Transmittal Letter December 4, 2010

Tumi Luggage in Brazil: A Feasibility Study
Tumi Luggage is a very popular , high end, luxurious product. With its success in the US, in some parts of Europe and Asia, it is with best interest to research the feasibility in expanding its operations i nto the beautiful and lucrative country of Brazil.

Feasibility and Marketing Plan: Tumi Luggage in Brazil
Dr. Judy Strauss

Associate Professor of Marketing University of Nevada, Reno Reno, Nevada 89557
Dear Dr. Strauss: We are pleased to present you with Bulletproof’s Feasibility and Marketing Plan for Tumi Luggage in the beautiful and lucrative country of Brazil. This plan will assist you in gaining valuable insight into the opportunity available for Tumi Luggage in Brazil. This plan is the result of an extensive research utilizing both primary and secondary findings. The suggestions proposed are carefully correlated with the market opportunities that are currently present in Brazil. The plan has been constructed in three different sections: (1) analysis of the potential market in Brazil, (2) the technical, financial and organizational elements that should be considered when entering the Brazilian market and (3) a marketing plan, if implemented, could create an overall increase in brand recognition, Tumi’s profitability and overall global market share. It is with confidence that the recommendations contained in this plan will cultivate excellent opportunities for Tumi Luggage, and the Brazilian market. We would like to give you our sincerest gratitude for allowing us to conduct this feasibility study and create suggestions for the company. It is our intention to allow the company to not only meet objectives in the country but also provide them the opportunity to realize profitability as well. Please contact us at bulletproof456@googlegroups.com at your convenience for any further discussion concerning the contents of this marketing proposal Sincerely, Jason Aguilar Jessika Archuleta Brenda Ford Keith Merson Rachel Sa-onoy Edita Sirusaite Debbie Vaughn Qi Kathy Zhou __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________

Executive Summary

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
Bulletproof has produced a feasibility study to explore if introducing Tumi luxury luggage into the Brazilian marketplace makes good business sense and will be profitable. Men and women who are business professionals, athletes, and celebrities are Tumi’s core customer with a market penetration rate of 2.4%. They typically earn more than $75,000 a year and have plenty of disposable income. They are males and females 30-45 years old and represent 21% of the total Brazilian population or 39,839,130. They are well-educated, frequent travelers of the world, ambitious, always of the go, and successful in both career and family life. They have an inclination to purchase the best, most luxurious, and most fashionable products including luggage and accessories. This group is attractive as a target market because they have the money and reasons to purchase Tumi luggage. One of Tumi’s most well known competitors is Samsonite. They are the world's leading manufacturer of luggage. The Brazilian affiliate had sales revenue of $8.2 million. Tumi is competing with a domestic luggage manufacturer and retailer, Primicia S.A. Industria e Comercio. Primicia is 100% Brazilian. In 2009, they had revenue from sales of $825 million. Hartmann is another competitor. They ranked 6th in the market for travel goods with shares of 2.3% from 2007 to 2009, dropping from 2.5% in 2006 and 2.6% in 2005. In addition to Tumi’s previously stated competitors, it is imperative to be aware of another competitor. Israco is the third largest competitor in Brazil, and like Primicia, carries the advantage of being a Brazilian based company. There are many opportunities in the industry that Tumi can take advantage of. The demand for goods such as luggage is increasing in Brazil. Additionally, luggage is quickly becoming not just a functional piece, but a fashion statement as well. Brazil is experiencing high air transportation growth and Tumi’s target market buyers travel frequently. Brazil is currently focusing its efforts on continuing economic growth is open to and encourages foreign investments. Although the indications for introducing Tumi luggage in Brazil are positive, there are risks to be considered. There is the risk the government may become unstable or be overthrown by hostile factions exposing Tumi to the possibility of expropriation of its assets. Another risk facing Tumi is the uncertainty of the market because the Brazilian government can raise tariffs to as high as the bound tariff rates of 31.4%. Bulletproof has set objectives for Tumi Luggage in the Brazilian market. The top three are to achieve $6 million in sales by the end of the year with initial production of 10,000 bags during that period, increase 5% in sales per year within the first three years, and reach profitability by the end of year two. Its strategy is to position itself as the sophisticated brand for professionals, athletes, and celebrities, and as the best choice in high-end travel and business accessories, which provides stylish, exceptional quality/durability, and highly functional personalized luggage products. This appeals to the status-conscious target market. After entering the Brazilian market, Tumi can compare their results to the competition in terms of actual sales or achieving the 2.4% adoption rate over a five year period.

General Information

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
República Federativa do Brasil, or Brazil as it is more commonly known as, is an increasingly attractive market for foreign investors. It is loccated in South America and it is in fact the largest country in the continent. Brazil’s borders touch Venezuela, Guyana, Suriname, French Guiana, Columbia, Peru, Bolivia, Uruguay, Paraguay and Argentina. Brazil’s topography is remarkably interesting as it includes hills, mountains, highlands, and scrublands. The northwestern part is predominantly rolling terrains broken by low rounded hills; while the southern area consists of rugged uplands. Brazil’s climate is as diverse as its topography. The climate comprises of a wide range, but most of the country is tropical. The climatic conditions vary from rainforests in the northern region, semi-arid deserts in the northeast and tropical savannas in Central Brazil. The population in Brazil is approximately 166 million people, a fact making it the fifth most populous nation in the world. Brazil is highly urbanized with a “metropolitan area of over 22 million people” (Victor 2010). The official language is Portuguese; which is spoken by majority of the population. The Brazilian economy is the largest economy in Latin America and the ninth largest in the world, making Brazil very noteworthy to foreign investors. It is one of the fastest growing major economies due to economic reforms. It has a “gross national product of $800 billion US Dollars with a purchasing power parity of $1.04 trillion and growth rate of 3% annually” (Victor, 2010). Brazil is a founding member of the United Nations (UN), and a member of: the G20, the Community for Portuguese Language Countries (CPLP), the Latin Union, the Organization of Ibero-American States, Mercosul, the Union of South American Nations, and is one of the BRIC countries (Wikipedia 2010). The history of Brazil originated in 1500 when Pedro Alvares Cabral claimed Brazil for Portugal. Brazil was a colony of Portugal until 1815 when it became the Kingdom of Brazil and united with the Kingdoms of Portugal and Alvares to become The United Kingdom of Portugal, Brazil, and Alvares. Brazil declared its independence in 1822 and then declared itself as a Republic in 1889. (Infoplease, 2010). Brazil now operates as Democratic government.

Consumer Target Market and Potential
Since the average Tumi Luggage is priced at $500, it is wise to consider that the target market for Tumi product should be the upper class, which comprises 10% of the population. Only 2.4% of Brazilian households have an annual disposable income of over $75,000. These households are mainly concentrated in the cities of Sao Paulo and Rio de Janeiro and although they represent a fraction of the population, their numbers surpass 1.2 million households and are easily convinced of purchasing products given their extraordinarily high income. Tumi presents its brand as a luxurious item for professionals, athletes, and frequent travelers. This specific market will be targeted in Brazil which represents the age group of 30-45, where an average of 14% of the population earns more than $100,000 a year (Euromonitor International, 2010).

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Feasibility and Marketing Plan: Tumi Luggage in Brazil

According to Euromonitor’s research on consumer buying trends in Brazil, luggage is no longer a functional product which people replace every 10-15 years. Consumers in Brazil are beginning to look at luggage as fashion objects and are even buying luggage items to match their clothing. Today, fashion luggage is considered to be a status symbol. Luggage, travel, and sports bags are the two largest sectors of the travel goods market. Brazilian consumer preferences are facilitated mobility, ergonomic designs and multi-functional products that can be rolled or carried, used for travel and office, computer bags and two-in-one products. Consumers are increasingly opting for vertical uprights instead of suitcases. While hard briefcases are no longer in style, leather and nylon portfolios are very popular and are expected to show significant market growth. Demand for convenience and comfort will continue. This is a great opportunity for Tumi to bring in its high quality, featherweight, quiet, smooth and reliable ride suitcases (Euromonitor International, 2010). Sales within the travel goods sector are driven, as in other sectors of personal goods, by new product launches. Brazilian consumers are attracted to new products launches; therefore, prior years’ models soon go out of fashion. Tumi would be a great novelty and new brand for the innovative, luxury hungry customers in the target market because Tumi has new luggage collections every year.

Market Penetration
Brazil, having the second fastest growing economy in Latin America, is similar to The United States with respect to travel, advertising, and having a “melting-pot” culture (Tema North, 2010). With all the diversity in Brazil, men and women age 30-45 who are business professionals, athletes, and celebrities are Tumi’s core customer with a market penetration rate of 2.4%. The breakdown of males and females age 30-45 is roughly 21% or 39,839,130 of the total Brazilian population, which is 189,953,000 (Wikipedia, 2009). The market penetration rate is at 2.4% which reflects 956,139 individuals or families adopting Tumi Luggage within the first five years of introduction. 4

Feasibility and Marketing Plan: Tumi Luggage in Brazil
The main cities Tumi will be marketing are Sao Paulo and Rio de Janeiro. These two cities make up roughly about 11% of the total population. With much of the target market living in these two cities, penetration of the luggage market will be relatively easy. As the map shows, the most densely populates cities are on the North East and South East coast lines.

