GLOBAL BUSINESS

ENVIRONMENT ASSIGNMENT

BY-

SRISTI SINHA (456)

CHELNA LUNKAD(517)

COUNTRY NAME

COMPANY PROFILE

Name of the company: Royal Indian Handicrafts

• Royal Indian Handicrafts is one of the biggest handicrafts company in India.

• Its main office is in Jaipur.

• It exports its handicrafts to the following places-

Japan

China

Spain

Italy

Russia

France

Portugal

Our company exports handicrafts which includes-

• Art metal Wares

• Wood wares

• Hand printed textiles & scarves

• Embroidered & Crotched Goods

• Shawls as artwares

• Zari & Zari goods

• Imitation Jewelery

• Misc. handicrafts.

GERMANY

OVERVIEW: GERMANY CONSUMER MARKET

The German consumer market is one of the largest in the

European Union. Germany's population is currently estimated

at about 81.726 million persons (as of 2011), which includes

citizens, permanent residents and other residents that are

permitted to live in Germany, e.g. persons with work permits

for both part time jobs and full time jobs.

It is the second largest exporter and third largest importer of

goods.

Germany (GDP per capita: US$ $43,741 in 2011) has one of the

most affluent consumer markets in the European Union.

Germany's economy appears to not changed much despite the

European Union (EU) crisis. It is the fourth largest economy in

the world (by nominal GDP) & fifth largest by PPP.

PESTLE ANALYSIS• P: POLITICALLocation: Central Europe

Officially known as Federal Republic of Germany

Area: 357, 104 Km2

Capital City: Berlin

State System: Democratic-Parliamentary Federal State

Administration:16 states

Time Zone: Central European Time (CET)

Currency: 1 Euro=100 cents

Gross National Income: EUR 2, 529. 78 Billion

President: Jaochim Gauck

3 levels of government: Federal, States & Local.

Main political parties in Germany are-The Christian Democratic Union (CDU) and The Socialist Democratic Party (SDP).

Germany was a founding member of the European Community in

1957, which became the EU in 1993. It is part of the Schengen

Area, and since 1999, a member of the euro area. Germany is

a great power and member of the United

Nations, NATO, the G8, the G20, the OECD and the Council of

Europe, and took a non-permanent seat on the UN Security

Council for the 2011–2012 term.

Also a part of WTO, World Bank, IMF, UNCTAD & UNDP.

• E: ECONOMICALLargest Economy in Europe, fourth largest by Nominal GDP in

the world & fifth by GDP(PPP)

1 Euro = Rs 69.99

GDP (Purchasing Power Parity): $3.194 trillion

GDP(nominal): $3.367 trillion

Foreign Exchange Reserves (Million): 250, 603

Nearly 40 Fortune 500 Companies are headquartered in Germany.

Labor force - by occupation

• agriculture: 1.6%

• industry: 24.6%

• services: 73.8% (2011)

Among the world's largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, shipbuilding, textiles.

Inflation Rate-0.57% (Jan 2013-Feb 2013)

Unemployment Rate in Germany increased to 5.90 percent in

January of 2013 from 5.30 percent in December of 2012

Germany introduced the common European currency, the

euro, on 1 January 2002.

Its monetary policy is set by the European Central Bank.

6th largest consumer of energy.

Committed to Kyoto Protocol.

Literacy rate among men and women: 99% (as of 2009)

Approx. 4.4% of GDP invested in education.

Germany's health care system was 77% government-funded and

23% privately funded as of 2005.

Germany is a transport hub. Mostly has motorways and high

speed trains. It has 2 large airports- Frankfurt airport &

Munich airport.

S:SOCIAL

Established Comprehensive System of Social Security

HDI=0.905. Index is based on

• Life expectancy at birth

• Adult Literacy Rate

• Standard of Living

Ethnic groups: German 91.5%, Turkish 2.4%, other 6.1% (made up largely of Greek, Italian, Polish, Russian, Serbo-Croatian, Spanish)

Religions: Christianity (50%), Other religions (3%), Islam (2%), Buddhism (1%), Non religious(38%), Not stated (6%)

Languages: German (>95%): official language, English (51%), French (15%), Russian (5%):main foreign languages.

The United Nations Population Fund lists Germany as host to

the third-highest number of international migrants

worldwide, about 5% or 10 million of all 191 million migrants.

