India is a lucrative yet challenging market. It has large growing consumer market and is ranked the second most attractive country for investments. Its government welcomes foreign direct investments (FDI) through its policy and Legislation. It provides a source of low cost labour and raw materials for firms. English language is widely spoken in India. However, India is an unfamiliar territory where there are large and established competitors. In addition, there are risks of terrorism, sudden change in the FDI policy. Its unreliable power supply is crucial for the functionality of Delight.
A research has been conducted, via the Internet, books, and journals, to address the following questions. Firstly, should enter the Indian market. Otherwise should the plans be aborted and consider entering other market like Latin America or Indonesia. Secondly, what kind of market development strategy should the firm employ i.e. whether through Licensee or Joint Venture or Acquisition? Thirdly, how can Delight gain competitive advantage? Fourthly, what kind of pricing strategy be used? Lastly, whether there is a need for field testing.
In order to understand consumers’ needs for water purifiers, a study has been conducted on the micro and the macro environments. Kolkata, in the North-eastern and Chennai in the Southern regions have been identified to have water contamination. Mumbai and Delhi are chosen due to the strategic locations for future expansion. The firm should begin with these entry points to achieve market share. In addition, there is shortage of power supplies, generally less than 24 hours throughout the country.
This means Delight will be able to function during this time with its backup battery. The air conditioner, as an analogous product, was studied to understand how other firm succeed in this market. It has been found that the Indian consumers has high context culture and enjoy watching movies and dramas. When buying a product, Indians consider whether the products has many feature relative to the price and whether there is other forms of substitute to that product category. There are similarities between the Indian and the Australian markets have been established.
The results of the financial analysis show that the most probable and cost effective mode of entry is through Dealer under Penetration pricing strategy. The target market is middle-class housewives due to influential power on decision makers. They can be enticed by advertisements that promote family health. The promotion media are Bollywood and Television as film-watching is considered national passion. Giving free samples of purified water allows consumers to taste the different and is a form of free publicity. There is no need for field testing as the sample size cannot be generalised for the entire market.
Due to its low manufacturing costs, firm should consider exporting Delight to other parts of the world from India. The focus of this case study is on India, a rough analysis has been conducted on alternative markets. Information suggests that Latin America is more attractive and less corrupted than Indonesia. Therefore, the Latin American market should be considered the alternative solution. In addition, the firm can consider multi-layer marketing, whereby consumers can enjoy rebates by inducing three other consumers to buy Delight. Lastly, due to low literacy rate in India, advertising Delight through radio is recommended. Advertisements can be aired to remind consumers of Delights and its benefits. This is an effective way of building brand equity.
In the case study of Blair water Purifiers India, the firm needs to decide the following:
* Whether to enter the Indian market with their existing product, i.e. Delight.
* If so, what kind of Market Development strategy to employ in the cost effective manner.
* Should the firm proceed with market testing or Licensee consideration or joint venture/Acquisition?
* At what price should the firm sell its water purifiers?
In order to address above mention matters, there is a need to perform analysis of various forms. This process enables better decision makings. This report covers a resource report, accounting for the scope of responsibility of each members of our team. The research methodology was done, primarily, via the Internet, journals and books. In addition, Methods comprise of qualitative and quantitative analysis. Namely, situation analysis i.e. SWOT, customer, product, market, promotion and financial analysis. The data has been extrapolated into useful meanings for the firm’s best interest.
In the findings, market development strategy has been formulated. Basing on qualitative and quantitative analysis, we have identified the target market, marketing mix strategy and contingency plan.
Kenneth – Research on culture, legislature, demography and government policy
Jarrod – Analysis and collect information on infrastructure
Choo Peng – Financial analysis and findings
Mathew – Research on promotion media, power/water supplies
Dion – Compare Indian and Australian markets; analyse market needs
Research methods have been done via the Internet, Books and journals. Analysis such as Situation, SWOT and industrial analysis have been performed. A SWOT analysis has been conducted to enable effective matching of the firm’s strengths to external opportunities while avoiding impact threats that will jeopardise the firm’s weaknesses.
In deciding to develop the Indian water purifiers market, there is a need to perform situation analysis on Blair Company, Inc., Competitors and Customers. Porter, (1979) suggests, the Porter’s 5 Forces can aid decision making on industrial attractiveness
Strength – Technology to product quality products Competent Engineers
Weakness – Limited experience and knowledge about Indian Market Low, i.e. brand awareness in India.