With Tumi being such an established company and a low penetration rate for adoption, Brazilians will be able to adopt this luggage lifestyle with relative ease. Whichever the case, it is important to remember to stay on the conservative side until experience and results are reached.

Industry and Competition
Samsonite One of Tumi’s most well known competitors is Samsonite. They are the world's leading manufacturer of luggage. They have grown into a network of 30 manufacturing and distribution centers employing 10,000 individuals throughout the world. Samsonite products are sold in more than 100 countries. (Samsonite, 2010). Their revenues from sales in 2009 were approximately $1.1 billion. The Brazilian affiliate had sales revenue of $8.2 million (Samsonite Brasil Ltda, 2010). One of the company’s strengths is its reputation for being extremely durable which came about from a picture of founder Jess Shwayder and four other Shwayder men standing on a piece of plywood atop a Samsonsite hard side suitcase (Samsonite, 2010). It also gained that reputation from consumer confusion identifying a competitor’s ad campaign featuring a gorilla tossing around a piece of luggage as Samsonite. Another of Samsonite’s strengths is its longevity; they began in 1910 in Denver, Colorado and since then have become an international private corporation located in Mansfield, MA (Samsonite, 2010). Samsonite’s ability to manufacture quality products at affordable prices also plays for the company’s favor. Samsonite’s products are luggages ranging from large suitcases to small toiletries bags and briefcases. They make hard side and soft side luggage. 5

Feasibility and Marketing Plan: Tumi Luggage in Brazil
Samsonite’s 20” soft side carryon spinner is priced about $400 but can be purchased on sale for about $200. Tumi’s 20” comparable price is $395-$595. The 25” softside medium spinner is $52O and $270 on sale. Tumi’s 25” is $795. A Samsonite 29”softside large spinner is about $620 and $300 on sale; Tumi’s 28” is $950. Samsonite also sells sets of luggage which includes small, medium, and large size bags with prices as low as $250 (Americanas.com). Samsonite uses several distribution channels which includes online vendors like Americanas.com and Le Postiche as well as department stores. Among them are Lojas Americanas, Lojas Renner and Sears. Samsonite’s promotional efforts include the use of free or reduced shipping, discounts, sales, pricematching, and coupons. Primicia Tumi is competing with a domestic luggage manufacturer and retailer, Primicia S.A. Industria e Comercio. Primicia is 100% Brazilian; they are a non-quoted public company located Sao Paulo, Brazil and employ about 700 people. In 2009, they had revenue from sales of $825 million (Samsonite Brasil Ltda, 2010). Primicia manufactures luggage, small travel bags, and backpacks. They also make a wide variety of luggage for children with well known characters such as Barbie, Pokémon, Mickey Mouse, Tazmanian Devil, and Hot Wheels (Primicia S.A., 2010). Primicia cleverly uses popular characters to promote its products geared for the younger market. In addition to their varied target market, they also use discounts and promotional offers for all of their products. Prices for a small 20” bag are around $90, a medium bag is $130, and a large bag is $170. A set of four bags is usually about $400 total. Luggage and bags for children cost $75 to $200, if trademarks like Barbie and Mickey Mouse are used. Because Primicia is 100% Brazilian, it gives strength to the company. This is because locals can easily identify with the products. Another strength the company has is its reasonable prices, making Primicia’s products available to most of the population. They also use quality materials such as polyester and aluminum. These make their luggage durable as well as lightweight. This is important because they specifically design a large portion of their luggage for young children. Primicia’s tasteful designs make their product very appealing. They know the Brazilian culture; and knowing the Brazilian culture gives Primicia a competitive advantage because they design their products for Brazilian preferences. Primicia uses Le Postiche, one of the largest retail chains, to sell its products. They use other stores such as Lojas Americanas and Lojas Renner. Le Postiche, Lojas Americanas, and Primicia have online websites available. Hartmann Inc. Hartmann is an established American company formed in 1877 which manufactures and sells leather luggage and bags. Starting out providing bags and trunks to the military, it has more recently entered into the luxury luggage market and is now known as providers of premium leather luggage pieces which sell for between $500 and $1,000.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
The Hartmann luggage line was sold in 2007 by its previous owner, Brown-Forman Corp., producer of Jack Daniel’s and Southern Comfort whiskeys to a New York private-equity firm, Clarion Partners LLC (“Brown-Forman Corp.: Sale of Luggage Division to Make Firm Pure Play”). Hartmann sells its luggage within the US at department stores such as Macys and through specialty luggage stores. Internationally, Hartmann has stores in the following countries: Canada, Dominican Republic, Qatar, Saudi Arabia, Singapore and the United Kingdom. Hartmann ranked 6th in the market for travel goods with shares of 2.3% from 2007 to 2009, dropping from 2.5% in 2006 and 2.6% in 2005. The Hartmann brand has held 2.3% market share for travel goods brands for 2007, 2008 and 2009. The brand dropped 0.2% from 2.5% in 2006. Israco In addition to Tumi’s previously stated competitors, Samsonite, Primicia, and Hartmann, it is imperative to be aware of another competitor. Israco is the third largest competitor in Brazil, and like Primicia, carries the advantage of being a Brazilian based company. Israco markets their products under two brands, Lansay and Fico, and is a national company (Israco, 2010). Even though they place third on the biggest competitors list in the region, they carry the insight of the local customs, giving them competitive advantage in the region. Israco’s Mala line (Mala de Bordo) is most comparative to Tumi’s roller luggage offerings. The Mala de Bordo is marketed under the Lansay brand and carries 23 high end bag style variations. Each style offers anywhere from one to four color options. (Israco, 2010). Various size and style options are produced and sold at various price marks to enable consumers of various income levels the ability attain their products. This allows for very strong market segmenting as consumers can easily fit their bag to their personality, because of the variety options available through the Mala line. Along with offering Roller luggage, Israco is diversified into other similar markets such as: laptop cases, wallets, toiletry bags, backpacks, and luggage accessories. They offer travelers items such as neck pillows to make their travel more pleasurable. (Israco, 2010). Being diversified gives them additional revenue streams that can be converted into working capital to expand their presence in the luggage market. The 42X58X27 (cm) hard side roller, the Mala-360º-tam.-M-Ouro-Velho-Lansay, goes for $489 and is warranted for two years (Americanas, 2010). Tumi’s 29X20X12.5” Vapor is the most similar product in comparison to the Mala 360 which is priced at $545 and is warranted for five years (Tumi, 2010). The Lansay roller duffel, SACOLA C/ RODAS LANSAY SÃO PAULO, is priced at $280 and is warranted for three years. (Le Postiche, 2010). This compares with Tumi’s T-Tech Presido that is priced at $395 and is warranted for five years. Israco uses well established luggage distribution channels by offering their products through many nationally known distributors. Distributors like Le Postiche and Americanas have made Israco’s products nationally know within Brazil. Tumi does have comparative products that may be successful within Brazil’s boarders.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil

Cultural and Social Analysis
Language The Federative Republic of Brazil or República Federativa do Brasil as said in Brazilians’ native tongue communicates using one prominent written and spoken language known as Portuguese. However, there are over 180 minority languages; mostly of indiginous tribes. Portuguese is the language of business, homelife, and politics in Brazil and 88.6% of the population over 15 is able to read and write. Brazilian Portuguese differs from dialects spoken in Portugal. Brazil is surrounded by predominantly Spanish-speaking countries resulting in some minor differences in enunciation and elocution (IndexMundi). Some less-common languages spoken in Brazil include: Spanish, German, and Italian. Because Tumi is considering doing business in Brazil, it would be extremely advantageous to include a Portuguese speaking partner to fully comprehend negotiations (Central Intelligence Agency, 2010). Religion Brazil is the world’s largest Roman Catholic populace with 73.6% of the population following this religion. The second largest religious following in Brazil is Protestant Christian at 15.3% (Central Intelligence Agency, 2010). Religion influences life and business because most religious holidays and customs are strictly followed and time can be taken off work to honor them. However, just as in North America, there is freedom of religion as guaranteed in the constitution. As imagined, sanctity of life, dignity, family and community are strong values of this Catholic culture that are integrated into business practices (Wikipedia, 2010). Customs of the People With a population of nearly 200 million (Central Intelligence Agency, 2010), it is somewhat disparaging to put labels of manners , habits, and customs of the people living here. Most of the population lives in densly populated urban areas and a third of the population live below the poverty line. Brazilian food tastes vary from region to region but most cook with foods readily available. Much of their cooking ingredients inlcude: beans, seafood, beef, chocolate, and tropical foods due to copious availability. Brazilians have a national alcoholic beverage, cochaca, which is derived from distilled cane. They also enjoy coffee. Brazilians love to dance and many have mastered styles of dance that originated in Brazil including samba, choro, and sertanejo. Brazilians enjoy recreational activities. There are many fanatics of soccer or futbol and Brazil’s national team is ranked among the world’s best. Martial Arts is another valued sport, and the country even developed several of it’s own styles including Brazillian Jiu-Jitsu. Car racing is another popular acivity, and the Brazilian team won the Formula One eight times. Personal appearance is important to many Brazilians and those who can afford it take pride in appearance and hygiene. Although the people of Brazil value their faith, drugs are a rampant part of their society. Unfortunately, Brazil is the second largest consumer of cocaine. (Kwintessential, 2010). Core Values Core values in Brazil include community, pride in work and appearance, and patient attitudes. Brazil is ranked fifth worldwide in the number of internet users, making online business ventures openly available to foreign producers. However, in business negotiations Brazilians prefer face to 8

