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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

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market entry

Market Entry

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

agenda
Agenda
  • Introduce the Four P’s
  • Summary and Lessons Learned
  • Market Entry Options
  • Open Discussion
the four p s of india
The Four P’s of India

Product(ion)

Place(ment)

Pric(ing)

Promotions

product ion
Product(ion)

How do you want to position your product in the Indian landscape?

product ion1
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
import duties
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!
landed costs comparison1
Landed Costs: Comparison
  • Less transport costs
  • Lower absolute import duties
  • No importer required
  • Lower HR costs
  • Lower costs for parts
case study high end cosmetics
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
case study industrial parts volume
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
place ment
Place(ment)

Where does your end customer buy your product? And how do you get it there?

distributor
Distributor
  • Works on margin
  • Keeps stock
  • Invests
  • More loyal
  • Demands exclusivity
  • Best for: stock requirements/FMCG
agent
Agent
  • Works on commission
  • Does not keep stock
  • Does not invest
  • Less loyal
  • No exclusivity
  • Best for: no stock, capital goods
stockist
Stockist
  • Works on fee
  • Are not sales responsible
  • Keeps stock (consignment)
  • Does not invest
  • Best for: FMCG, price sensitivity
sales office
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
case study nexusnovus importer fmcg
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)
case study viva la delicia vanilla beans
Case Study:Viva La Delicia Vanilla Beans
  • Sales Manager pan India
  • Vendor listings with all supermarkets
  • Direct supply/stockist
case study client in machine tooling
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
price ing
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!

indians
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!

understanding indian prices
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!)
implications of the indian tax system
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
speak the same language
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.
promotions
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.

promotions and business development
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
conclusions
Conclusions

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

tomtom india case study
TomTom India case study
  • Product: made for India
  • Price: reasonable
  • Promo: PR launch great but no follow-up
tomtom india case study1
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
why is finding a reliable importer so hard
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
what works
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