Opportunity – Attractive market for water purifier this is due to Liberation. Low cost labour cost.
Threat – Aquarius has superior technology and has superior distribution channel.
Aquaguard has Brand Equity in India and has aggressive sales force.
Threat of Substitute Product – Aquarius exhibits superior technology; however, the firm have yet become aggressive. Aquagaurd has strong brand equity. Delight needs to be differentiated from competitors’ products.
Bargaining Power of Buyers – In the case of Licensee, there is a risk of cannibalism on agent’s existing product. In the case of Joint Venture, there is a risk of backward integration. The choice of distributors is of crucial strategic importance.
Jockeying for Position -As there are over 100 competitors competing for market share, tactical price competition seems likely. It is important that Blair Company Inc consider pricing strategy and be prepared to cope with this adverse effect.
Competitor Analysis (by Products)
In order to differentiate Delight from its competitors, Appendix 1 summarised major competing products based on the attributes (by Prof James cited in Kerin and Peterson 2003 pp 89 -103). Comparison can be made between competing product and those that Delight is offering. The results show that
* Aquagaurd, in term of quality, does not exhibit superior technology and need electricity, however, with high brand equity; it is able to charge a high price.
* Aquarius exhibits high technology at a relatively lower price than Aquagaurd.
* Zero-B is a value for money product, where it is of relatively good technology at a low price.
The results seem to indicate some price competition among big competitors.
Customer analysis enables better understanding of the market and identifies the attributes which matters most to the customers. A study of consumers in India, suggested by Indian Child 2000, the results have been tabulated in Appendix 2 – Indian Consumers’ Characteristics. After analysing the data, useful information have been found and summarised below.
* High Death rate primarily due to contamination in food and water
* Female and infant are most vulnerable to diseases.
* The rich and the middle class are situated in the Urban and Metropolitan areas, namely Mumbai, New Delhi, Chennai and Kolkata.
* The Indians are status conscious. This is important in pricing and product positioning strategies.
* In addition, Indian society is a high-context culture.
* The society is of male dominant however, women have high influential power. Indian Child 2000 suggests that the male dominant society is gradually reducing.
* Water is expected to be served and to have large portion of food.
* Indians adopt Marsala philosophy, which means value for money.
* Interestingly, film watching is considered “national passion”. Housewives, especially, enjoy watching evening dramas.
To the Indian consumers, the attributes that will influence their buying decision are:
* Product Category – in term of the feature and technology relative to price
* Functionality – How useful is the product? Is there a cheaper option?
* Origin of product – Made in U.S or local products
Needs of water purifiers
A study of market pattern shows that the Indian market is not homogeneous. The demand for water purifiers varies according to regions. In Chennai and Kolkata, as Khanna (2001) suggests, there have been Arsenic contamination in the supply of drinking water. There is a fear of Arsenic poisoning, which will lead to serious health hazard such as Cancer and skin pigmentation problem. The need for water purifiers is therefore high. Appendix 3 illustrates the regions in India, which suffers from serious Arsenic contamination.
Government Policy and Legislature
A study of the Indian Government policy shows that the local government welcome foreign investment under Foreign Direct Investment (FDI). Under FDI policy, the local government offer tax concession for foreign investment in Free Trade Zone. However, all foreign investment needs registration and approval by Reserve Bank of India (RBI). This policy is under Foreign Exchange Management Act, 1990 (42 of 1999) Section 47 sub-section (2) clause (h). In addition, export oriented firms are not subjected to income tax. Therefore, if Blair Company, Inc. cannot achieve sustainability in the local market, it may consider export Delight water purifier to other parts of the world under Licensee or Joint Venture.
RBI has approved sixty industry categories via the automatic route for FDI. Water purifier is in one of the approved category i.e. under consumer durables. Under FDI, the government allow full and free repatriation of capital, royalty and dividens. The approved entry strategies, under Companies Act, 1956 Chapter I-VII, are Acquisition of an Indian Company or Joint venture with an Indian Partner. Joint Venture also includes licensing a right to product or sell a product locally. Therefore, Blair Company, Inc. can repatriate its investment fully and freely under Licensee or Joint Venture or acquisition.
Indian economy has been progressing positively in a rapid fashion. As per Indian Infoline Ltd, the Gross Domestic Product (GDP) is Rs36.7 Trillion which is approximately US$1.2 Trillion. The growth rate has been at 3.8 percent per year. There has been relatively low market saturation in the consumer durables sector. This is beneficial for Blair Company, Inc. in its introduction of Delight water purifiers. In addition, Indian market is ranked second most attractive place for investment by prominent analyst in Decan Herald News.