Feasibility and Marketing Plan: Tumi Luggage in Brazil face communication and take their time when it comes to making important decisions. Brazil uses a polychronic schedule. They value personal relationships and normally only do business with those known and trusted. Brazilian businessmen prefer to deal with individuals rather than large organizations and hold the individual accountable (Victor, 2010). (Kwintessential, 2010). High Context Culture Brazil is considered to be a high-context culture. In a high-context culture, communication is highly dependent on non-verbal aspects of communication. How something is said and who is saying it becomes part of the message. This type of communication style indicates that Brazilians focus on maintaining personal relationships based on trust. Currently, Tumi has corporate headquarters in the United States, the United Kingdom, Deutschland, and Japan. The United States and Deutschland are both considered to be low-context cultures, while the United Kingdom and Japan are considered to be high-context cultures. Therefore, Tumi already understands the communication styles of the Brazilian people. Many high-context culture characteristics are identified in the Geert Hofsted Dimensions including Uncertainty Avoidance, Individualism, Power Distance, Masculinity, and Long Term Orientation. Uncertainty Avoidance (UAI) ranks highest in Geert Hofstede Dimensions at 76. This indicates that the society is not accepting of change, has a low tolerance for uncertainty, and avoids risk taking. They prefer doing business with people they know to avoid risk. The culture adheres to laws, rules, and regulations and employees seek order, consistency, and structure. In order to control everything and minimize uncertainty, Brazilians expect written documentation and detailed contracts. The low Individualism (IND) ranking of 21 indicates they are a Collectivist society. High-context cultures are generally collectivistic. Loyalty is the most important value amongst all of their societal rules. The people of Brazil are paternalistic; they build long term relationships and value commitment to their supervisors or managers. The high Power Distance (PDI) ranking of 69 reflects how the Brazilian people expect and accept that power is distributed unequally. The organizational structure of businesses in Brazil is hierarchical. Employees know who they report to and are respectful of the hierarchical structure. Status and position are important and using professional titles shows respect. People are accepting of their role and status within organizations and society, in general. Although the Masculinity (MAS) ranking is neutral at 49, the Brazilian culture is considered to be Feminine. They value relationships, social harmony and the quality of life. They tend to me more nurturing than those in a Masculine society. Hofstede included Brazil in his newest dimension, Long Term Orientation. Brazil has a high ranking of 65, which indicates that the people of Brazil have high work ethics. They are comfortable with working hard today in order to see the reward in the long term. The importance of their actions is based on the future as opposed to past traditions.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil

Aesthetics: Symbolism, Beauty, Color Meanings (Advertising) Brazil enjoys an international reputation for producing some of the world’s most creative advertising. (O’Barr, 2008). Print ads and television commercials produced in Brazil have received top awards at the Cannes Lions International Advertising Festival. The creative advertising is usually simple and visual. Brazil is known internationally for beautiful women. Physical beauty is a status symbol and beautiful women are common in their creative advertising. The annual carnival and futebol are very important to the Brazilian people. The carnival is a fourday national celebration that includes costumes, music, and dancing. People of all races and social classes join together to celebrate and to forget about what they call the “hard realities of life.” Every four years, the people come together to support their soccer team in the World Cup. They show their national pride by hoisting the green and yellow Brazilian flags and wearing the flag colors. Social Institutions: Family Life, Educational Institution, Class Systems, etc. The family life in Brazil is considered to be traditional with a couple and their children; however, extended families remain close. Women tend to take on a traditional role. In recent years, more women are seeking higher education and are entering the work force. The Brazilian government oversees the higher education system. Tuition is free; however, admission is competitive in demanding fields. Brazil has one of the highest levels of income inequality in the world. It is ranked number 10 on the Gini Index on the CIA World Factbook website. Business Consumers: Protocols, Greetings, Keeping Time, Space, Gift Giving, Hospitality, Negotiations When doing business in Brazil, it is important to become familiar with local business customs. Machismo is common in the Brazilian culture and women managers are scarce. However, women managers are well respected and viewed as cosmopolitan and professional. They are generally accepted and treated courteously because they have had to work hard to obtain their positions. Handshaking is common for both men and women. Meetings should always be made well in advance; however, punctuality is not important. Business cards should be presented in both Portuguese and English. Speaking distance in Brazil is approximately 3-4 inches closer than in the US, and one should expect to be touched more often. Gift giving is not expected; however, it is acceptable to offer to buy lunch. First names are used in business setting; however, titles are important. Do not use the term “America” when referring to the United States, as Brazilians consider themselves to be Americans. When negotiating with Brazilians it is important to consider the Hofstede Dimensions. Brazilians conduct business based on relationships and they value the person they are doing business with, not the company. The key to success in business in Brazil is committing to developing strong, longterm relationships.

Profile of a Typical Person
Potential buyers of the Tumi Luggage are professionals within the ages 30 to 45. They are welleducated and are frequent travelers around the globe. They are ambitious, healthy, and successful

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Feasibility and Marketing Plan: Tumi Luggage in Brazil in both family and career. Below is a sketched profile of a typical person in Tumi Luggage’s target market. Pablo Álvares is a 42 year old business professional. He resides in Sau Paulo and runs a logistics company within his hometown. He and his family are Roman Catholic. He speaks Portuguese and English as is common for business professionals. His family is what one may describe as a “handsome family,” dressed very well and conservatively while going to church. His kids attend a Catholic school and his wife is a homemaker as well as a business professional working with Pablo. It is given that Pablo is very meticulous about his appearance, his family and his properties. It should be no shock that he would only want the supreme, most luxurious products for himself and his family. Recently, he received insight that there is great opportunity for him to expand his business throughout Brazil’s Sudeste (Southeast) region. He decides that he will be expanding his logistics company by opening a facility in Rio de Janeiro. This decision will definitely increase his traveling accommodations. During the start up of the new site, he expects to split time between both locations. He also decides that he will travel by bus, train, and by air. He realizes that he requires a piece of luggage that is of high durability and styled professionally. He assumes that there is high chance that his luggage might be handled carelessly in his travels, and he prefers luggage that offers a hard case that can withstand the abuse it will experience in baggage claim. He currently prefers the Lansay Mala 360 hard side. Pablo’s concerns with damage to his bag could be a great opportunity for Tumi. Tumi’s ballistic grade materials offer extremely high durability. Pair this with Tumi’s five year warranty on its luxurious bags and Pablo could be very pleased with the Tumi brand. Tumi also offers a hard side roller bag that would also put Pablo’s mind at ease. If Tumi can give Pablo the sense of security that he feels with the Mala 360, Pablo will be rolling his beautiful, luxurious Tumi bag throughout Brazilian travel centers.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil Company Summary
The luxurious brand of Tumi Inc. has been a name difficult to ignore in the travel and luggage industry. The company has been making its mark since 1975 when it was first established by Charlie Clifford (Tumi Inc., 2010). Tumi, a unit of Doughty Hanson & Co. since 2004 currently accounts for 65% of sales. Although the economic downturn slowed Tumi’s growth in 2008, it only marginally affected Tumi’s sales in 2009. Management has put a series of initiatives in place to return the company to growth and take advantage of a weaker competitive landscape (Doughty Hanson, 2009). Tumi is the leading international brand of luxury travel, business and lifestyle accessories. The name Tumi embodies premium quality and design to many consumers in the United States, Europe and in some parts of Asia. Tumi has the reputation of having the highest standards in their products; it surely is no surprise that their great standards are applied in all the facets of their operation, structure and employment. A great strength of the company is that it is run with integrity and a high degree of ethics. This is evident with the company’s own Code of Ethics with their active membership in the Fair Labor Association, and their own team of ESSG (Environmental, Social, Supply Chain and Governance) whose task is to consistently work on improving work practices and environmental performance of the company. Tumi’s ethical standards are built and well followed when conducting business. Product quality and design have always been high attributes of the company. Although they have fierce competition, Tumi’s products are like no other. Their products are made from hundreds of custom-designed and engineered parts (The Tumi Difference, 2010). In addition, Tumi currently holds more than 25 patents for its design and engineering breakthroughs (Tumi, Inc., 2010). Tumi also puts a metal plate with a unique registration number in each of the bags they sell. This way, customers are able to register for the Tumi Tracer program to be entered in Tumi’s central database, and just in case, they lose the luggage, they will be able to be reunited with their bag if it is found (Tumi Inc., 2010). It is rather difficult to name a company’s deemed weakness, but it certainly is an invaluable task in contributing to the company’s success. It is necessary for Tumi to know and understand the different dimensions of their company even if that meant hearing the company’s weaknesses. One of Tumi’s weaknesses would be they are in a highly competitive industry. With competition such as Samsonite and Primicia, Tumi must take measures to strengthen their position in the market. In their current situation, they must certainly take an initiative to revise their marketing strategy and perhaps specifically have a broader product line (Euromonitor International, 2010). Lack of products catered to women is also a weakness of Tumi. As a response to this weakness, Tumi redirected its efforts to expanding their offerings and enhancing their marketing efforts in order to firmly build a solid brand in the minds of consumers. Beginning in 2006, Tumi went in with their new itinerary; that is to partner up with different companies to extend their product lines. In recent years, Tumi has branched out from its core offerings of luggage to offer accessories like wallets, watches and even pens (Walters, 2010). They also teamed with designer Anish Kapoor back in 2006 to produce a powerpack backpack incorporating solar energy for charging phones and PDAs along with an agreement with Ducati that launched a collection of co-branded pieces. Even more recently in 2010, Tumi and Lexus created a partnership to create a premiere custom luggage for 2012 LFA supercar (Tumi, Inc., 2010). This type of partnership will surely be a step in the expansion of Tumi’s line.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
In addition to new product lines, Tumi has over the years expanded their retail channels, making it more convenient for consumers to obtain their product.

