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Old Town White Coffee, India

1.0 Introduction The history of Old Town White Coffee (OTWC) began in 1999, started as a classic coffee shop of White Caf in Ipoh, Malaysia. With the inspiration of vision and passion to make and serve fine coffee to Malaysian household and food service industry, the founder and executive director, Mr. Goh Ching Mun and Mr. Tan Say Yup created a secret of Old Town 3in-1 instant white coffee. After launching OLD TOWN Brand, the company strives to be Malaysias Leading White Coffee producer with profitable growth through a combination of organic growth coupled and strong aftermarket business. In 2005, the company expanded vertically into food and beverage industry by opening retail chains of OLD TOWN F & B Outlets. Within a short span of eight years, the Company globally reaches at 13 countries, across the South East Asia, Hong Kong, Taiwan, China, Australia, Ireland, Canada, and USA. By the end of 2009, Old Town White Coffee was franchised 1,348 retail outlets in Malaysia, 550 retail outlets in Singapore, and 2,100 retail outlets in Hong Kong (Old Town White Coffee, 2011). So, what is the next step? OTWC India! The probability of OTWC successfully introducing its coffee bar culture in India is relatively high for many reasons. Firstly, India has a huge amount of population. India, which is the seventh-largest country in the world and the second-most populous country with over 1.18 billion people (around 17.31% of the worlds population). India is also expected to have population more than 1.6 billion by 2030 and might surpass the population of China (U.S. Department of State, 2010). The following is a proposal to open new locations of OTWC in India:- (1) Mumbai: 13,900,000 people and (2) New Delhi: 12,100,000 people (City Mayors Statistics, 2010). These two locations were strategically picked to ensure success of the business venture and will serve as test locations. If the new stores are highly profitable, OTWC can expand to more than 200 locations in India. Secondly, India is one of the largest coffee producer countries in the world. There are over 170,000 coffee farms in India, cultivating nearly 900,000 acres of coffee trees, employing about 600,000 Indian, and exporting over 500,000 pounds of coffee in each year. Most of the coffee in India is grown in three states: Karnataka, Kerala, and Tamilnadu. These states accounted for over 92% of India's coffee production in each year (Wikia, 2010). With expanding business to India, OTWC could reduce the transportation and importing cost of coffee beans. Besides that, OTWC could also integrate backward or form alliances with the
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local producer to produce its own healthy and unique aroma of organic coffee bean to serve Indian households and to become low-cost leadership. Thirdly, there is a new consumer culture emerging in India. Today, Indias young are becoming world-class consumers. They have increasingly wealthy and are willing to spend on everything. These changes can be attributed by many factors such as the Indian economy went through a massive liberalization under the new minority government of P.V. Narasimha Rao in 1991. The revolution had opened the Indias economy to foreign investment and trade. The new policies has dismantled important controls, lowered customs duties, devalued the currency, abolished licensing controls on private investment, dropped tax rates, and broke public sector monopolies (Schuman, 2003). This is the good news for both foreign and local entrepreneurs. Multinational companies such as Citibank, McDonalds and Motorola have been taking advantage of these new policies and finding a new home in India. These companies owe their success to the rising young elite due to the mass outsourcing by foreign companies. According to Thottam (2003) in the Time Magazine entitled Where The Good Jobs are Going, writes, U.S. companies are expected to send 3.3 million jobs overseas in the next 12 years, primarily to India according to a study by Forrester Research. Increasingly in job opportunities enables Indian consumers to reinvest in the Indian economy. Time Magazine journalist, Michael Schumann, asserts that with the changing Indian economy, Indian attitudes towards money are also changing. The Indian consumers today, inspired by job opportunities, have switched to spend more compare to previous. With the money, they are willing to pay anything and everything. They even want to do what the rest of the world is doing, includes getting fast food in McDonalds, wearing Levis Jeans, and etc, but whats more is that they are willing to pay. For it, Indian consumers will definitely welcome the internationally popular OTWC to its country. The two proposed locations for OTWC shop are strategically picked because both Mumbai and New Dehli are home to many call centers where these younger spenders work. Besides, many colleges and Universities are also located here which will allow OTWC to target the young generations. Furthermore, these two cities are also major hot spots for tourists, who recognize a multinational brand such as OTWC. Of course, the OTWC menu in India must cater to the Indian taste, mixing traditional menu items with those that a customized for the Indian tastes.

