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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. India has a unique market. Market Entry, simplified: The four P’s of India. Market Entry Strategies. Agenda. Introduce the Four P’s - PowerPoint PPT Presentation
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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 marketPrice
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
Export Volume
Value Localized
Market Entry
Product
Place
Price
Promo
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Agenda1. Introduce the Four P’s2. Summary and Lessons Learned3. Market Entry Options4. 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?
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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
TransportImport Duties
Importer Margin
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Import DutiesGoods
Duties ValueBasic 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
• Calculated over CIF+1%• If shipping at FOB/Ex
works: FOB/ExW + 20%=CIF!
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Examples From ParticipantsCompany Type HS RateBronneberg 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
Geluidsreductie
39051200 24%
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Landed Costs: Comparison
Production
Assembly
Sales Office
Export
0 50 100 150 200
CIFTransportImport DutiesProductionAssemblyImporter
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Landed Costs: Comparison
Production
Assembly
Sales Office
Export
0 50 100
150
200
Less transport costs
Lower absolute import duties
No importer required
Lower HR costs Lower costs for
parts
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Comparison on Other AspectsOption Concep
t SalesAfter Sales
Market Info
Local R&D
Localization
Export ✗ ✗ ✗ ✗ ✗Sales Office ✔ ✔ ✔ ✗ ✗Assembly ✔ ✔ ✔ ✔ ✔Production ✔ ✔ ✔ ✔ ✔
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Case Study: High End Cosmetics Competitor analysis
All products manufactured abroad (quality, IP)
All but one had its own sales office
Main reasons: circumventing (arrogant)
importers maintaining global
pricing
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Case Study: Industrial Parts (volume) 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?
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India is LARGE!Supply Chain Considerations
Variables
Geographic Urban, Rural, IndustrialType B2C, B2B, GovPurchase Decision
CxO, purchase department, design
Payment terms Delivery, Credit PeriodVolumes Large, low, valueStock Fast moving, value, no stock (deliver to
order)Addition After sales, installation, returns
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Distributor
Importer
Dist 1
Dist 2
Dist 3
Dist 4
Works on margin Keeps stock Invests More loyal Demands
exclusivity Best for: stock
requirements/FMCG
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Agent
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
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Stockist Works on fee Are not sales
responsible Keeps stock
(consignment) Does not invest Best for: FMCG,
price sensitivity
Importer
Stockist1
Stockist2
Stockist3
Stockist4
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Sales Office
SO
Agent 1Agent 2Agent 3Agent 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
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Case StudyNexusNovus Importer FMCG One sales manager Multiple distributors Invest in stock Credit terms: 60 days
plus Returns of stock Low margins (Disinvested in 2012)
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Case Study:Viva La Delicia Vanilla Beans
Sales Manager pan India
Vendor listings with all supermarkets
Direct supply/stockist
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Case StudyClient in Machine Tooling 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!
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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
toTax VAT (12-
14%)CST (2%)Octroi (5%)
BTWImport DutyImport 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.
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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?
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Market Entry Strategies vs. Market Entry P’s
Export Volume
Value Localized
Market Entry
Product
Place
Price
Promo
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TomTom India case study Product: made for India Price: reasonable Promo: PR launch great
but no follow-up
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TomTom India case study Product: made for India Price: reasonable Promo: PR launch great
but no follow-up Place: not available,
no where to be found
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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 ApproachStart-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 UsNexusNovusRutger de Bruijn, [email protected]
Phone: +31 (0) 6 5345 999 4www.nexusnovus.com
