Market Entry

1. Market Entry Entering the Indian market requires a thorough understanding of Product, Place, Promotions and Price in relation to the Indian ground reality

2. India has a unique market

3. Market Entry, simplified:The four P’s of India

4. Market Entry Strategies

5. Agenda • Introduce the Four P’s • Summary and Lessons Learned • Market Entry Options • Open Discussion

6. The Four P’s of India Product(ion) Place(ment) Pric(ing) Promotions

7. Product(ion) How do you want to position your product in the Indian landscape?

8. Product(ion) Typical Questions Less Typical Niche untapped? Localization? Assembly? Local production? Local R&D? • Market size, growth • Competitors • Clients • Sales channels • Fiscal, legal, license

9. Landed Costs

10. Import Duties Goods 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!

11. Examples From Participants

12. Landed Costs: Comparison

13. Landed Costs: Comparison • Less transport costs • Lower absolute import duties • No importer required • Lower HR costs • Lower costs for parts

14. Comparison on Other Aspects

15. 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

16. 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

17. Place(ment) Where does your end customer buy your product? And how do you get it there?

18. India is LARGE!

19. Distributor • Works on margin • Keeps stock • Invests • More loyal • Demands exclusivity • Best for: stock requirements/FMCG

20. Agent • Works on commission • Does not keep stock • Does not invest • Less loyal • No exclusivity • Best for: no stock, capital goods

21. Stockist • Works on fee • Are not sales responsible • Keeps stock (consignment) • Does not invest • Best for: FMCG, price sensitivity

22. Sales Office • 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

23. 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)

24. Case Study:Viva La Delicia Vanilla Beans • Sales Manager pan India • Vendor listings with all supermarkets • Direct supply/stockist

25. 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

26. 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!

27. Indians Will 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!

28. 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!)

29. The Indian Tax System

30. 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

31. 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.

32. Promotions Once you have set your price, your supply chain, and made a decision on production, you are ready to promote your products in India.

33. Promotions and Business Development Options 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)! • Exhibitions (together with your distributors/agents/sales managers!) • Extensive travel/meeting the clients • PR/Marketing: is relatively cost effective

34. Conclusions How come it is so hard to find a reliable importer? How do I choose the right entry strategy?

35. Market Entry Strategies vs. Market Entry P’s

36. TomTom India case study • Product: made for India • Price: reasonable • Promo: PR launch great but no follow-up

37. 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

38. Export (utilizing existing capacity)

39. 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

40. 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

41. FMCG (price sensitive)

42. Capital Goods(low volumes)

43. Step-by-Step Approach

44. Contact Us