The infrastructures of India to be discussed in this section include the air and sea ports of entry and the power and water supply. The air and sea ports of entry are important because Blair Company, Inc. needs to consider importing key components to India for assembly or delivery for domestic or for the global market. The power and water supply are important as Blair Company, Inc. needs to consider the needs of water purifiers and its ability to function in case of power failures.
The major ports of entry by air are in:
* Kolkata (Calcultta)
The major ports of entry by sea are in:
* Kolkata (Calcultta)
Reliability of Power Supply in India
As Delight water purifiers require electricity to function. The reliability of power supply in India is therefore important. Appendix 5 illustrates the statistics of power shortage in Indian since 1997 to 1999. Appendix 5 shows the percentage of power failure per year basing on four major regions. The condition is gradually improving. The entire of India has an average of 2 to 3 hours of blackouts.
Water Supply in India
Appendix 6 illustrates the shortage of water supply in for major regions. The results show that the two major cities, Chennai and Kolkata, have insufficient safe drinking water. Other cities like Mumbai and Delhi, results may show that there is sufficient safe drinking water; however, it is doubtful whether the quality meets the standards set by World Health Organisation (WHO).
Appendix 7 illustrates the Pro forma Income statements of Joint Venture through Dealer and Direct Sales under Skimming and Penetration pricing strategies for 2 regions, 4 regions and national market. The calculation is a quantitative method of analysing the Market Development strategies. In the calculations, the following are assumed:
* Labour cost is at Rs25 per hour
* 5 working days in a week
* employees work 8 hours a day
* Return of Investment is at 20%
* Advertising Expenses i.e. advertising and promotion expense at Rs2,000,000
* Administrative expense i.e. administration salaries 5% of Sales
The results show that through Direct Sales force, there is high net profit generated however there is also very high risk. Though through Dealer generate lower net profit, however, the risks are about 6 times lesser. Therefore, it is important to sell Delinght water purifiers through Dealer.
Though the analysis show potential benefits for Blair Company, Inc. to enter the Indian market. It is necessary to analyse other similar product category that may share the same entry pattern as water purifiers. The product chosen is Air Conditioners. The reason this product is chosen is because, both products are consumer durables, both consume electricity. It is important to understand how the Indian consumers perceived of home appliances that consume electricity. Both products are merchandise which is relatively high priced and would require consumers to consider before buying.
According to a research done by AIG, the result shows that within three years of entering the Indian market, Lucky Gold Star (LG) has over taken many well established American competitors. LG has emerged to become the market leader and holds 29% market share. However, the total number of air-cons sold in India is a low of 980,000 units in the domestic market. The reason is due to its high price of a minimum of Rs15,000. In addition, as one of the most important attribute is ‘whether there is cheaper options’. Apparently, middle class Indians resort to cheaper fans and air coolers.
LG entered the market via Joint Venture with an Indian partner. It out beat its American competitors by differentiating itself in term of technology such as energy efficient. It s promotion strategy is based on health benefits. For instance, air-purification features so that family members breathe clean air. LG also has strong after sales and customer service. This gives customers the confidence in its product. LG penetrated the market through selling its air-cons at a cheaper price and more features than its other competitors.
Similarities between Indian and Australian markets
The similarities between Indian and Australian markets are that both exhibit homogeneous consumption patterns. Both markets are concern with cleanliness of drinking waters. Consumers from both markets are discerning, and purchase product for value for money. Both markets are concern with origin of products.
Differences between Indian and Australian markets
Australian consumers have fair decision making process, where husbands and wives consult each other before decisions are made. Australia is a low context culture. Australian consumers have higher dispensable income; they have higher purchasing powers. Australia has government support for education thus, higher literacy rate.
Considerations of various modes of entry
Appendix 8 illustrates trade-offs and benefits of various modes of entry. Various modes of entry have advantages and disadvantages. In this case study, it is important that Blair Company, Inc. to consider choosing Joint Venture. This allows the firm to have market present for the domestic market. In addition, the firm can consider future low cost manufacturing and exporting the products to other parts of the world thereby increasing profit margin.
Having analysed on the relevant information, it is important to formulate strategies to effectively introduce Delight water purifiers to the Indian market.
Target Market (by regions)
The target markets are Kolkata and Chennai where consumers are consuming dangerous Arsenic elements. It is important to target this market due to better probability of selling water purifiers in the regions that needed water purification device.
