Ib Final Ppt

8/4/2019 Ib Final Ppt

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TRATON- KOMPANGA OOO

Business Entry into Russia: Tea(Consumer Product)

Submitted to:Dr. Raghunathan (Chairman)

Prof. Sudhir Sachdev (President)

Prepared by:

New International Business Development Group (No. 11)Mayank Jaswal (Chairman)

Govind Garg (CEO)Harish Ranganathan(CFO)

Rajesh Roy (CMO)

2011


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Background of Traton

A big conglomerate in India with presence in:

Consumer products unit

White goods unit

Food retail chain

Hotels

Grocery Retail Chain

Established in 1963 with a product Darj T in India


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Why Go GLOBAL?

To increase sales, revenues, and profits

To grow the companys global market share

To achieve greater economies of scale

To reduce risk

To build a global brand

To respond to competitors


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Where In World ?

RUSSIA

Target

The company will start operations in Russia


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Why RUSSIA?

To increase sales, revenues, and profits

70% of Russians' income is disposable vs. around 40% in the West.

Largest importer of tea in the world. The total value of Russian tea imports in2007 was $308.97 million, which is nearly 14% of the global market

Lower costs and higher prices

Retail volume growth rates of 15% and 12% in black standard tea bags and

black specialty tea bags respectively, in 2007

Opportunities


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Opportunities for Indian Tea Companies in theRussian Tea Market

CATEGORIES GLOBAL INDIA RUSSIA

Market size in terms of retail value ($

million)

23,323 876.4 3,266

Market size in terms of retail

volume(Million Kg)

1,765 226.04 161.44

Growth rate in terms of retail value

(08-09)

4.50% 3.50% 12%

Growth rate in terms of retail volume

(08-09)

3.50% 2.60% 2.30%

Per capita consumption (per kg) 0.3 0.7 1.3

Average retail price (in US$ per kg) $13.20 $3.90 $20.20

Growth rate in retail price (2008-09) 0.90% 0.90% 9.50%


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Mode Of Entry


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To have Joint Venture

Provides access to government contacts andexisting distribution network

Provides local help minimizing the problems

associated with bureaucracy and corruption

Good understanding of the Russian market

Sharing of profits and risks

Pooling of resources


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Trade Agreement with Russia

CIS (Commonwealth of Independent States)

APEC (Asia-Pacific Economic Community)

EURASEC (Eurasian Economic Community)

G-20

G-8

No FTA with India so far


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SWOT Analysis of RussiaStrengths:

Ranked 11th by Nominal GDP and 6th by

PPP GDP with average annual growth of6%.

AGR of consumption is 1.7-1.8% per

year, largely due to new middle class

that constitute 50% of the population

Per capita GDP of $10521, as comparedto Indias $1265

Rich in natural resources like coal, oil

and gas, Russian energy independence

Weaknesses:

Corruption

Ranked 123rd

at ease of doing business inRussia (latest world bank survey)

Courts are unpredictable and in need of

urgent reform

Limited access to foreign financing

High rate of poverty and unemployment High rate of public expenditure

Opportunities:

Indo-Russian Trade Relations

Contribution of agriculture into GDP

is just 4.2%

Instant Translation of web-pages

Neighbors need energy Low cost airline carriers

Threats:

Unlawful criminal gangs Fluctuating prices of oil and US Dollar.

High public debt accounts, due to the drop

in stock market and governance issues

Increasing rate of unemployment, recently

increased from 6.5% to 8.9%


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Tax Rates

Corporate Profit Tax: 20%

(2% to the federal budget and 18% to the regional budget)

VAT Rate: 18%

Russia has a regular rate of tax on the income of

individual/entity

13% for a resident on income tax

30% for non-residents on income tax 9% for a resident on dividend income

15% for non-residents on dividend income.

Custom duty: 8% (23%on packaged tea)


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Labor Laws

Russian labor legislations provides certain guarantees foremployees, in particular:

Standard working hours are not to exceed 40 hours per

week.

Overtime is permitted for certain categories of employees incertain circumstances, but generally should not exceed four

hours in two successive days and 120 hours per year.

Trial period last for three months

Direct cash payment to Russian employees in foreigncurrency is prohibited

Freedom of employ any personnel regardless of the

nationality


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Transfer of Profits back home

There is no limit on repatriation of Profit.