Technical Feasibility
Raw materials and manufacturing capabilities in Brazil are abundant. Its economy is larger, more advanced, and more stable than other countries in South America. Brazil has developed large-scale sectors of business that include agriculture, mining, service, and manufacturing. Main products grown in Brazil include coffee, soybeans, sugarcane, beef, and cocoa, wheat, rice, and corn. Since leather is made from beef, this natural resource will be abundantly available. Other natural resources such as electricity and water are already part of the Brazil’s infrastructure. Brazil has one of the most diverse industrial sectors in Latin America with industries of textiles, shoes, chemicals, cement, lumber, iron ore, tin, steel, aircraft, motor vehicles and parts, other machinery and equipment (Brazil Sourcing). Brazil is ranked 11th in the world for electricity production and annually creates 438.8 billion kWh of electricity. Water is also an abundant resource, it covers 55,460 sq km of Brazil. Its total renewable water resources are 8,233 cu km (CIA World Factbook). It should not be difficult to locate a manufacturing plant. The Southeast coast of Brazil has some of the densest concentrations of customers Tumi will appeal to. Cities such as Sao Paulo and Rio de Janeiro are the ideal locations for manufacturing. However, the surrounding countryside is also a viable manufacturing option. Along with importing many goods such as oil, machinery and equipment, Brazil is well equipped for manufacturing luggage as high quality as Tumi. Excellent raw material, qualified labor and a flexible industry are the mainstream factors in this favorable scenario for inserting Brazil in the world context (WoodBusinessPortal.com). Brazil is rapidly becoming a powerhouse in the manufacturing sector. Brazil is creating jobs and of the 230,000 jobs created in the manufacturing sector, all of them are high paying and most are unionized as well as run business with government help. Tumi has ample labor available to them. The technology required to manufacture Tumi’s products is also readily available. Channel Structure: Lojas Americanas is one of Brazil’s largest non-food retailers. Lojas Americanas operates about 470 discount department stores offering apparel, household and beauty products, CDs, toys, and chocolates and candies in more than 20 states and in the Federal District (Answers.com). The web site is easy to use. With the revenue generated from the abundance of stores, as well as the fact Lojas currently sells luggage, Tumi will be a good fit for this retailer. Brazil has a strong retail sector to offer to prospective merchandisers. Pao de Acucar accounts for $12 Billion (US) in total annual sales. This retailer sells everything from diet yogurt to athletic sports equipment. Pao de Acucar also has a strong delivery system and an easy to use website. Carrefour is the Macy's of Brazil. With locations in Sao Paulo and Rio de Janeiro, their total annual sales are about $10 Billion (US). Their products range from everyday items like shampoo and conditioner to washing machines, computers, cell phones, and bicycles. Selling Tumi Luggage at Carrefour will be like selling luggage at Macy's in the United States. The website for Carrefour is simple to use and it is easy to find everything you are looking for. Some other high-end department stores that may be willing to carry Tumi include Daslu, which is located in Sao Paulo and is considered one of the most luxurious and extravagant shopping destinations in the world. This would vastly appeal to our market of people with a taste for the 13

Feasibility and Marketing Plan: Tumi Luggage in Brazil finer things. Lojas Renner is yet another viable retailer that currently sells luggage to the Brazilian public. Mainly non-food items, Renner operates 126 stores within the big cities of Brazil; Rio de Janeiro and Sao Paulo. "This sector, (retail), is responsible for the highest number of employed people in all sectors of the services industry. The bulk of employed people in this sector come from companies that employ less than 500 employees. Combined retail and wholesale sectors were made up of 708,635 retail and wholesale outlets. There are few retail chains in the economy. Most of them are located in the capitals of each state but are not part of the retail context in the less developed economies in rural areas (Brazil Sourcing).” Transportation options: Brazil has 1,751,868 kilometers of roads, 96,353 km of them paved and 1,655,515 km unpaved, 50,000 km of navigable waterways, 734 airports with paved runways, Sao Paulo and Rio de Janeiro have the two biggest airports. Brazil also has 1,980 km of railways connecting the Northern and Southern coasts. All these modes of travel are different ways for Tumi Luggage to be distributed throughout Brazil.

It is entirely feasible for Tumi luggage to be manufactured and distributed throughout Brazil with the amount of resources available at the disposal of manufacturers. The amount of land, energy, people willing to work, and government help with industry, Tumi might thrive in Brazil.

Financial Feasibility
Country Economic Analysis: Brazil, Russia, India, and China are known as the “BRIC” countries; the four large emerging economies today. In the 1990’s Brazil began transitioning from a neoliberal economy to an open economy by decreasing protections, instituting the “Plano Real” (plan to 14

Feasibility and Marketing Plan: Tumi Luggage in Brazil reduce inflation), establishing economic stability, and privatizing a large section of the economy. These factors contributed to their ability to compete internationally. Brazil is in the process of developing ties to other developing countries to promote exports and generate financial growth. Brazil is a member of MERCOSUR and the WTO; promoting and protecting international trade. They are also a member of the G20; Finance Ministers and Central Bank Governors promoting cooperative international economic development. Brazil was ranked 26th in exports compared to the world in 2009. Brazil’s exports totaled $153 billion and imports totaled $127.7 billion resulting in a $25.3 billion trade surplus (Worldfactbook, 2010). The major exports are transportation equipment, iron ore, soybeans, footwear, coffee, and automobiles. Brazil also produces 25% of the world’s sugar and 80% of the world’s orange juice. Their largest exporting markets are the United States, China, and the European Union (Trading Economics, 2010). Tax breaks are offered to companies using Brazilian-made parts in production. Brazil’s applied tariff rate is 11.5% and the average bound tariff is 31.4%. Foreign exporters are uncertain of the market because the Brazilian government can raise the applied rates as high as the bound rates in order to manage pricing and supply. All companies interested in exporting to Brazil must register with the Secretariat of Foreign Trade (SECEX) in order to access Brazil’s computerized trade documentation system. The system can be efficient with regards to fees; however, companies are frustrated with documentation errors and the lengthy process regardless if it is a new or current product (Trading Economics, 2010). Brazil’s GDP is $1,572 billion; nearly double from 1998, 8.8% increase over last year, and 2.54% of the world economy (World Bank, 2010). The GDP per capita is $4,448. Large and growing industries such as agriculture, mining, and manufacturing continue to contribute to Brazil’s stable position in the global economy. The exchange rate averaged 1.79% from 1992 until 2010. The historical high was 3.95% in 2002 and record low was 0% in 1992.

2005 2006 2007 2008 2009 November 8, 2010

Prior Year Rate Variance 2.4344 n/a 2.1761 -0.2583 1.5 -0.6761 1.8644 0.3644 2.032 0.1676 1.67850 -0.3535

