2 The Marketing Process 
The strategic plan defines the company�s overall mission and objectives. Marketing plays a 
role in helping to accomplish the overall strategic objectives of each business unit. Figure 1.3 gives 
the general picture of the factors that influence marketing strategy: target consumers are the centre. 
The company, through market analysis, planning (followed by implementation and control of the 
business plan) identifies the total market, divides it into smaller segments, selects the most 
promising segments and focuses on serving them.