International Bussiness - Individual Assigment Aug 2010 Alen Joseph

8/8/2019 International Bussiness - Individual Assigment Aug 2010 Alen Joseph

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COUNTRY

FACTORANALYSIS

International business

Individual Assignment number I

Due date August 20th

2010Submitted on August 20

th2010

BYALEN JOSEPH


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Globalization refers to the shift towards a more integrated and interdependent world economy. This

basically means that world has suddenly become one huge common market. A product which might be

have been produced in one country is exported to the other. Sometimes the countries might have

production houses of each country in order to cut down on labour cost &Exporting cost . Globalization

of a product is on a rise as it is targeted at huge wider market and it also hopes to gain from national

difference in exchange rate.

In this context when we are looking at a Australian product to be launched in an another country .

The first name that pops up the mind is of the famous VEGEMITE. It is one product which is

closest to the heart of all Australians is VEGEMITE. It was launched 1922 and was invented by Cyril.P.

Callister. Vegemite is a dark brown Australian food paste made from yeast Extract. It is used for

sandwiches, toast, crumpets and filling for pastries.

Vegemite is made from used brewers' yeast extract, and various vegetable and spice additives. It is salty,

slightly bitter, and umami or malty similar to beef bouillon. The texture is smooth and sticky.

Vegemite is a name popular name in all households in Australia. Morning breakfast or evening snack is

incomplete without vegemite.

Inventor Cyril P CallisterLaunch year 1922

Company Fred Wakker & Co

Current supplier Kraft foods

Nutritional value of Vegemite-

y Its unique taste & its Nutritional value It is a rich in Vitamin B. It is also rich in vitamins B1, B2, B3

and folate. A single 5g serving of Vegemite provides from 25-50% of the recommended daily

intake for these four vitamins

y It has no added colors or flavors

y It contains no added sugar

y Rich source of protein.

y It is advisable to be taken by females during the child bearing age.

y It is vegetarian food.

y Is more tooth friendly compared to jam or choc nut spreads


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Advantages of Indian market over others

1. One of major factors in food industry is the ready availability of raw materials in India because

of diverse agro climatic conditions .Therefore is a huge scope for food processing industries.

2. Low labor cost.-The relatively low-cost but skilled workforce can be effectively utilized to set uplarge, low-cost production bases for domestic and export markets.

3. The presence of the whole value chain. Therefore resulting in many Multinational companies(MNC) setting up factories in India in order to provide for both the local markets as well as to

export to other countries.

In order to understand the challenges and opportunities of Indian market . We should have an over all

idea about the political, cultural, economic factors in India which play a huge role in influencing the

market.

Economy of India

India is ranked 5

th

largest economy in the world with GDP estimated at $1.2 billion. In Indian fiscal yearIFY 2008/09 (April & March). Indian economy was growing by an average of over 9% over the last 3

fiscal years. India has a population of over 1 billion and a rapidly growing middle income population of

over 300 million. The Indian economy is ranked above various developed countries like France, Italy,

United Kingdom and Russia. The GDP growth of India is the 3rd

largest in Asia as a whole.


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Opportunities in Indian market economy

Huge market -Indian consumers spend a large share of their income on food with share of expenditure

on food& beverages estimated at 42.3% of total private consumption expenditure in IFY 2007/2008.

Consumer demographics India has a large & growing middle class 300 million .It also has a large &

growing young population- The medium age of the population is 24 & over 100 million Indians are in the

age bracket. Assuming the Indian economy goals at a real compound rate of 7.3% from 2005- 2025.

Indian income levels would triple & middle class population would grow spread beyond top tier to

middle tier & small cities.

Growth in real household disposable income will likely grow from Rs 113744 in 2005 to Rs. 318896by

2025. A compound annual growth rate of 5.3%.

As the Indian household income rises so would overall spreading & consumption making India the fifth

largest consumer market by 2025.

Risk involved

India is distant from all the major markets. Therefore, the cost of shipping is high and shipping time adds to the

disadvantage. Cost of shipping is also affected by the fact that inbound freight traffic has been low - therefore,

container movement is not at its most cost-efficient. This is changing as India imports more products and inbound

freight traffic increases.

India also lacks any serious trade pact memberships, and therefore does not receive preferential access to the

major markets. This leads to quota and duty disadvantages, which depress the sourcing volumes from India far

below their potential.