The inflation rate (CPI) is 4.2% compared to 5.9% in the prior year. The monetary policies of the 1994 “Plano Real” caused the local currency to appreciate. First, the plan helped to stabilize the Brazilian economy and then initialized economic growth.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
The Global Competitive Index indicates Brazil’s ranking improved 8 points from 2009 to 2010. It is ranked the 9th largest domestic market in the world. Brazil has been able to weather the global financial crisis by diversified production and export structures. Their large population and domestic market provide safeguards against the dependency of exporting. Brazil also rates high in “Technological Readiness;” which is the ability to enhance industry growth with evolving technology. Brazil’s developed financial markets and macroeconomic fundamentals also explain why they have not been affected by the crisis. As mentioned in the “Consumer Target Market and Potential” section of this report, Brazil’s distribution of wealth is very unequal. Poverty and income inequality must be addressed in order to take advantage of Brazil’s competitive advantages. Production Costs: By choosing to lease a property in Sao Paulo, Tumi could drastically reduce the amount of initial capital necessary to start production in the Brazilian market. Instead of a $7,027,407 purchase price for the facility, Tumi could elect to lease the same facility at a price of $52,706 per month instead of using larger amount of capital to acquire a building. This does not mean that Tumi will be able to avoid capital expenditures altogether as this facility will require tooling in order to make the property ready for production (www.vivareal.net). We must first start with the amount of capital required for tooling a leased facility to meet our production needs. The largest tooling investment will be the sewing stations, because at Tumi, we pride ourselves on using high grade ballistic materials. We need machines that can perform with these materials. We found the Sailrite Long Arm Professional Grade Machine will meet our needs and carries a price tag of $3950.50 per station (www.sailrite.com). We would also need to expend capital on assembly stations. We found the Jamco Heavy-Duty workbench will meet our needs and retails for $634.90 (www.msc.com). We expect each sewing machine and assembly station pair to be able to produce 5 complete bags per day, based on an 8 hour production schedule. We find that we will require 10 station pairs in order to meet our sales goals. This equates to a total of $45,854 in capital expenditures. [(634.90+3950.50) X 10]. In addition, we would extend the total capital to $150,000 to accommodate the need for hand tools for the assembly process and any tenant improvements necessary on the building. Improvements would include electrical upgrades needed to run machinery, retrofitting the building to the production needs. In order to maintain liquidity, we decided to issue bonds in order to raise this capital. In order to estimate our cost of production, we evaluated the results from Samsonite’s final 10-k report. This was difficult because Samsonite returned to a privately held company in 2007 and is no longer required to publish financial reports to the public. In the 2006 fiscal year, they reported $48 Million in Latin American revenues, a quarter of which we assume came from Brazil (approx. $12 Million or 1% of Samsonite’s total revenues). The costs associated with total revenues were $6.12 Million, assuming 1% of Brazil revenues matched with 1% of Brazil costs per Samsonite’s 2006 SEC 10-k Filing. Understanding Tumi is a smaller entity than Samsonite, we conservatively projected our annual revenue at $6 million, half the actual results of Samsonite in 2006. We also understand our buying power for raw materials would be less robust than Samsonite, so we would expect a low profit margin. With the assumption of these costs, we found the expected cost of production should be around 60% of our revenues (approx. $3.6 million dollars). This cost doesn’t include 11.5% of tariffs also imposed on the revenues.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
To meet the $6 million sales goal, we would need to produce 10,000 bags for Brazil annually (sales goal divided by $600 average bag price). This amount of production would require 10 workstation pairs (Sewing + Assembly) producing 5 bags per 8 hour period (based on 17 production days per month). Considering all of this, we approximate cost of production within Brazil’s market will be 71.5% of sales or $4,290,000 ($6 million X 71.5%). We would also be responsible for lease expenses of $632,472 and labor expenses of $144,000 annually ($300/month X 40 workers X 12 months, based on minimum wage of 267.81/month from Reuters.com). We also expect overhead expenses of $500,000 annually (Management wages, and expenses not directly tied to the finished goods.) This puts our annual cost of production at approximately $5,566,472.

Organizational Feasibility
Brazil political/legal feasibility: At the same time Brazil is focused strongly on continuing its economic growth, the country is developing its political and legal environment with the goal of removing barriers and improving its image worldwide. The upcoming Olympic Games are an important driver for Brazil improving its political and legal environment to appear more legitimate in the eyes of the world. Brazil is continually improving its relationships with other countries. In Brazil, politics have a high influence on business. For each of the common measures for ease of doing business, there are a high number of steps involved. Brazil is ranked 126 in the world for ease of starting a business, requiring 16 procedures, 120 days, and 6.92 % GNI per capita to start a business (Doing Business, 2010). Because there are so many steps involving government officials, the chances for corruption are high. A 2004 report on corruption on Brazil by Kroll, a risk consulting company, used a questionnaire to break down government corruption in Brazil into three parts: perception, experience and behavior. For the experiences section, the report found that 62% of those participating in bidding were subject to requests for bribes on some aspect of the event or contract. More than 25% were pressured to make political contributions in exchange for favors and 29% admitted to using threats of embarrassment of public officials for public advantage (Abramo, 2004). Brazil is ranked 75th in the world in the 2009 Corruption Perceptions Index published by Transparency International (CPI Table, 2009). Political censorship is a significant problem in Brazil which ranked just above the US on Google’s list of government requests for removal of information (Censorship, 2010). However, Brazil is more open to topics such as sexuality. Censorship for indecency is less common than in other parts of the world. Public advertisements featuring nudity or adult themes are common in the urban areas, but in the country side, this is far less common where social and religious conservatism is strong (Brazil, 2010). Company Organization: To sell products and services in Brazil, US companies need to have legal representation in Brazil, which could take the form of a local office, an agent or distributor or joint venture. This is because products sold in Brazil need to be accompanied by a Nota Fiscal (invoice) at the point of sale, which bears the identification number of the seller. The seller can only have an identification number on his invoice if he is a registered legal entity in Brazil (Brazil: Market Entry Information, 2010). Tumi designs, markets and sells luggage, business cases and travel accessories in 87 Tumi-owned retail stores and outlets, as well as partner-operated stores (partnerships with hotel chain 17

Feasibility and Marketing Plan: Tumi Luggage in Brazil
Starwood and luxury cruise line Seabourn), premier department and specialty stores and travel retail locations. The company also sells its products over the internet and via a business-tobusiness channel. Tumi outsources its manufacturing to over 15 third party manufacturers in Asia, each supervised by an in-house sourcing team. Since 2004, retail development is a major area of focus. Today the retail channel (including partner-operated stores) accounts for about 65% of Tumi luggage sales. Right now Tumi sells its luggage in Brazil’s duty free stores in the International Airports of Rio de Janeiro and Sao Paulo. To expand in Brazil, Tumi would need to stage its entrance. It might be safe to find a distributor or agent in the beginning for exporting, which will also sell Tumi luggage in department stores, boutiques, and luxury-item stores. The advantage of this will mean low investment risks and permits. Penetration into Brazil’s market might otherwise be impossible. Another possibility would be to find a partner or create a partnership/joint venture and open a few retail stores. This will permit Tumi to have a part in the development, marketing and growth of the product, and allow it to invest capital maximizing growth potential (Doughty Hanson, 2009). Brazil’s business culture is largely based upon personal relationships. Tumi will need a strong presence in developing relationships in Brazil; it is encouraged to meet one-on-one with potential partners. One of the best ways to find a partner for entrance to the Brazilian market is by attending a local trade show (Doing Business, 2010) Professional personnel with required skills and knowledge are available in Brazil to open retail stores. However, it will be necessary to have US managers supervise Tumi advertisements and provide training for local employees and store managers.

Conclusion
SWOT Analysis: Tumi has several internal factors that are strengths. There are also many opportunities in the industry that Tumi can take advantage of. Matching Tumi’s strengths with industry opportunities allows them to develop offensive strategies and stay competitive. (See Appendix 2 for full SWOT). The demand for goods such as luggage is increasing in Brazil. Additionally, luggage is quickly becoming not just a functional piece, but a fashion statement as well (Euromonitor International, 2010). The brand name, design, and quality an individual totes while traveling lets others know who they are, how well off they are, and how impressed you should be with them. Tumi has an image as the most desirable brand of prestige travel luggage. They also have a reputation for premium quality products and classy designs (Tumi, 2010). Brazilians get excited when a new product is introduced in the market or when an existing product comes out with a new model. Tumi is not currently being sold directly in Brazil markets and will be very attractive to Brazilians when it is finally available. Promoting it before it is actually introduced will heighten the anticipation for it and has the potential to significantly impact revenues. Tumi enjoys customer loyalty because of excellent customer support and service. This would be the case with its Brazilian customers as well. Brazil is experiencing high air transportation growth. Tumi’s target market buyers travel frequently. The target market cities are upper income and densely populated. This will fit nicely

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Feasibility and Marketing Plan: Tumi Luggage in Brazil with Tumi’s niche markets of high-end, luxury products. One of their niche markets are the dutyfree shops located in airports like our target market cities of Sao Paulo and Rio De Janiero.

Internal Factor Evaluation-TUMI Strengths
1. Image as the most desirable brand of prestige travel luggage 2. Reputation for quality products-ballistic nylon, tracer chip, design, functionality 3. Company follows strong Code of Ethics policies 4. Customer loyalty because of excellent customer support and service 5. Financially sound and funds for developing distribution channels and manufacturing sites are available 6. Distribution channels are unique: Duty-free shops in airports, Specialty stores, High-end retail stores 7. Niche Market of high-end, luxury product 8. Socially responsible 9. Generous expenditures on Research and Development

External Factor Evaluation- TUMI Opportunities
1. Brazil is focused on continuing economic growth

2. Political and legal barriers are being removed.

3. Brazil is open to & encourages foreign investment 4. Demand for all kinds of goods is increasing in Brazil 5. In Brazil luggage is increasingly becoming a fashion statement 6. Tumi is attractive as "new" product to Brazil and also when new models introduced 7. Target market buyers travel frequently 8. Target market cities are upper income and densely populated 9. High air transportation growth

Weaknesses
1. High prices of products 2. Sales people who don't know the product 3. Limited product colors, designs. 4. Weak marketing strategy 5. Weak position in market-need to target women to capture more market share 6. Not currently participating in green initiatives

Threats
1. Rivalry from foreign and domestic competitors is high 2. Physical barriers to entry, high tariff barriers, heavy taxing, complex customs system 3. Increase in governmental laws and regulations 4. Ineffective legal system for enforcing IPR & commercial laws. 5. High rate of uneven income distribution 6. Commodity-driven economy

