Markt Entry Vibrant India Dag
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Market Entry Entering the Indian market requires a thorough understanding of Product, Place, Promotions and Price in relation to the Indian ground reality 1
Transcript of Markt Entry Vibrant India Dag
Market EntryEntering the Indian market requires a thorough understanding of Product, Place, Promotions and Price in relation to the Indian ground reality
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India has a unique market
Price Sensitive
High Import Duties
Huge
Low labor costs
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Market Entry, simplified:
The four P’s of India
Market Entry
Product
Place
Price
Promo
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Market Entry Strategies
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Export Volume
Value Localized
Market Entry
Product
Place
Price
Promo
Agenda
1. Introduce the Four P’s
2. Summary and Lessons Learned
3. Market Entry Options
4. Open Discussion
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The Four P’s of India1. Product(ion)
2. Place(ment)
3. Pric(ing)
4. Promotions
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Product(ion)How do you want to position
your product in the Indian
landscape?
Product(ion)
Typical Questions
Market size, growth
Competitors
Clients
Sales channels
Fiscal, legal, license
Less Typical
Niche untapped?
Localization?
Assembly?
Local production?
Local R&D?
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Landed Costs
Production + Margin
Transport
Import Duties
Importer Margin
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Import Duties
Goods
Duties Value
Basic duty 10%
Other duties 20%
Total 30%
Services
No Import Duties
Attracts Service Tax (10%) To be paid by
customer
Compliance: Tax Deducted from Source
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• Calculated over CIF+1%
• If shipping at FOB/Ex
works: FOB/ExW +
20%=CIF!
Examples From ParticipantsCompany Type HS Rate
Bronneberg Machines Metal 27%
Praxas Vracht Tube 28182000 24%
Ridder Drive
Systems
Motoren voor
Tuinbouw
84369900 12.5%
Terlet Proces ketels 84 20-27%
Acoustics &
Noise
reductions
Geluidsreduc
tie
39051200 24%
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Landed Costs: Comparison
0 50 100 150 200
Production
Assembly
Sales Office
ExportCIF
Transport
Import Duties
Production
Assembly
Importer
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Landed Costs: Comparison
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0 100 200
Production
Assembly
Sales Office
Export
Less transport costs
Lower absolute
import duties
No importer
required
Lower HR costs
Lower costs for
parts
Comparison on Other Aspects
Option Concept
Sales
After
Sales
Market
Info
Local
R&D
Localiza
tion
Export ✗ ✗ ✗ ✗ ✗
Sales Office ✔ ✔ ✔ ✗ ✗
Assembly ✔ ✔ ✔ ✔ ✔
Production ✔ ✔ ✔ ✔ ✔
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Case Study:
High End Cosmetics
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Competitor analysis
All products
manufactured abroad
(quality, IP)
All but one had its own
sales office
Main reasons:
circumventing (arrogant)
importers
maintaining global pricing
Case Study: Industrial Parts
(volume)
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Japanese and Chinese
use export model
European companies opt
for subsidiary
Sales Office
Assembly
Production
Price
Localization
Lower cost to R&D
Entering niche
markets
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Place(ment)Where does your end customer
buy your product? And how do
you get it there?
India is LARGE!Supply Chain
Considerations
Variables
Geographic Urban, Rural, Industrial
Type B2C, B2B, Gov
Purchase
Decision
CxO, purchase department, design
Payment terms Delivery, Credit Period
Volumes Large, low, value
Stock Fast moving, value, no stock (deliver to
order)
Addition After sales, installation, returns
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Distributor
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Importer
Dist 1
Dist 2
Dist 3
Dist 4
Works on margin
Keeps stock
Invests
More loyal
Demands exclusivity
Best for: stock requirements/FMCG
Agent
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Importer
Agent 1
Agent 2
Agent 3
Agent 4
Agent 5
Agent 6
Works on commission
Does not keep stock
Does not invest
Less loyal
No exclusivity
Best for: no stock, capital goods
Stockist
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Works on fee
Are not sales
responsible
Keeps stock
(consignment)
Does not invest
Best for: FMCG,
price sensitivity
Importer
Stockist1
Stockist2
Stockist3
Stockist4
Sales Office
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SO
Agent 1
Agent 2
Agent 3
Agent 4
Sales Manager
Variations
Own pan-India sales force
Sales manager + agents
Sales manager +
distributors
Good option when
Into concept sales
Dealing with agents (not
loyal)
Localization is required
Price is an issue
Case Study
NexusNovus Importer FMCG
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One sales manager
Multiple distributors
Invest in stock
Credit terms: 60 days plus
Returns of stock
Low margins
(Disinvested in 2012)
Case Study:
Viva La Delicia Vanilla Beans
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Sales Manager pan
India
Vendor listings with
all supermarkets
Direct
supply/stockist
Case Study
Client in Machine Tooling
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One sales manager
Major focus on exhibitions
Decision maker: engineer
(during blue printing)
High value stock
Direct supply to customer
No agents, no stockist, no
distributor
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Price(ing)Indians are price sensitive, but are willing to pay for high quality. Understanding this paradigm will allow you to price your product well and still make a good margin!