Fragmentation of supply base also creates barriers to achieving true integration between the various links in

supply chain. This creates issues of lack of control and lack of consistent or reliable performance. The huge

geographical spread further complicates this issue.

India is home to six million retail outlets, including 2 million in 5,160 towns and four million in 627,000 villages.

Super markets virtually do not exist in India. This makes logistics particularly for new players extremely difficult. It

also makes new product launches difficult since retailers are reluctant to allocate resources and time to slow

moving products. Critical factors for success are the ability to build, develop, and maintain a robust distribution

network

Political situation of indiaIndia is democratic country by democratic we mean that the government is formed by the people

exercised by elected representatives. The current political situation in India is fairly stable as congress isheading the government for few years now.

Indian economy is a mixed economy it means that few sectors which are of national importance like

security , sale of arms etc are under government control. However there are other sectors which are

entirely privatized like the FMCG sector. Therefore both private and government institutes exist. India

lately has been promoting privatization even more. A lot of sectors which were earlier under the

government have been privatized like electricity etc.


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Opportunities

Government Assistance-The Government has introduced several schemes to provide financial

assistance for setting up and modernizing of food processing units, creation of infrastructure, support

for research and development and human resource development in addition to other promotional

measures to encourage the growth of the processed food sector.

Foreign Direct Investment-Foreign direct investment (FDI) in the country's food sector is poised to hit

the US$ 3-billion mark in coming years. FDI approvals in food processing have doubled in last one year

alone. The cumulative FDI inflow in food processing reached US$ 2,804 million in March '06. In '05-06,

the sector received approvals worth US$ 41 million. This figure is almost double the US$ 22 million

approved in 2004-05.

Conducive food processing policy environment The national policy on food processing aims at

increasing the level of food processing from the present 2 per cent to 10 per cent by 2010 and 25 per

cent by 2025. The government has allowed 100 per cent FDI in processing sector.

Risk involved-

y Indian Bureaucratic procedures The business still has to deal with inefficient slow-moving

bureaucratic procedures.

y Corruption -India bureaucracy also comes in top ten corrupt nations in the world.

y The reservation for the small scale industries is high in India. Which became as the

y Excise and other tax imbalances. The political diversity of India 35 states and union territories,

and a coalition of ruling parties has led to show progress in rationalizing these imbalances due to

debate and discussions.

y Labour laws are still seen to be relatively unfriendly to business. The labour laws in India are out

dated.

Culture of India

No market study is complete without taking into account its culture . Which often determines whether a

product will sell in the market or not. Indians do not mind investing on good food. Food has always been

close to Indian hearts.

Advantages

Indians spend a lot on buying good and labeled food because of the globalization, education,

globalization, double income households, exposure to the western food habits has brought about a huge

change in the food habits of Indians.


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Market offers less options - The Indians do not have much of options in terms of bread spreads . their

choices are limited to jams, cheese, butter/peanut butter. Vegemite will prove to be a new variety in the

market and will be instant hit with the youth. As they have a inherent habit of trying out new

international brands. It should be noted that majority of the current Indian population is under the age

of 25yrs.

The challenge in the culture of Indian market

Indian taste buds differ form place to place. What works in one state might not work in the other.

It is its diverse nature. Indias market is divided into two parts the rural india and urban india. It is the

urban population that our product will be looking at. However there should be long term goals of

reaching out to the rural market which huge and mostly untapped.

Competition from other huge names like Kisan, Amul. However it should be noted that there are not

many players in this sector which opens up opportunity for success. It should be noted that both the

above mentioned names are Indian brands and therefore there are practically no major multinationalplayers in the bread spreads in India. Which is a golden opportunity for any brand in the sector.

The buying culture in India is dominated by both quality andprice. As most of the multinational brands

who fail in india due to their high rates. Therefore the companies have come up with small packets of

the same product in order to fit the budget of all. For E.g. Kisan Jam has come up with small packets of

jams for Re 1. This has been the strategy used by big brands to enter the huge rural Indian market which

is largely untapped.

Decision makers

The consumer market in india. In order to succeed in any market. We need to understand who makes

the decision of buying a particular product at home. Therefore let us now look at the key decision

making people in the family . whom we call our target group for any marketing strategy.