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Feasibility and Marketing Plan: Tumi Luggage in Brazil
7. Limited retail channels 7. Political censorship in advertising 8. High on corruption index-75th worldwide; low ethics 9. Online sales capturing potential "live" market share

Brazil is currently focusing its efforts on continuing economic growth. It is endeavoring to remove political and legal barriers. Brazil is open to and encourages foreign investments (Doing Business, 2010). These factors make Brazil a much more attractive venue for commercial trade with the outside world. Tumi is a financially sound entity and has the funds available to develop distribution channels and manufacturing sites within the Brazilian borders (Doughty Hanson, 2009). Risks: Although the indications for introducing Tumi luggage in Brazil are positive, there are risks to be considered. For instance, although Tumi is likely to be well received upon initial introduction, it may not thrive in the long run and capture the expected revenues Tumi needs. Since there is a high rate of income inequality, Brazilians may decide to buy a competitor’s product because of Tumi’s higher prices. There is also the risk the government may become unstable or be overthrown by hostile factions. This will expose Tumi to the possibility of expropriation of its assets. Brazil is very high in corruption (CPI Table, 2009). It has an ineffective legal system for enforcing commercial laws and IPR. This could put Tumi at risk for having its intellectual properties rights violated and its patents nullified. Another risk facing Tumi is the uncertainty of the market because the Brazilian government can raise the applied tariff rates of 11.5% as high as the bound tariff rates of 31.4% in order to manage pricing and supply (Trading Economic, 2010).

Recommendation: Collectively, we do not recommend marketing Tumi in Brazil because of the high tariffs that would have to be paid to import into the country and because the process to import goods into Brazil is difficult. Also, although Tumi is financially sound and looking to expand their markets, we do not feel marketing in Brazil would be the wisest use of its capital. The profit margin if any, would be too low to market in Brazil.

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Feasibility and Marketing Plan: Tumi Luggage in Brazil Marketing Plan Target Market, Objectives and Positioning Strategy
Mission Tumi Luggage’s mission is to provide the Brazilian market with an upscale, luxurious selection of luggage and accessories and outstanding customer service. We exist to attract and maintain customers. Our high quality products and exceptional service will far exceed our customers’ expectations. Target Markets Tumi Luggage is targeting two population segments within the broad category of the upper class travel oriented males and females with disposable income. Both segments will be mostly in the area of Sau Paulo and Rio de Janeiro.


Professionals: these are the full time working professional men and women. They typically earn more than $100,000 a year. They are in the age bracket of 30-45 year old; 39,839,130 males and females or 21% of the total Brazilian population. They have an annual disposable income of $ 75,000. They will purchase luxurious brands for both traveling business and personal vacation purposes. They are well-educated, frequent travelers of the world, are ambitious, successful in both career and family life. This group is being targeted as they work full time and travel very frequently and therefore have the need for several luxurious, high quality and fashionable luggage. They also have the disposable income to spend on luggage and accessories and will take advantage of this as this group is fashion conscious and views items as a status symbol as well. Athletes: this segment has plenty of disposable income because of their occupation. Like the professional segment, this group has an annual disposable income of at least $ 75,000. They have an inclination to purchase the best, the most luxurious, most fashionable products including luggage and accessories. This group is attractive because they have the money and have the reason to purchase Tumi luggage. Athletes travel frequently and are always on the go. It helps if their luggage is stylish and durable; with both money and reason to purchase the luggage, there is no limit to the number of Tumi products they would like to own.



Marketing Objectives Bulletproof has set attainable objectives for Tumi Luggage in the Brazilian market, they are as follows:
  

Accomplish $6 million in sales by the end of the year with initial production of 10,000 bags during that period Increase 5% in sales per year with the first three years while decreasing cost of production by 5% per year Reach profitability by the end of year two and achieve a market share of 10% next to Primicia. 21

Feasibility and Marketing Plan: Tumi Luggage in Brazil
 

Increase the product and brand awareness among the target audience by 30% in one year through multiple advertising Medias. Build an effective pull campaign, bringing in new customers at an increased rate of 30% per year

Positioning With the target audience in mind, Tumi Luggage will position its products as follows: Made for the sophisticated brand aware professionals, athletes and frequent travellers who only want the premier products, Tumi Luggage, the leader in high end travel and business accessories, provides stylish, exceptional quality/ durability and highly functional personalized luggage products. Unlike any other travel goods company, Tumi Luggage personalizes your every need, enhancing your travelling experience. This positioning statement was chosen after careful analysis of the earlier discussed SWOT and competitive analysis. Bulletproof realized that there is the growing trend of consumer purchases of high end, luxurious products. The targeted markets’ purchases are more inclined towards products that are of great novelty. The target market is “luxury-hungry” and views the products as fashion objects even considering these items to be a status symbol. In addition to the great quality of the product the company offers, Tumi also personalizes their products to the liking of their target audience. This is why Tumi Luggage will better serve this market. Tumi Luggage will leverage their competitive edge to achieve the desired positioning.

Marketing Mix Strategies
1. Product Based on Euromonitor’s research about consumer buying trends Brazil luggage is no longer a functional product which people replace every 10-15 years. Consumers in Brazil are beginning to look at luggage as fashion objects and are even buying luggage items to match their clothing. Brazilian consumer preferences are facilitated mobility, ergonomic designs and multi-functional products that can be rolled or carried, used for travel and office, computer bags and two-in-one products. Consumers are opting increasingly for vertical uprights instead of suitcases. While hard briefcases are out, leather and nylon portfolios are in and are expected to show significant growth. That is great opportunity for Tumi to bring in its high quality, featherweight, quiet, smooth and reliable ride suitcases (Euromonitor International Consumer Lifestyles). Product quality and design have always been high attributes of the company. Although they have fierce competition, Tumi’s products are like no other. Their products are made from hundreds of custom-designed and engineered parts (The Tumi Difference, 2010). In addition, Tumi currently holds more than 25 patents for its design and engineering breakthroughs (Tumi, Inc., 2010). Tumi also puts a metal plate with a unique registration number in each of the bags they sell. This way, customers are able to register for the Tumi Tracer program to be entered in Tumi’s central database, and just in case, they lose the luggage, they will be able to be reunited with their bag if it is found (Tumi Inc., 2010). Tumi is already selling its luggage in the Sao Paulo and Rio de Janeiro airports in Brazil for business and leisure travelers: Deluxe Slim, Expandable Organizer, Compact Carry On, and Expandable Pack Luggage. Tumi will be further introduced in Brazil’s market as a luxurious brand with all available 22

Feasibility and Marketing Plan: Tumi Luggage in Brazil collections. Product adaptation will not be necessary because Tumi sells standardized product (around the world in 67 countries. With the help of the partner Tumi will be able to bring all collections to Brazil to satisfy majority of the target market with the needs for durability, style and brand. Tumi has collections to satisfy everybody’s tastes and needs : suitcases, briefcases, carry-ons, satchels, duffels, backpacks, cosmetic cases, gym bags, made from ballistic very durable nylon, full grain Napa leather, lightweight polycarbonate, different sizes up to 26”, two wheeled, four wheeled, expandable, with laptop protection, and special services and features for business travelers as (t-pass”-checkpoint friendly briefcases, tracer complimentary program for lost luggage, organizational excellence with its business case collections, Tumi cases are extremely well-organized with retractable zip pouches, ID tags, along with elasticized accessory pockets, pen loops and convenient water-resistant umbrella pockets and easy-clip key rings. Tumi combines sleek, sophisticated design details with ultra-functional features. Tumi has always had a passion for perfection, with equal focus on form and function. It is the brand of choice for traveling professionals and style leaders around the world who appreciate modern design and intelligent solutions (Tumi Luggage). Tumi has many collections to meet everybody’s needs: Townhouse, Alpha, LXT, Alpha Bravo, Voyageur, Tumi Vapor, T-Tech. Every year creative designers as David Chu introduce new collection, that’s what Brazil’s customers are looking for including novelty, growth, innovation, and brand names. Tumi introduced T-3 collection with an agreement with Ducati a few years ago, in 2010 Tumi and Lexus created a partnership to create a premiere custom luggage for 2012 LFA supercar (Tumi, Inc., 2010), these partnership and globally known names as Lexus and Ducati will appeal to Tumi’s target market of young and wealthy. The other great innovation coming up in 2011 collections what will appeal to Brazilian tastes, and their wish to show they status and image will be colorful design collections Villa, Voyageur and Vapor with distinctive designs of graffiti pioneer John “Crash” Matos and also a option of customizing Alpha suitcase will be introduced. The other collection Crash Tumi Tag Limited Edition,, with only 1000 pieces will be brought to Brazil where it should meet a lot of attention as that will be a very special collection for collectors of the brand(Tumi celebrates double-digit growth spurred by new lines). Tumi is a customer service and customer satisfaction oriented company. Eric Gusman, Senior Vice President of Tumi International observed that Tumi listen to their loyal customers, who are frequent business travelers, and extend their lines for them. He said "Tumi is about design, not fashion. We want to produce best in class products and services for the most demanding customers. Service quality is number one at Tumi, so customers are willing to buy again." Tumi cares about their customers and in exchange for their loyalty customers get can expect to experience world-class, after-sales customer service; and for five years after you purchase a Tumi product from an authorized Tumi store or dealer, buyer will be covered by Limited Warranty (Tumi Inc). This service is presented internationally and it will be brought to Brazil and presented as Tumi’s core competency.