IndiansWill fight with an auto rickshaw driver over five
rupees, but will not allow their friends to pick up a
restaurant bill for five thousand rupees!
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Understanding Indian Prices
Local quality is “bad, imported quality is
“good” (premium prices accepted)
Interest rates are high, bank loans are
hard to get (customers require credit)
Tax compliance is tough (optimize your
supply chain)
After sales service/installation is important
(offer it!)
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The Indian Tax SystemType Goods Similar to Services Similar
to
Tax VAT (12-14%)
CST (2%)
Octroi (5%)
BTW
Import Duty
Import Duty
Service
Tax (ST)
BTW
Related Maximum Retail Price
(MRP): set by
manufacturer or Importer
Tax Deducted from
Source (TDS)
functions like ICP in
Europe
Awaited Goods and Services Tax (GST) to unify all of the
above.
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Implications of the
Indian Tax System
MRP sets a maximum
While VAT varies from state to state
Octroi only in Maharashtra (and
unconstitutional!)
CST has compounding effect
ST to manufacturer has a compounding
effect
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Speak the same language!
25% margin retailer: mark-down, including taxes
20% margin distributor: mark-up, excluding taxes
30% discount to distributor: 30% discount on end price, hence a mark-down
Negotiations will very often be about which definition is being used, who pays for VAT, CST, Octroi, Transport, etc.
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PromotionsOnce you have set your
price, your supply chain, and
made a decision on
production, you are ready to
promote your products in India.
Promotions and Business
Development
Options
Exhibitions (together with your distributors/agents/sales managers!)
Extensive travel/meeting the clients
PR/Marketing: is relatively cost effective
Insights
Use English on packing, unless you sell in rural areas or to lower middle class
Send a hard copy folder, rather then an email
Call (or ask your sales manager to call)!
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ConclusionsHow come it is so hard to find a
reliable importer? How do I
choose the right entry
strategy?
Market Entry Strategies vs.
Market Entry P’s
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Export Volume
Value Localized
Market Entry
Product
Place
Price
Promo
TomTom India case study
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Product: made for India
Price: reasonable
Promo: PR launch great
but no follow-up
TomTom India case study
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Product: made for India
Price: reasonable
Promo: PR launch great
but no follow-up
Place: not available, no
where to be found
Export
(utilizing existing capacity)
• ImporterProduct
• Stock: distributor/stockist
• No stock: agentPlace
• Give permanent discounts
• Favorable payment termsPrice
• Reimburse promotionsPromo
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Why is Finding a Reliable
Importer so Hard?
He takes all financial risk
High interest rates
Hard to get a loan
Exchange rate is erratic
Margins are not great
Returns, damages, shrinkage
Investments in BD, PR
Compliance, taxes
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What works:
Permanent discounts (to compensate
import duties)
Pay for BD, PR (not through discount!)
Hire exclusive sales manager
Give credit (or pay for cost to L.C.)
Invest in getting to know each other
personally
Match size and scale
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FMCG
(price sensitive)
• Local Production
• (or at least S.O.)Product
• Distributor/stockist
• + Sales ManagerPlace
• Focus on competitive prices
• 15% off/ Buy 1 get one Free, etc.Price
• In-store promotionsPromo
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Capital Goods
(low volumes)
• Local Assembly
• (or at least S.O.)Product
• Agent
• + Sales ManagerPlace
• Focus on payment terms/credit periods/finance optionsPrice
• Invest in exhibitionsPromo
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Step-by-Step Approach
Start-up
•Set price as if assembled/produced on location
•Incorp S.O.
•Hire Sales Manager
Build Market
•Export to S.O. at below cost
•Appoint stockists/distributors
•Promote product
Assemble/Manufacture
•Find partner for assembly
•Or find license holder
•Start local production and start making margin
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Contact Us
NexusNovus
Rutger de Bruijn, MD
Phone: +31 (0) 6 5345 999 4
www.nexusnovus.com
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