The consumers targeted are the middle class housewives. This is because they have more exposure to contaminated water therefore they are vulnerable. In addition, since film-watching is considered ‘national passion’, promotion can be done over radio and television to entice them to buy Delight water purifiers. In addition, as homemakers, they are more concern with family health; they will be motivated by advertisements to improve cleanliness in drinking waters. Lastly, wives have high influential powers on decision-makers, it is strategic to target housewives to motivate husband to buy Delight water purifiers.
Market Development Strategies
Based on information analysed, the group has decided on Joint Venture through Dealer to develop the market for four regions. The four regions are Mumbai, Delhi, Kolkata and Chennai. Due to the low spending power of Indian consumers and the high context culture, it is important that Blair Company, Inc. has market presence. It needs to manufacture Delight water purifier in India in order to compete with other competitors. Joint Venture allows control over the firm’s strategies as compared to License; the firm has no control over the agents marketing strategies. Through direct sales, where the sales commission is high, it is important that the firm distribute it product through a dealer. In terms of Return on Investment (ROI) and Risk, selling Delight water purifiers under Penetration pricing strategy is appropriate.
Marketing Mix strategies
Price – In other word, to compete in the Indian market, Aquaguard price of Rs5,500 is the ceiling price. As Aquaguard has brand equity, Delight cannot be priced beyond Rs5,500. Therefore, in order to capture the market, Delight needs to adopt penetration pricing strategy and it can be done only through Dealer. It is also possible that Aquaguard does the advertising through Direct Sales, while discerning Indian consumers buy Delight it gives more features and value at the lower price.
Promotion – Blair Company, Inc. can promote its Delight water purifiers through Bollywood, Television and Radio as film watching is ‘national passion’. Appendix 8 shows the capabilities of Bollywood as a advertising medium.
Product – Blair Company, Inc. should consider cost cutting measures. In order to increase market share, the water purifiers need to be cheaper so that more Indian consumers can afford to buy. It needs to be position as a health product.
Place – The most cost effective method to distribute Delight water purifiers is through Dealer. As the sales commission per unit is high, and ultimately Delight will not be able to compete effectively when the price to the consumer is higher that the ceiling price. Only through Dealer that the ultimate selling price to the consumers be below the ceiling price.
Need for Field testing – There is no need for field testing. This is because the results from the field testing of 20 units of water purifiers cannot be generalised to the entire Indian market. The technique is too costly; it costs as much as Licensee.
Consideration of other market entry options in Latin America Vs Indonesia
Appendix 9 illustrated the corruption ranking many countries, done by Transparency International Research Institution. Indonesia is ranked the lowest among the prospecting markets. It is apparent that Indonesia has high corrupted bureaucracy as compared to the Latin American countries. According to Global Investments Prospects Assessment (GIPA), as illustrated in Appendix 10, Latin America is more attractive for investment while Indonesia is not in the chart. Latin America is prospective for Blair Company, Inc. to enter the market.
There is no strategy that is ‘fool-proof’, therefore, the contingency plan for this case study based on various scenarios have been summarised.
1. If there is sudden change in the FDI policy that may negatively impact the firm should consider entering the Latin American region. The reasons are that geographically, Latin America is closer to the firm as compared to India and Indonesia. This region exhibits lesser corruption than that in India and Indonesia. Thirdly, the economy in Latin America is vibrant.
2. In the case where the Indian domestic market is sluggish in the sales of Delight water purifiers, the firm should consider exporting the product to other parts of the world. This way, the firm can take advantage of the low manufacturing cost and improve profit margin.
This report has identified the issues that Blair Company, Inc. needs to consider i.e. whether to enter the market with their existing product, i.e. Delight. Having analyse various aspect of the issues, such as SWOT analysis, situation analysis, customer analysis and product analysis several findings have been derived. Findings market development strategies, target market, marketing mix strategies and contingency plans have been formulated.
It is recommended that the firm should consider developing the market further to the business sector. The B2B sector includes food chains, restaurants and ‘fizzy’ drink manufacturer such as Coca-cola.
It is also recommended that to reduce cost, the firm should consider multi-layer marketing. This enables the consumers to gain a small profit while the firm’s product can be marketed via word of mouth.
Radio is also recommended as an advertising medium because, in Indian movies, it is important to have theme songs and heroes. If the advertisements are endorsed by celebrities singing the theme songs, the songs can be played over the radio to can brand equity.