2. Distribution Distribution of the Tumi product into the Brazilian market presents many obstacles and risks. Since it is not feasible to manufacture in the country as it would cost about 70% of our sales revenue, (see Production Costs), Tumi would need to import most of its products. Importing, however presents another issue due to the instability of extremely high tariffs in Brazil. Our products would either need to be flown in or shipped on freight boats to enter the country, presenting even more expense. Once in the country, our company would have to give up even more control and profit by hiring a middleman to ship the 23

Feasibility and Marketing Plan: Tumi Luggage in Brazil product to its destination of retail stores. Since this is such an expensive and high quality product, trusted transportation would probably be needed and may include a contract. Initial mode of entry for Tumi into the Brazilian market would be to use selective merchandising through high-end retail centers already located in Brazil. Ideal locations for these retail centers as mentioned earlier include densely-populated urban areas of the South East including Sao Paulo and Rio de Janeiro where the more affluent reside, which means greater exposure to the small percentage of potential buyers. This is also a smart move competitively because Brazilian the market would have an easier time opening up to a foreign product if it were sold by local merchandisers. Control of the retail channel would be shared by Tumi executives and the middlemen, whose communication would primarily be through mail, internet, and telephone. This presents another risk as Brazilian business people prefer face to face contact and value client relationships. Home-country middlemen might be a good idea as we would need one who spoke Portuguese to clearly understand all transactions. If we were to engage in business with this country, Tumi would enter into the Brazilian market through a joint venture or partnership that would bear some of the financial responsibility of the investment. Some prospective retailers that Tumi is strongly considering to carry its products include Carrefour, Daslu, and Lojas Renner, which all have several locations in Sao Paulo and Rio de Janeiro. These merchandisers are high-end and similar to US stores such as Macy’s or Bloomingdale’s. Carrefour is the world’s second largest retail group in the world (Carrefour,1). Daslu is considered "the shopping Mecca" for the wealthy in Sao Paulo (Daslu,1). This store prides itself on having the most stylish and exclusive fashionable merchandise, which is exactly how Tumi would like to be represented. Lojas Renner is another option for retail being the 2nd largest department store in Brazil with more than 126 locations (Lojas Renner, 1). Brazilian residents are familiar with these stores and prospective customers who shop here have higher disposable incomes than other purchasers.

3. Marketing Communications Tumi will enter into an international joint venture with a small Brazilian luggage retailer because it leaves Tumi less susceptible to political harassment and helps minimize anti-multinational corporation feelings. Its competitive advantage is increased. The likelihood of expropriation, should Brazil’s government become unstable, is greatly reduced. Also, since Brazil has an ineffective legal system for enforcing commercial laws and IPR, a joint venture will provide much needed protection. The economic risk of higher tariffs being imposed will be lessened as well. Tumi’s international marketing communications will consist of advertising, public relations, and direct selling. Advertising will be done via newspapers, magazines, TV ads, signs in city streets (e.g. during the carnival), and the Internet. Most Brazilians consider ads entertaining and enjoyable (International Marketing, 2009). Brazil enjoys an international reputation for producing some of the world’s most creative advertising. Print ads and television commercials produced in Brazil have received top awards (Doing Business, 2010). The two most important Brazilian newspapers "O Estado de Sao Paulo" with a circulation of between 300,000 and "Folha de Sao Paulo" with a circulation between 500,000 and 1 million reach qualified audiences of decision-makers and are published nationally including Sao Paulo, Brazil's business center and Rio de Janeiro. The most popular magazine in Brazil with a circulation of over a million copies is the weekly Veja (Brazil Brands, 2010). 24

Feasibility and Marketing Plan: Tumi Luggage in Brazil
Television is extremely influential on nearly all aspects of Brazilian culture and society. Recent data estimated a total of 36.5 million TV sets in Brazil and 209 TV sets per 1,000 people. Television broadcasts now reach all of Brazil. The most popular programming continues to be the evening news and the evening soap operas (telenovelas) that run at 7 and 8 o'clock. Whole families arrange their days so they can watch the nightly episodes. The associated commercial slots form nearly perfect media opportunities for advertisers (O’Barr, 2008). Airtime has always been sold in blocks to ad agencies and commercials are sandwiched together in a string of 10 to 50 commercials within one station break (International Marketing, 2009). According to the International Telecommunications Union, internet users now number over 50 million. According to the Brazilian Institute of Geography and Statistics, the number of online buyers has increased 20% since 2009. Direct selling will be done via catalogs. Our primary target market is upper income professionals and athletes/celebrities. Catalogs will be distributed to two types of potential customers in our target market. The first type of customer is the individual. Market studies will be conducted to determine areas of Sao Paulo and Rio de Janeiro where most of the upper income populations live. The second type of customer is the corporate client. Corporations often give gifts as incentives or rewards to its employees, especially its executives. Tumi has developed a customized catalog for this purpose. An aspect of public relations is corporate sponsorship. Helping to sponsor the upcoming Summer Olympics in Rio de Janeiro in 2016 is an excellent opportunity for Tumi to promote itself to Brazilians. Brazilians love soccer and carnivals (CIA World Factbook, 2010). Both are important advertising venues. Sponsorship of the FIFA World Cup to be held in Rio de Janeiro in 2014 and the Carnival Rio de Janeiro 2011 will provide Tumi with maximum exposure to the Brazilian people. Tumi will present a standardized product which it currently markets globally. It will require a message that is customized in its advertising appeal to the Brazilian culture. The message will be, “Tumi. Of course. A statement of success. A symbol of achievement. Set your goal high.” (Tumi Special Markets, 2010). Brazilians take pride in their appearance and their high work ethic. They are comfortable with working hard today in order to see the reward in the long term. The organizational structure of businesses in Brazil is hierarchical. Employees know who they report to and are respectful of the hierarchical structure. Status and position are important. (Geert Hofstede, 2010). Tumi’s message reinforces these cultural values. The message will be in Portuguese because it is spoken by nearly 100 percent of the population with only moderate regional variations. These tend to diminish as a result of mass media, especially national television networks that are viewed by the majority of Brazilians (O’Barr, 2008). Tumi’s proposed promotion budget will be 6.5% of net sales. This figure was arrived at as a result of researching other companies in the industry with the same or similar products and then averaging their advertising and marketing expenses as a percentage of net sales. 4. Price When determining distribution and retail prices of Tumi bags and accessories for the Brazilian market we considered: 1) competitive pricing, 2) production and marketing costs, 3) expected profit margin, and 4) local economies. As indicated in the “Industry and Competition” sections of this report, our North American competitors in Brazil are: Samsonite and Hartman. Our Brazilian based competitors are: Israco and Primicia. The luggage prices for our North American competitors range from $200 to $1,000 per bag and 25

Feasibility and Marketing Plan: Tumi Luggage in Brazil the prices for our Brazilian competitors range from $90 to $545. Due to the vast number of products Tumi offers this analysis will be based on Tumi’s three most popular luggage items: 20” spinner, 25” spinner, and 28” spinner with an average retail price of $600. Based on our production cost analysis, we determined it would not be economically feasible to manufacture our luggage in Brazil. We will continue to outsource our manufacturing to over 15 third party manufactures in Asia. Samsonite’s 10-K SEC filing to estimate for year ending 1/31/07 indicated production costs at 49% of net sales. Because Samsonite highly discounts their luggage we estimate Tumi’s production margin to be approximately 39%. Marketing costs will be a key factor in product success in Brazil. We will need to partner with a highly reputable advertising company in Brazil in order to develop an advertising campaign that not only makes our product distinguishable from our competitors, but also distinguishable from the other very creative and visual advertising campaigns Brazil is famous for. Again, using Samsonite’s 10-K, we estimate our marketing costs to be approximately 9% of net sales. This is consistent with Samsonite’s advertising margin. According to the Doughty Hanson 2009 Annual Review, Tumi’s total revenue in 2009 was $195 million which is consistent with Samsonite’s 1/31/07 10-K.

Tumi Company Wide 2009($) 195,000,000 39% 76,050,000 118,950,000

Brazil

Tumi 2011($)

Net Sales Gross Margin % Gross Margin $ Cost of Goods Sold

6,000,000 39% 2,340,000 3,660,000

According to a recent Bloomberg Poll Brazil ranks third in preferred places to invest. Unfortunately, high tariffs and government regulations make it challenging to export to Brazil. Tariff rates ranging from 11% - 35% make it difficult to set a standard retail pricing. Based on this information, we will sell Tumi luggage with prices similar to our other markets, averaging $600 per bag. We will keep a close eye on the tariff rates and economic conditions in Brazil and make adjustments as necessary.