Population Density: 229/ km2

Per Capita: $ 41,168 (GDP: Nominal)

Median Age:

• Male-42.2 years

• Female-44.7 years

Sex ratio: Male: female :: 1.06:1

T:TECHNOLOGICAL

Germany is one of the leading countries in developing and using

green technologies.

107 million mobile cellular users (9th in the world)

62.073 million internet users (6th in the world)

German companies represent 15.6% of research advanced goods

worldwide, ranking 2nd in the world (followed by US)

The Federal Government provides funding through annual grants

or endowment capital

In 2010 the Federal Ministry of Economics and Technology

created a budget of 2.3 billion Euros for technology research

and development.

L:LEGAL

Law enforcing System is divided at 3 levels-

• Federal

• State &

• Local

Historically speaking, German Law in part goes back to Roman

Law and in part dates back to numerous other legal sources in

the various German regions.

In surveys on Political and Legal Stability, foreign investors put

Germany second only to Great Britain. This legal stability

attracts foreign companies and is to the benefit of investments

and entrepreneurial activity in Germany.

All industrial imports into Germany are subject to an "Import

Turnover Tax" of 19%, which is charged on the duty-paid

value of the import article plus the customs duty, which varies

by item.

It is important, however, to collect and present all invoices as

originals in order to deduct any VAT charges from one's own

tax liability or to get reimbursed by the German Ministry of

Finance, if eligible.

To engage in "Crafts" you may need the approval of a trade

association and establish the fact that you meet German

standards relating to specific qualifications for your chosen

craft.

Imported goods must be accompanied by a customs

declaration, which has to be submitted in writing, and an

invoice in duplicate. Normally the German importer files this

declaration. The commercial invoice must show the country of

purchase and the country of origin of the goods. The invoice

should contain:

• (company) and address of seller and buyer

• Place and date of issue

• Number, kind of packages

• Precise description of articles

• Volume or quantity in normal commercial units

• Invoice price (in invoice currency)

• Terms of delivery and

• Payment.

In addition, a certificate of origin may be required in some cases.

Customs duties vary according to material and product. Though

duties are high for a few items, i.e., dried flowers, potpourri

(16.7-20 percent), T-shirts (12.0-13.2) and hand-

woven, woolen blankets (13.4 percent), the majority of

customs duty rates falls in the range of 5-8 percent.

In addition, there is a 16 percent sales tax, which is eventually

passed on to the consumer in form of the value-added tax

(VAT). But the VAT has to be paid when entering the German

market by the exporter/German importer.

E:ENVIRONMENTALEurope’s largest & world’s 6th largest carbon emitter

After signing Kyoto Protocol,

• 22% reduction in carbon (Cox) emissions.

• 39% of wind energy of world’s requirement.

• Committed to use renewable energy source in future.

Climate: Cool, continental climate with abundant rainfall and long overcast season. Lower temperatures with considerable snowfall in east and south.

Prone to rapid weather variations from merging of Gulf Stream and extreme northeastern climate conditions.

January: coldest month

Annual precipitation varies from 2,000 millimeters a year in the southern mountains to a low of 400 millimeters in the vicinity of Mainz. Over most of the country, it averages between 600 millimeters and 800 millimeters per annum.

WORK PERMIT IN GERMANY

To qualify as for a German work permit, the basic requirements for the employee and the German company are as follows:

• The potential employee has to be employed on equal terms as a German employee.

• German or other European nationals are not available to fill the position.

• Usually the employee must have a university degree or comparable qualification. For some positions there are special requirements.

• The German company must be registered at the LaborAuthorities in Germany and apply for a Corporate Registration Number.

STARTING UP A BUSINESS IN

GERMANY

Starting a business in Germany is relatively straightforward.

While there are formalities to follow, the basic procedures and

regulations of starting a business in Germany do not significantly

differ from those in English-speaking countries. German law

makes no distinction between German nationals and foreigners

when it comes to establishing companies in Germany. There are

also no restrictions on the repatriation of profits. Much like in

English-speaking countries, German law distinguishes between

limited companies, joint stock companies (similar to a public

limited company), and other forms of partnerships.

STEPS-

• The first important steps are to contact a financial or tax advisor. They will know if it is necessary to hire a notary and how to register the business at the local court(Amtsgericht).

• Shortly after this, the chamber of commerce should contact you, having received your details from the commercial register.

• The next step is to organise two sets of tax registration, one for commercial tax at the so-called Gewerbesteueramt and one at the local tax office (Finanzamt).

