Country

factor
Analysis

International business
Individual Assignment number I
Due date – August 20th 2010
Submitted on August 20th 2010

BY
ALEN JOSEPH
Globalization refers to the shift towards a more integrated and interdependent world economy. This
basically means that world has suddenly become one huge common market. A product which might be
have been produced in one country is exported to the other. Sometimes the countries might have
production houses of each country in order to cut down on labour cost &Exporting cost . Globalization of
a product is on a rise as it is targeted at huge wider market and it also hopes to gain from national
difference in exchange rate.

In this context when we are looking at a Australian product to be launched in an another country .
The first name that pops up the mind is of the famous VEGEMITE. It is one product which is
closest to the heart of all Australians is VEGEMITE. It was launched 1922 and was invented by Cyril.P.
Callister. Vegemite is a dark brown Australian food paste made from yeast Extract. It is used for
sandwiches, toast, crumpets and filling for pastries.
Vegemite is made from used brewers' yeast extract, and various vegetable and spice additives. It is salty,
slightly bitter, and umami or malty — similar to beef bouillon. The texture is smooth and sticky.
Vegemite is a name popular name in all households in Australia. Morning breakfast or evening snack is
incomplete without vegemite.

Inventor Cyril P Callister

Launch year 1922
Company Fred Wakker & Co
Current supplier Kraft foods

Nutritional value of Vegemite-

 Its unique taste & its Nutritional value It is a rich in Vitamin B. It is also rich in vitamins B1, B2, B3
and folate. A single 5g serving of Vegemite provides from 25-50% of the recommended daily
intake for these four vitamins
 It has no added colors or flavors
 It contains no added sugar
 Rich source of protein.
 It is advisable to be taken by females during the child bearing age.
 It is vegetarian food.
 Is more tooth friendly compared to jam or choc nut spreads

Advantages of Indian market over others

 1. One of major factors in food industry is the ready availability of raw materials in India because
of diverse agro climatic conditions .Therefore is a huge scope for food processing industries.
2. Low labor cost .-The relatively low-cost but skilled workforce can be effectively utilized to set up
large, low-cost production bases for domestic and export markets.

3. The presence of the whole value chain. Therefore resulting in many Multinational companies
(MNC) setting up factories in India in order to provide for both the local markets as well as to
export to other countries.
In order to understand the challenges and opportunities’ of Indian market . We should have an over all
idea about the political, cultural, economic factors in India which play a huge role in influencing the
market.

Economy of India

India is ranked 5th largest economy in the world with GDP estimated at $1.2 billion. In Indian fiscal year
IFY 2008/09 (April & March). Indian economy was growing by an average of over 9% over the last 3
fiscal years. India has a population of over 1 billion and a rapidly growing middle income population of
over 300 million. The Indian economy is ranked above various developed countries like France, Italy,
United Kingdom and Russia. The GDP growth of India is the 3 rd largest in Asia as a whole.

Opportunities in Indian market economy

Huge market -Indian consumers spend a large share of their income on food with share of expenditure
on food& beverages estimated at 42.3% of total private consumption expenditure in IFY 2007/2008.
Consumer demographics – India has a large & growing middle class 300 million .It also has a large &
growing young population- The medium age of the population is 24 & over 100 million Indians are in the
age bracket. Assuming the Indian economy goals at a real compound rate of 7.3% from 2005- 2025.
Indian income levels would triple & middle class population would grow spread beyond top tier to
middle tier & small cities.

Growth in real household disposable income will likely grow from Rs 113744 in 2005 to Rs. 318896by
2025. A compound annual growth rate of 5.3%.
As the Indian household income rises so would overall spreading & consumption making India the fifth
largest consumer market by 2025.

Risk involved

India is distant from all the major markets. Therefore, the cost of shipping is high and shipping time adds to the
disadvantage. Cost of shipping is also affected by the fact that inbound freight traffic has been low - therefore,
container movement is not at its most cost-efficient. This is changing as India imports more products and inbound
freight traffic increases.

India also lacks any serious trade pact memberships, and therefore does not receive preferential access to the
major markets. This leads to quota and duty disadvantages, which depress the sourcing volumes from India far
below their potential.

Fragmentation of supply base also creates barriers to achieving true integration between the various links in
supply chain. This creates issues of lack of control and lack of consistent or reliable performance. The huge
geographical spread further complicates this issue.

India is home to six million retail outlets, including 2 million in 5,160 towns and four million in 627,000 villages.
Super markets virtually do not exist in India. This makes logistics particularly for new players extremely difficult. It
also makes new product launches difficult since retailers are reluctant to allocate resources and time to slow
moving products. Critical factors for success are the ability to build, develop, and maintain a robust distribution
network

 Political situation of india

India is democratic country – by democratic we mean that the government is formed by the people
exercised by elected representatives. The current political situation in India is fairly stable as congress is
heading the government for few years now.

Indian economy is a mixed economy it means that few sectors which are of national importance like
security , sale of arms etc are under government control. However there are other sectors which are
entirely privatized like the FMCG sector. Therefore both private and government institutes exist. India
lately has been promoting privatization even more. A lot of sectors which were earlier under the
government have been privatized like electricity etc.

Opportunities
Government Assistance-The Government has introduced several schemes to provide financial
assistance for setting up and modernizing of food processing units, creation of infrastructure, support
for research and development and human resource development in addition to other promotional
measures to encourage the growth of the processed food sector.

Foreign Direct Investment -Foreign direct investment (FDI) in the country's food sector is poised to hit
the US$ 3-billion mark in coming years. FDI approvals in food processing have doubled in last one year
alone. The cumulative FDI inflow in food processing reached US$ 2,804 million in March '06. In '05-06,
the sector received approvals worth US$ 41 million. This figure is almost double the US$ 22 million
approved in 2004-05.