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Old Town White Coffee, India

2.0 Contents 2.1 Indias Political Perspectives Political environment is an important issue to every business transactions. A company with a better understanding of political environment will lead to greater networking ability and adaptation. 2.1.1 Political System India is a Sovereign, Secular, Democratic Republic with a Parliamentary form of Government. Besides that, India is also the world's largest democracy country. Indias government was formed in 1947 after the country gained its independence from the Imperial Britain. Nevertheless, India is governed under the Constitution of India 1950, which it was modeled after the United States constitution. Under this constitution, India is a federal republic, meaning it is a representative democracy with power divided between the state and federal government. There are three branches which are stated in constitution of India, including a bicameral legislature, executive branch, and judicial branch (Trade Chakra, 2008). Unlike America, the head of state and the head of government in India are different. The head of state is the President who serves more as a symbolic ceremonial figure, and has little power except when in emergency situations. The real executive power is held by the Prime Minister and the Council of Ministers which is stated in Article 74(1) Constitution of India 1949. The current Indian president is Smt. Pratibha Devisingh Patil. The prime minister of India is the head of government, head of the Council of Ministers and the leader of the majority party in parliament. The prime minister leads the executive branch of government in a parliamentary system. The current prime minister of India is the Dr. Manmohan Singh. The current government of India is in favor of long-term foreign investment. There shall be a Council of Ministers with the Prime Minister at the head to aid and advise the President who shall, in the exercise of his functions, act in accordance with such advice: Provided that the President may require the council of Ministers to reconsider. - Article 74(1) in the constitution of India 1949 -

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Old Town White Coffee, India

In 1999, the prime minister called for a Second generation reforms to include improving the investment climate, cutting red tape, a comprehensive WTO strategy, reform in agriculture and small scale industry, and better corporate governance. India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long-term investments. These include a free and vibrant press, a judiciary that can and does overrule the government, a sophisticated legal and accounting system and a user-friendly intellectual infrastructure. (Ravindran, 2000) 2.1.2 Law Though liberalization, economic policies for International business still have many restrictions. The Companies Act 1956 of India is an Indian law that sets down rules for the establishment of both public and private companies. As stated in Companies Act 1956, the most commonly business organization used by foreign investors in India is the locally incorporated company because other forms such as sole proprietorships and partnerships are essentially impossible under the Indian law. The most common companies can be public or private but the common public is not allowed to buy shares of the company and there can only be up to 50 shareholders. Import duties are applied to almost all goods entering India. The tariff system is based on the Harmonized System (HS) and tariffs are in the 40% to 60% range for basic raw materials, 60% to 100% for semi-processed goods, and 100% and above on finished and consumer goods. Shipments to India require a commercial invoice, a packing list and bill of lading. A certificate of origin is not required on imports originating from other countries. The following are the foreign investment policies of India:a) All foreign investment projects, not considered a priority industry eligible for automatic

clearance by the Reserve Bank of India, require approval by the Foreign Investment Promotion Board or a newly created committee for review of smaller investment projects.
b) The government permits foreign firms to hold up to 51% equity in Indian venture on a

case-by-case basis.
c) Automatic approval is granted to foreign investments of up to 51% equity in 34 high-

priority industrial sectors.

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Old Town White Coffee, India

d) Foreign companies are permitted to acquire land and own buildings as long as

permission is obtained from the Reserve Bank of India.


e) No specific tax incentives exist to attract foreign investment.

(The Companies Act, 1956) 2.1.3 Political Risks and Causes Sovereign Risk India is a parliamentary democracy since India independence from British. India does not face any real threat of serious revolutionary movement which might lead to the collapse of state machinery. Sovereign Risk in India is therefore zero for both foreign direct investment and foreign portfolio investment. However, many industrial and business are trying to restrain themselves from investing in the north-eastern parts of India because of terrorist threats. (India One Stop, 2009) Commercial Risk In India, not each and every product or service can be readily sold. It is necessary to study the demand and supply situation for a particular product or service before making any major investment. For examples, there are 4/5 households in rural area do not have electrical product such as refrigerator, radio, etc due to poor infrastructure condition. As it is, advertisement through radio might not reach to certain citizens in rural area. Thus, entering into Indias consumer market involves some kind of gamble and hence involves commercial risk. (India One Stop, 2009) Political Risk India suffered political instability for few years due to the failure of any party to win an absolute majority in Parliament and hence it led to the formation of coalition governments. With strong and healthy coalition governments emerging, political instability in India has changed better since the previous general elections in 1999. By the way, the political instability did not change India's economic because it delayed certain decisions relating to the economy. Economic liberalization which mostly interested foreign investors has been accepted as essential by all political parties including the Communist Party of India (Marxist) which is
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dead against a free economic world. Nonetheless, political instability has posed no investment risk to foreign investors as no policy framed by a past government has been upturned by any successive government so far. Being a strong democratic nation the chances of an army coup or foreign dictatorship are minimal. Hence, political risk in India is practically absent. (India One Stop, 2009) Risk Due To Terrorism In the past, India has suffered several terrorist attacks on its territory which could have a negative impact on investor confidence. However, some of the financial experts believe that the negative impact of terrorist attacks would be only in a short term phenomenon. In the longrun, India would continue to be a favorable investment destination. (India One Stop, 2009)