• After this it is possible to obtain a certificate of registration (Gewerbeanmeldeschein) and to commence business.

Keep in mind that if you must have atleast 25,000 euros in the case of limited liability company and 50,000 euros for a joint stock company.

Foreigners intending to open a business in Germany can obtain a residence permit if there is an overriding economic interest or a regional demand, if the activity can be expected to have a positive impact on the economy and if the funding is ensured.

HANDICRAFTS INDUSTRY IN GERMANY

Germany is famous for the quality and detail of its traditional

handicrafts. Traditional motifs that incorporate natural

elements are still popular, adorning clocks, Christmas

decorations (which are almost synonymous with German

crafts), and even candy.

In the European Union, only 2 countries which have the most

significant number of buyers for handicrafts are- Germany and

Italy. Even though China is a major handicraft importer, India

is not behind. Indian SMEs have increased their supply of

production of handicrafts. There is a significant market

potential for Indian handicrafts in Germany.

Germany is the largest market for giftware and handicrafts items

in Europe.

HANDICRAFT INDUSTRY IN INDIA

• India is one of the important suppliers of handicrafts to

the world market. The Indian handicrafts industry is

highly labour intensive cottage based industry and

decentralized, being spread all over the country in rural

and urban areas. Numerous artisans are engaged in crafts

work on part-time basis. The industry provides

employment to over six million artisans (including those

in carpet trade), which include a large number of women

and people belonging to the weaker sections of the

society.

SWOT ANALYSIS

S: STRENGTHS

• Diversified and potential market.

• Large product variety and range due to the diversified culture

means more options to the customers.

• This legal stability attracts foreign companies and is to the

benefit of investments and entrepreneurial activity in

Germany.

• Flexible production from India.

• Cheap cost of the handicrafts.

• Good distribution.

• Some products have various applications.

W:WEAKNESS

• Some materials are too sensitive and can break easily.

• Trade barriers are strict in Germany

• No proper co-ordination between the government and private

players.

• Lack of promotion of the handicrafts.

• Poor advertising strategies.

O:OPPORTURNITIES

• Have more customers.

• Developing fashion industry requires handicrafts products.

• More demand of Indian Handicrafts.

• Germany has technology, man power and transparent system

of working.

• Expansion of the handicrafts industry.

• Has the opportunity to beat China for the No. 1 spot.

• Internet shopping of Indian handicrafts now available.

T:THREATS

• China is the biggest threat since they have a higher market

share in the handicrafts sector.

• Better trade terms offered by other competing countries.

• Balance between demand and supply.

• Increased and better technological support & R&D facilities in

competing countries.

• The recent hike in job losses in Germany.

• Entry of new competitors.

• Buyer’s perceptions about the brand/product..

• Buyer’s changing tastes and needs.

• Adverse shifts in foreign exchange rates and trade policies of

foreign governments.

MICHAEL PORTER’S 5 FORCE

MODEL

RIVALRY AMONG EXISTING

COMPETITORS

THREAT OF NEW

ENTRANTS

BUYER POWER

THREAT OF SUBSTITUTES

SUPPLIER POWER

Rivalry among existing competitors: Chinese competitors, local

competitors and the existing Indian competitors.

Threat of New Entrants: Different country handicrafts

Threat of Substitute Products: Other handicrafts companies

giving the same handicrafts with more options.

Threat of buyers growing bargaining power: If the buyer is well

known about the product, buyers are more concentrated on the

sellers and substitutes are available, then it is high.

Threat of Suppliers Growing Bargaining Power: pressure

suppliers can exert on businesses by raising prices, lowering

quality, or reducing availability of their products.

STP:SEGEMENTATION,TARGETING,POSITIONING

S:SEGMENTATION

• All Age Groups (above 16 years)

• All Income Groups

• Majority Women

DEMOGRAPHIC

• Urban AreaGEOGRAPHIC

• Brand Loyalty

• Product Usage RateBEHAVIOURAL

T:TARGETING

• Mainly women ( especially students, house wives and working

both)

• People with interest in antiques and handicraft.

• Creatively innovative people.

• People who understand art, design, culture and aesthetics.

P:POSTIONING

“An effort to influence consumer perception of a brand or product relative to the perception of competing brands or products. Its objective is to occupy a clear, unique, and advantageous position in the consumer's mind.”