Beyond basic needs, households make their children's future a clear priority; education is seen as a

passport to a better tomorrow. To gain a winning edge, parents spend much money and effort securing

the right schools and tutoring for their children and invest in nutrition, computer games, and books. As

a result, several categories of productsfrom protein powders to educational toyshave enjoyed rapid

growth.


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Target group of consumers in Indian market

According to publication released by Spenser Stuart India one of the leading executive search consulting

firms privately held since 1956. There were three major emerging segments in the Indian consumer

population namely the kids, youth & women

With about 300 million children in the age group of 4- 14 years of age in India which is a huge for any

market. The children have come to be important decision makers as to what is to be bought at home.

Specially when it comes to morning breakfast.

Youth power with about majority of the population of India falling under the category of below 25

years of age. They are not only brand conscious but also do not compromise on quality.Woman In Indian home the lady in the house often decides what comes home. What is best for the

family therefore lately the markets have started targeting the women population. The woman

population of india generally wants both quality as well as price.

Suggestions to succeed in Indian market

Tailoring the business model to India

Knowing what makes consumers tick is a vital first step. To capture their hearts and wallets

profitablycompanies must use that knowledge to tailor the business model to local conditions.

Offer value at the right price

Getting the price right is just as important. Although the incomes of Indian consumers are growing, they

still have many competing pulls on their modest budgets. Winning companies thus have learned the

importance of affordability. Affordability also has a bearing on price points for everyday products,

sometimes in a paradoxical way. The shampoo market, for example, was revolutionized by ten-milliliter

sachets, priced under five cents each. In ten years, the shampoo-buying share of India's population

increased to 45 percent, from 18 percent, and such sachets drove almost all of this growth despite theirpremium price per unit of volume. These products succeeded because consumers who could not afford

to spend 20 to 30 times more on a bottle of shampoo can now opt for single-serve portions.

Children

Youth

Woman


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Getting distribution right

The key to distributing products successfully in India is to rely on a third-party network, since building

one takes too long and is ultimately more expensive. Unilever, for instance, has achieved national reach

through more than 20 distribution centers, run by third-party agents, that transport and store its goods.

These centers serve in excess of 7,000 distributors, which use salespeople trained by Unilever to workwith more than eight million retailers

The study of Indian market and overall economy before taking theplunge. Research firms in India can

provide the information to determine how, when and where to enter the market. There are also

companies which can guide the foreign firm through the entry process from beginning to end --

performing the requisite research, assisting with configuration of the project, helping develop Indian

partners and financing, finding the land or ready premises, and pushing through the paperwork

required.

The unique sourcing channels - existence of number of intermediatories involved between the

importer & retailer. An organized retailer may source an imported product directly through an exporteror through an Indian importer or a distributor or directly from exporter/ manufacturer.

Conclusion India despite its existing challenges and huge diverse market. Has great potential of untapped market.

Moreover the Indians do not have much of options available to them in terms of bread spreads.

Therefore Vegemite can become a household name in India has it has in Australia.

Consolidator

DistributorImporterAustralian exporter


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Bibliography

International market entry and expansion via independent or integrated channels of distribution

E Anderson, AT Coughlan - The Journal ofMarketing, 1987 - JSTOR

Referred date 11/8/2010

http://finmin.nic.in/foreign_investment/fii/index.html

Referred Date 12/8/2010

http://www.indianmba.com/Faculty_Column/FC519/fc519.html

http://www.indianembassy.org/newsite/Doing_business_In_India/FDI_Policy_Procedures.asp

Referred date 13/8/2010

http://www.naukrihub.com/india/fmcg/scope/

http://www.ibef.org/download/indianbazaar_jan19.pdf

http://www.chillibreeze.com/articles_various/fmcg-in-india.asp

http://www.researchandmarkets.com/reportinfo.asp?report_id=403137

http://www.researchandmarkets.com/reportinfo.asp?report_id=403132


http://info.shine.com/Industry-Information/FMCG/780.aspx

http://myfmcg.blogspot.com/2009/09/challenges-before-indian-fmcg-sector.html

http://www.docstoc.com/docs/14591795/FMCG-sector

http://www.imexmanagement.com/content/shows/resources/pdf/24.pdf

http://mofpi.nic.in/ContentPage.aspx?CategoryId=148


http://www.3isite.com/articles/insight1.htm

International Bussiness - Individual Assigment Aug 2010 Alen Joseph

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