Conducive food processing policy environment The national policy on food processing aims at
increasing the level of food processing from the present 2 per cent to 10 per cent by 2010 and 25 per
cent by 2025. The government has allowed 100 per cent FDI in processing sector.

Risk involved-
 Indian Bureaucratic procedures –The business still has to deal with inefficient slow-moving
bureaucratic procedures.

 Corruption -India bureaucracy also comes in top ten corrupt nations in the world.

 The reservation for the small scale industries is high in India. Which became as the

 Excise and other tax imbalances. The political diversity of India’ 35 states and union territories,
and a coalition of ruling parties has led to show progress in rationalizing these imbalances due to
debate and discussions.

 Labour laws are still seen to be relatively unfriendly to business. The labour laws in India are out
dated.

Culture of India

No market study is complete without taking into account its culture . Which often determines whether a
product will sell in the market or not. Indians do not mind investing on good food. Food has always been
close to Indian hearts.

Advantages

Indians spend a lot on buying good and labeled food because of the globalization, education,
globalization, double income households, exposure to the western food habits has brought about a huge
change in the food habits of Indians.

Market offers less options - The Indians do not have much of options in terms of bread spreads . their
choices are limited to jams, cheese, butter/peanut butter. Vegemite will prove to be a new variety in the
market and will be instant hit with the youth. As they have a inherent habit of trying out new
international brands. It should be noted that majority of the current Indian population is under the age
of 25yrs.

The challenge in the culture of Indian market

Indian taste buds differ form place to place. What works in one state might not work in the other.

It is its diverse nature. India’s market is divided into two parts the rural india and urban india. It is the
urban population that our product will be looking at. However there should be long term goals of
reaching out to the rural market which huge and mostly untapped.

Competition from other huge names like Kisan, Amul. However it should be noted that there are not
many players in this sector which opens up opportunity for success. It should be noted that both the
above mentioned names are Indian brands and therefore there are practically no major multinational
players in the bread spreads in India. Which is a golden opportunity for any brand in the sector.

The buying culture in India is dominated by both quality and price. As most of the multinational brands
who fail in india due to their high rates. Therefore the companies have come up with small packets of
the same product in order to fit the budget of all. For E.g. Kisan Jam has come up with small packets of
jams for Re 1. This has been the strategy used by big brands to enter the huge rural Indian market which
is largely untapped.

Decision makers
The consumer market in india. In order to succeed in any market. We need to understand who makes
the decision of buying a particular product at home. Therefore let us now look at the key decision
making people in the family . whom we call our target group for any marketing strategy.

Beyond basic needs, households make their children's future a clear priority; education is seen as a
passport to a better tomorrow. To gain a winning edge, parents spend much money and effort securing
the right schools and tutoring for their children and invest in nutrition, computer games, and books. As a
result, several categories of products—from protein powders to educational toys—have enjoyed rapid
growth.

Target group of consumers in Indian market

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According to publication released by Spenser Stuart India one of the leading executive search consulting
firms privately held since 1956. There were three major emerging segments in the Indian consumer
population namely the kids, youth & women
With about 300 million children in the age group of 4- 14 years of age in India which is a huge for any
market. The children have come to be important decision makers as to what is to be bought at home.
Specially when it comes to morning breakfast.
Youth power – with about majority of the population of India falling under the category of below 25
years of age. They are not only brand conscious but also do not compromise on quality.
Woman – In Indian home the lady in the house often decides what comes home. What is best for the
family therefore lately the markets have started targeting the women population. The woman
population of india generally wants both quality as well as price.

Suggestions to succeed in Indian market

Tailoring the business model to India

Knowing what makes consumers tick is a vital first step. To capture their hearts and wallets—profitably
—companies must use that knowledge to tailor the business model to local conditions.

Offer value at the right price

Getting the price right is just as important. Although the incomes of Indian consumers are growing, they
still have many competing pulls on their modest budgets. Winning companies thus have learned the
importance of affordability. Affordability also has a bearing on price points for everyday products,
sometimes in a paradoxical way. The shampoo market, for example, was revolutionized by ten-milliliter
sachets, priced under five cents each. In ten years, the shampoo-buying share of India's population
increased to 45 percent, from 18 percent, and such sachets drove almost all of this growth despite their
premium price per unit of volume. These products succeeded because consumers who could not afford
to spend 20 to 30 times more on a bottle of shampoo can now opt for single-serve portions.

Getting distribution right

The key to distributing products successfully in India is to rely on a third-party network, since building
one takes too long and is ultimately more expensive. Unilever, for instance, has achieved national reach
through more than 20 distribution centers, run by third-party agents, that transport and store its goods.
These centers serve in excess of 7,000 distributors, which use salespeople trained by Unilever to work
with more than eight million retailers

The study of Indian market and overall economy before taking the plunge. Research firms in India can
provide the information to determine how, when and where to enter the market. There are also
companies which can guide the foreign firm through the entry process from beginning to end
--performing the requisite research, assisting with configuration of the project, helping develop Indian
partners and financing, finding the land or ready premises, and pushing through the paperwork
required.

The unique sourcing channels - existence of number of intermediatories involved between the
importer & retailer. An organized retailer may source an imported product directly through an exporter
or through an Indian importer or a distributor or directly from exporter/ manufacturer.

Consolidator

Importer Distributor
Australian exporter

Conclusion –
India despite its existing challenges and huge diverse market. Has great potential of untapped market.
Moreover the Indians do not have much of options available to them in terms of bread spreads.
Therefore Vegemite can become a household name in India has it has in Australia.
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