Differentiation is based on:-

• Quality

• Pricing

• Unique

• Availability

MARKET ENTRY STRATEGIES

The German market is decentralized and diverse, with interests and tastes differing dramatically from one German state to another. Successful market strategies take into account regional differences as part of a strong national market presence. For investors, Germany’s relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help to move effective tax rates to internationally competitive levels.

• DIRECT EXPORT: The company directly sells to the costumer.

• INTERNET MARKET ENTRY has become an increasingly famous way of entering into the market. This has resulted in the concept of International Internet Marketing.

• JOINT VENTURE: Establishing a firm jointly with one or two or more independent firms .

• MELA: The Indo-German Mela which happened recently in Pune could be held in Germany as well but with a separate sector of handicrafts.

*Foreign entrepreneurs may be granted a settlement permit after three years if their business is successful and their livelihood is assured.

OUR APPROACH

• General Partnership/ joint venture with

“Spiegel”.

• Spiegel is currently online and is planning to

open up a store. Taking the benefit of a store

opening, we shall do a JV or general

partnership.

PROMOTIONAL STRATAGIES

• Pull Strategies

• Promotional strategies that pull the product toward the end user by enticing the consumer to buy the product.

• For this we will go for advertising because advertising is geared to attract a customer's attention to help win his/her loyalty .For this we will use radio, television, billboards and the printed press.

• A small booklet can be provided on the planes which has info on our company and our products. And also in how many ways can you use the handicrafts.

Contd……

• INDO-GERMAN Handicraft Fair. This is a fair which will showcase various Indian Handicraft items in Germany for a few days.

• Contests

Contests are a frequently used promotional strategy. Many contests don't even require a purchase. The idea is to promote your brand and put your logo and name in front of the public rather than make money through a hard-sell campaign. People like to win prizes. Sponsoring contests can bring attention to your product without company overtness.

Contd…

• Mail Order Marketing

Customers who come into your business are not to be overlooked. These customers have already decided to purchase your product. What can be helpful is getting personal information from these customers. Offer a free product or service in exchange for the information. These are customers who are already familiar with your company and represent the target audience you want to market your new products to.

Contd…

• Social Media

Social media websites such as Facebook and Google+ offer companies a way to promote products and services in a more relaxed environment. This is direct marketing at its best. Social networks connect with a world of potential customers that can view your company from a different perspective. Rather than seeing your company as "trying to sell" something, the social network can see a company that is in touch with people on a more personal level. This can help lessen the divide between the company and the buyer, which in turn presents a more appealing and familiar image of the company.

Contd..

• Product Giveaways

Product giveaways and allowing potential

customers to sample a product are methods

used often by companies to introduce new

food and household products. Many of these

companies sponsor in-store promotions, giving

away product samples to entice the buying

public into trying new products.

Contd..

• Promotional Gifts

Giving away functional branded gifts can be a

more effective promotional move than handing

out simple business cards. Put your business card

on a magnet, ink pen or key chain. These are gifts

you can give your customers that they may

use, which keeps your business in plain sight

rather than in the trash or in a drawer with other

business cards the customer may not look at.

Contd..

• Customer Appreciation Events

An in-store customer appreciation event with free refreshments and door prizes will draw customers into the store. Emphasis on the appreciation part of the event, with no purchase of anything necessary, is an effective way to draw not only current customers but also potential customers through the door. Pizza, hot dogs and soda are inexpensive food items that can be used to make the event more attractive. Setting up convenient product displays before the launch of the event will ensure the products you want to promote are highly visible when the customers arrive.

Contd..

• After-Sale Customer Surveys

Contacting customers by telephone or through the mail after a sale is a promotional strategy that puts the importance of customer satisfaction first while leaving the door open for a promotional opportunity. Skilled salespeople make survey calls to customers to gather information that can later be used for marketing by asking questions relating to the way the customers feel about the products and services purchased. This serves the dual purpose of promoting your company as one that cares what the customer thinks and one that is always striving to provide the best service and product.

DISTRIBUTION CHANNEL• Distribution intermediaries

While exporting, choosing the right trading partner is very important. As mentioned earlier, the trade structure of the handicrafts and wooden gifts market in the EU is very complex. Therefore it is a must for exporters willing to export to the EU to find out the best trading partner according to their specific profile, product range and goals. Some main distribution channels exporter may consider are -Agents

• Importers-wholesalers

• Buying Groups

• Retailers

• Export marketing organisations.

Thank you