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2.2 Indias Culture Perspectives According to the Griffin, R. W. (2010), Culture is the collection of values, beliefs, behaviors, customs, and attitudes that distinguish one society to another. The elements that used to measure a societys culture are religion, language, aesthetics, education, manners and customs, values and attitudes, and social structure. 2.2.1 Religions India is one of the most religiously diverse nations in the world, with some of the most deeply religious societies and cultures. In India, religion still plays a central and definitive role in the life of many of its people. There are 80% of the people in India are Hinduism. Islam is practiced by around 13%. Sikhism, Jainism, and Buddhism are influential not only in India but across the world. Christianity, Zoroastrianism, Judaism and the Bahai Faith are also influential but their numbers are smaller. In Hinduism, the cow is regarded as a symbol of ahimsa (nonviolence), mother goddess and bringer of good fortune and wealth. For this reason, cows are revered in Hindu culture and feeding a cow is seen as an act of worship. India, being a multireligious society, celebrates holidays and festivals of various religions. There are three majors national holidays that are celebrated with zeal and enthusiasm across India are the Independence Day, the Republic Day, and the Gandhi Jayanti. The traditional of Indian culture is defined by relatively strict social hierarchy. Children from an early age are reminded of their roles and places in society. This is reinforced by the fact that many believe gods and spirits have an integral and functional role in determining their life. However, a far more powerful division is the traditional Hindu bifurcation into nonpolluting and polluting occupations. Strict social taboos have governed these groups for thousands of years. In recent years, particularly in cities, some of these lines have blurred or even disappeared. In rural areas, it is common that three or four generations of the family live under the same roof. The patriarch often resolves family issues. 2.2.2 Languages On average 50% of Indians are literate. The national language is Hindi and about 83% of the population speaks it. Other than that, India has 18 official languages primarily associated with the different states, as well as over 700 different dialects. Though English enjoys associate
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status, it is the most important language for national, political, and commercial communication. India has been influenced by many cultures including the English, the Iranians, Central Asians, Arabians and Afghanistan. Therefore, India itself has a very diverse culture and history. The caste system though no longer sanctioned by the government still exists to a certain extent, yet it is slowly fading away.

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Old Town White Coffee, India

3.0 Strategies 3.1 Entry Modes OTWC will start-up its businesses in Mumbai and New Dehli by using Foreign Direct investment (FDI) mode. This strategy was practically used by Starbulks at year 2010 and was successfully entered into Indias coffee market. In New Dehli, a small scale Roasting Plant will be set up where the teams have the responsibility in the daily production and distribution operations. The production team will produce the coffee and the distribution team will manage the inventory and distribution of products and equipment to the retail locations. The below chart is showing the OTWC separated branches in India.

The primary target market for OTWC shop in India is the youngsters, both male and female from the ages of 16-38. This target group is being selected because they are well educated and normally comes from middle to upper middle income group. Besides, the locations of OTWC shops are being selected because both locations are home to the call centers, thus might be a lot of well educated and highly paid consumers stay at the particular locations. With superb marketing strategies, OTWC can easily gain the brand loyalty. The secondary target markets are the tourists in the areas. Tourists will recognize OTWC, as it is a multinational company. They will normally choose a familiar and well-known brand rather than the unknown brands

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Old Town White Coffee, India