Revenue and Expenses
The bases for revenues are solely based on net sales. In order to reach our sales expectations we will need to assume some expenses. To determine these expenses, we need to set some rule on our capital assets. Because we decided not to purchase a building we will not be concerned with the depreciation of this type of asset. We would be responsible to recognize depreciation expense on the equipment used in production. The work stations would be considered 7 year assets as per tax codes for 2009. (www.irs.gov) We would need to expense the cost of the work stations over this time period. In addition to depreciation we would need to recognize expenses not related directly to the finished goods; the overhead, marketing and taxes. All other expenses would be tied to the gross margin calculation previously provided, as part of 26

Feasibility and Marketing Plan: Tumi Luggage in Brazil the cost of goods sold. By using our net sales goal of $6,000,000, which would be our revenues that we would recognize, and backing out the previous mentioned expense we reach net income. The income statement would be as follows: Net Sales……………………………………………………………………6,000,000 COGS (61% of Net Sales)………...............3,660,000 Marketing Expense (9% Net Sales)……540,000 Depreciation Expense (7 year assets).....21,429 Overhead Expense……………………….........500,000 Total Expenses.................4,721,429 Net Income………………………………………………………………...1,278,571 Tax (1,278,571 X 35%)…………………….447,500 Net Income Net of Tax…………………………………...………………831,071 Tariffs (11.5% of Net sales)………………690,000 Net income From Operation………………………………………..141,071 The income from operation shows to be positive, but it is imperative that we are aware that there are cost not calculated into income from operation. These expenses would include payments due to partners associated in the joint venture and any incidental cost, such as maintenance expenses. Being conservative we must be aware that these additions expenses could cause a net loss result.

Evaluation plan
The goal for Tumi’s entrance into the Brazil market is to obtain a profitable position in the market. Tumi’s leadership in luxury luggage products must translate to this new market while facing new competitive pressures. Each of our marketing objectives can be measured periodically for success. As Tumi works to become established in the market, Bulletproof recommends an aggressive quarterly evaluation schedule. This is important because as a joint venture, Tumi’s entrance could quickly move away from our vision and our marketing objectives unless the company watches carefully. Future evaluation schedules could be done midyear. 1) Accomplish $6 million in sales by the end of the year with initial production of 10,000 bags during that period. The following steps need to be followed to assure that we reach this objective: Quarterly meeting with Tumi marketing managers and their counterparts in the joint venture. Require weekly sales reports to be compiled and presented at these meetings. Packages for sales promotions that can be offered to local marketing representatives if the sales are falling short. Corporate representatives to be assigned to assist local sales representatives if they are falling short.

o o o o

2) Increase 5% in sales per year with the first three years while decreasing cost of production by 5% per year. 27

Feasibility and Marketing Plan: Tumi Luggage in Brazil o o Inspecting of Brazilian facilities to make sure that they are running efficiently. Evaluate performance of sales managers and facility managers and offer bonuses for the best performances.

3) Reach profitability by the end of year two and achieve a market share of 10% next to Primicia. o Profitability can be measured by analyzing Tumi’s financial ratios. o Market share is measured by sales numbers and by using information from the Brazilian marketing representatives, as well as an independent research firm to make sure that numbers are not inflated. o Price incentives can be offered at the end of year two if market share does not look like it will meet Tumi’s requirement. 4) Increase the product and brand awareness among the target audience by 30% in one year through multiple advertising medias. o o Using a local research firm we can track awareness metrics. CPM analysis and Brazilian ratings information will give Tumi metrics which they can use to know if they are spending too much, or not enough to promote brand awareness.

5) Build an effective pull campaign, bringing in new customers at an increased rate of 30% per year: o o Keep the resources for a pull campaign separate the resources for the push campaigns so that returns on money invested can be tracked. Measure the percentage increase quarterly so that Tumi can anticipate whether the 30% increase will be met. If not, the company can increase its allocation to the pull campaign budget.

Measurement of these objectives is only one part. Tumi must be careful to compile the information in a way that it can be analyzed both by the Brazilian counterparts in the joint venture, and by Tumi corporate. Tumi does not want to be in a situation where the Brazilian partners control both the gathering of the data and the decisions to be made from the information. Goals must be matched with the partners as well. Tumi must try to avoid a situation where the corporate offices have a list of stated goals which the Brazilian partners share, but find that the Brazilians have created a separate list of goals that they are trying to meet at the same time, or before the corporate goals are met. This requires both sides meeting and discussing the objectives often.

28

Feasibility and Marketing Plan: Tumi Luggage in Brazil References
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Doing Business in Brazil: 2010 Country Commercial Guide for U.S. Companies. Retreived November 7, 2010 from http://www.buyusainfo.net/docs/x_6282408.pdf Doughty Hanson & Co. Financial report 2009. Retrieved on November 7, 2010 from http://www.doughtyhanson.com/en/~/media/Files/D/Doughty-HansonCorporate/Annual%20Reports/dh-ar09.pdf Florence, S. D. (2010). Brazil's Luxurious Daslu. Retrieved November 11, 2010, from FactioMagazine: http://www.factio-magazine.com/shopping/detail.cfm?article_id=14041706 Foreign Trade Barriers. November, 2010. http://www.sice.oas.org/ctyindex/USA/USTR_Reports/BRZ_2010.pdf Fran Finnegan & Company. (2010). Samsonite Corp/FL · 10-K. Retrieved November 11, 2010, from www.secinfo.com: http://www.secinfo.com/d11MXs.u11h8.htm Google. Seaport map of Brazil. Photo retrieved October 30, 2010 from http://www.seatech.eng.br/areas.php-Sea Port Map Google.com. Other photos retrieved on October 30, 2010 http://www.answers.com/topic/lojas-americanas-s-a http://ri.lasa.com.br/ Lojas Americanas. Retailers in Brazil. Retrieved November 6, 2010 from MSC Industrial Direct Co., Inc. (2010). MSC Direct. Retrieved November 11, 2010, from www.mscdirect.com: http://www1.mscdirect.com/CGI/NNSRIT?PMPXNO=17801829&PMT4NO=97731277 Sailrite Enterprises, Inc. (2010). Professional Long Arm Sewing Machine Power Stand & MC-SCR. Retrieved November 11, 2010, from www.Sailrite.com: http://www.sailrite.com/ProfessionalLong-Arm-Sewing-Machine-Power-Stand-MC-SCR Sala-I-Martin, Blanke, et al. 2010. The Global Competitiveness 2009-2010: Contributing to LongTerm Prosperity amid the Global Economic Crisis. http://bit.ly/d3YlwC SEC Filing Samsonite Corp/FL, for 1/31/07. Retrieved on December 2, 2010: http://www.secinfo.com/d11MXs.u11h8.htm#dk2m Sendas. Actual retailer in Brazil. Retrieved October 30, 2010 from http://www.sendas.com.br/data/Pages/LUMIS1D1D8F39PTBRIE.htm The Tumi Difference. (2010 October 30). Tumi. Retrieved on October 30, 2010, from Tumi http://www.tumi.com/

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Thomas Rueters. (2010). UPDATE 1-Brazil minimum wage to rise 8.8 pct in 2010. Retrieved November 11, 2010, from www.Rueters.com: http://www.reuters.com/article/idUSN3145544020090831 Trading Economics. Website. 2010. http://www.tradingeconomics.com/Economics/GDPGrowth.aspx?Symbol=BRL Tumi. (2010 October 30). Tumi. Retrieved on October 30, 2010, from Tumi http://www.tumi.com/ Tumi, Inc.: Private Company Information. (2010 November 1). Retrieved on November 1, 2010, from Bloomberg BusinessWeek Online http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=9114053 Tumi celebrates double-digit growth spurred by new lines. Retrieved on December 2, 2010 from http://www.moodiereport.com/document.php?c_id=30&doc_id=25888 V-Brazil. Retailers in Brazil. Retrieved October 30, 2010 from http://www.vbrazil.com/business/retailers.html VivaReal. (2010). Industrial for sale in Sao Paulo, Brazi. Retrieved November 11, 2010, from www.VivaReal.com: http://www.vivareal.net/industrial-24818639/ Walters H. Tumi's New Itinerary. BusinessWeek Online [serial online]. January 24, 2007;:2. Available from: Academic Search Premier, Ipswich, MA. Accessed November 7, 2010. Wikimedia. (2010, Dec 05). Carrefour. Retrieved Dec 06, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Carrefour Wikimedia. (2010, Sept 06). Daslu. Retrieved Dec 06, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Daslu Wikimedia. (2010, Dec 04). Lojas Renner. Retrieved Dec 06, 2010, from Wikipedia: http://en.wikipedia.org/wiki/Lojas_Renner Wholesale Network. Wholesalers in Brazil. Retrieved October 30, 2010 from http://www.wholesalersnetwork.com/merchandise/brazilian/index.htm-BrazilianWholesalers Wikipedia. Airport Map of Brazil. Photo retrieved October 30, 2010 from http://en.wikipedia.org/wiki/Transport_in_Brazil-airport map Wood Business Portal. Natural Resources in Brazil. Retrieved October 30, 2010 from http://www.woodbusinessportal.com/en/news1/121/Brazil_-_world. World Bank Website. November, 2010. http://bit.ly/b09CeC

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Feasibility and Marketing Plan: Tumi Luggage in Brazil Appendix
Brazil's ranking in Doing Business 2010 Brazil - Compared to global good practice economy as well as selected economies: Brazil is ranked 129 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Rank Ease of Doing Business Starting a Business Dealing with Construction Permits Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business (Doing Business 2010 Brazil). Doing Business 2010 129 126 113 138 73 150 100 131

120 87 100

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