Tax rate of 15% is applicable


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Political and Economic Analysis

Political analysis

Current Strengths: Current challenges

Continuity in policies Corruption and crime

International integration Terrorism

Future prospects Future risks

Growing international relations Pressure from bureaucracy

Economic analysis


Successful economic reforms Unemployment

Strong current account surplus Dependence on foreign money


Comfortable foreign exchange reserves Decreasing budget surplus

Growing foreign investments Adverse balance of payments


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Social and Technological AnalysisSocial analysis


Improvement in real income and wage levels High AIDS rate

Educated population High mortality rate


Revamp of social security benefits Widening income inequality and rising poverty

National welfare fund Increasing spread of the AIDS epidemic

Tax benefits to healthcare and education

Technological analysis


Advanced space technologies Poor performance on patents

Weak science and technology systems


Increasing presence of IT sector Piracy and poor infrastructure

Increasing number of skilled workers

Military technologies helping the farming sector


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Marketing Plan

PRODUCT

Darj Tea

Black Tea(500Gm,1Kg)

SEGMENTATION

Two cities with highest population

Moscow with population 11514330

Saint Petersburg with population 4848742


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TARGETING Tea Consuming middle(46%) class in income group of $16000

to $50000 80% of targeted population consumes tea

Total Consumption of tea in both cities by middle class= 80% x

46%x (11514330+4848742)*1.3kg= 7828094 Kg

Black tea consumption is 40% of total tea consumption

Black tea consumption = 40% of 7828094=3131237 kg

We are targeting 7% of the total black tea consumption by

middle class = 7%(3131237) =219187 Kg

Price of Our Tea per Kg = $ 10.5 (50% less than average retail

price in Russia)

Total Market Share which are targeting is of worth = $10.5 per

Kg* 219187Kg = $ 2301463 (approx)


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PRICING

Cost 1.25

Selling Price 10.5

Import Duty 1

Shipping charges 0.01

Middle man expense 1

Advertisement cost 6

Other charges 0.25

Profit 2.69


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COMPETITORS

Company /Brand Market share

Orimi Trade OOO 13.1

Ahmed Tea fabika OOO 13.0

Unilever SNG OOO 9.9

Mai Kompanga OAO 9.6

Akbar Bros Ltd 3.8


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DIFFERENTIATION

Price less than the competitors

Average Retail Price of Tea in Russia= $20.2

Our Price = $ 10.5 (50% less than avg. Retail Price)

Quality

Black Tea from Darjeeling, India

Brews Quickly


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PROMOTION

Advertisement

Newspapers

Argumenty i Fakty

The Moscow Times

Hoardings

Promotion Schemes


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Initial Investments:

Investment Dollar (US)Publishing in newspapers 54000

Hoarding Budget 200000

Promotion scheme 480000

Retail Incentives 300000

Salaries & other expenses 500000

Banner Cost 200000

Miscellaneous expenses 54796

Shipping & Distribution

expenses

440565

Grand Total 1788796


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Income statement: (Projected)

2012 2013 2014

Sales Revenue 2301463 2761752 3314094

Less: Cost of Goods Sold 273983.75 361658 477387.35

Gross Margin 2027479.25 2400094 2836706.65

ess: Selling & Distribution expens 440565.87 583913.28 773288.6

Less: Advertisement expense 1332656.96 439250.08 514473.64

Less: Salaries & Wages 500000 600000 700000

Less: Miscellaneous Expenses 54796.75 65756 78907Earnings before Taxes -300540.35 761174.6 770037.41

Less: Tax expenses (20%) (60108.07) 152234.92 154007.482

Net Income (240432.28) 608939.68 616029.92

( All figures in US $)


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Breakeven Analysis:

Initial Investment $ 1788796

Profit/Loss ( I Year ) $ - 240432.28

Profit/Loss (II Year ) $ 608939.68

Profit/Loss (III Year ) $ 616029.92

Breakeven 3-4 Years

Both cost and Revenues will be shared on the 50:50ratio between TRATON-KAMPANGO


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Organization chart:


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EXIT Strategy:

If MAI KAMPANGO wants to exit the business

FIRST RIGHT OF REFUSAL to be with TRATON

Valuation to be done by a mutually agreed firm.

If MAI KAMPANGO wants to exit the business, it cando so only after 5 years


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Conclusion

The Joint venture Traton-Kompango Ltd

will help our Company to Penetrate the

Russian Market and help us in achieving

our corporate goal of going Global.

d i i ifi


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Product Registration Certificate


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Sanitary-Epidemiological Conclusion Certificate


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GOST-R Certificate of conformity: Health & Safety


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http://dipp.nic.in/fdi_statistics/india_fdi_index.htm, India FDI Fact Sheet -

April 2011

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http://www.rusimpex.ru/Content_e/Custom/index.htm

http://www.doingbusiness.org/ExploreEconomies/?economyid=159 ,

"Doing Business in Russia 2010". World Bank

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df, GDP(PPP), world bank

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www.fni.no/russcasp/DBF-bon1009-49-53.pdf, Reflections on Modeling the

Russian Economy41, Wehrheim, P. (2003) Modeling Russias economy in

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