3.2 Marketing Strategies Product Strategy Product mean the goods and service or idea with tangible or intangible attributes combination the company offers to the target market that create value for a buyer or user. (Kotler & Armstrong, 2010). According to Kotler (2010), the product is a centre focus of the marketing mix. If it fail to satisfy the needs of consumer, no amount of promotion, price cutting or distribution will pursuade people to buy. OTWC India will customize their menu to meet the tastes of their new target market. This includes the addition of more tea items taking in accordance that Indians are known to be more a tea-drinking population, as well as adding some new flavors in their coffee selection. OTWC shop will sell a variety of coffee and tea beverages along with different types of snacks such as pastry, confection, and baked goods, coffee-related accessories, and etc. A new menu will be formulated after several months of research and development. There are some common tastes and preferences of the Indians are known already. For example, Indians tend to take more cream in their coffee. Also, the skim milk option will not be offered in India because dieting is not a commonly accepted practice in the country. Indians will feel that they are being cheated out of their money if skim milk is put in their beverages. Some of the facilities should also be provided. For examples, the wireless internet is necessary important and must be provided in each stores, so that customers can bring their laptop to continue their work or might spend more time in the stores. The environment of OTWC shop should not be neglected too because the design of the shop will provide customers with a pleasant place to come and relax, study, work, or have business meetings. Besides that, Indians also like spices in their tea and coffee, especially ginger and black clove. One of Indias favorite fruit flavors in mango, and in fact the mango is Indias national fruit. Packaging is also needed to take into consideration because it helps to attract customers. For packaging in India, green, yellow and brown will be chosen as the product packaging color because all those colors reflect the distinctive and rich culture and colorful spirit of the people of India. For branding, the brand logo in India will be remained as same as in Malaysia outlet.

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Old Town White Coffee, India

The raw material such as coffee beans and tea will be bought from local Indian farmers in order to support the local agricultural economy, save money in transportation and tariffs, and gain tax benefits. Of course, an inspection of the crops is very important in which this process will ensure that the high quality coffee beans to be selected and used in the daily operation and further generate better brand image. These coffee beans will then be transported to the OTWC roasting plant located near the New Dehli location and then transported to Mumbai through a vast and efficient railway system. The equipment and other necessary supplies will be shipped from Malaysia keeping in mind there is a tariff on all these items. The inventory policy is to keep the stores stocked but not overstocked to ensure freshness of products. Thus, better gauges of the numerical figures in the inventory policies should be made after observing consumer trends. Pricing Strategy Price is the amount of the money customers have to pay to obtain the product. The value that received from the product must be highest than the value that customers pay for exchange its goods and services. Pricing strategies usually change as the product passes through its life cycle (Kotler & Armstrong, 2006). For a each stage of the life cycle, the price strategy might be different. Skimming pricing will be taken place in the early stages at the early stage of product life cycle in order to gain necessary cash flow. Later on, competitive pricing will be implemented for the success of the venture in order to gain competitive advantages and market shares. Of course, promotional pricing strategy, meaning temporary price reduction will be given in certain festivals or events to build patronage and store traffic. Used effectively, it can also stimulate consumer demand. The costs of production must also take into consideration because it involve the start-up capital, transportation cost, and imported goods. Thus, the star-up price will be set at about RM 3.70 per drink using the concept of zone pricing to make the coffee affordable to the target audience. Exchanges will be done in rupees so that would be about Rs 55. With using the promotional pricing strategy, OTWC prices will be 20% lower than those existing local competitors such as Barrista Coffee Company. The use of these pricing will ease the companys slide into the market place. Although, it is possible to get a cup of coffee for merely Rs 5 at small stalls on the street. However, with a popular multinational brand, plus the superb
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marketing strategies and reasonable prices, OTWC is going to prove that the it is worth enough to pay at higher price for getting a better quality of product, service, and environment. For it, the success of the Barista Coffee Company is a good example. Promotion Strategy Promotion has been defined as the coordination of all seller-initiated effort to set up channels of information and persuasion in order to sell goods and services or promote an idea (Belch & Belch, 2008). Basicly, the promotion strategy is set up to attract the customer intention toward product and persuade a quick purchase of the product in order to gain a short term profit or encourage the brand switching for the customers. According to Belch & Belch, (2009), promotion was a coordination of all seller-initiated effort to set up channels of information and persuasion in order to sell goods and services or promote an idea. In the other word, promotion is used by the firm to communicate their product or services with the public. The types and availability of media for marketing purposes in India are very similar to Malaysia, which include newspaper advertising, television ads, and etc. Since, this is a test venture and there are only two locations of OTWC shop being opened, the promotion for the store must be very focused on the target markets. For examples, billboard advertising should be located at the highly traffic areas to increase customers awareness and further leading Indian consumers to the store locations. The indicative advertisement rates per month for general formats are given below:a.) Horizontal: (i) 728 x 90 leader board = around Rs 3176 (RM 214) /month per ad (ii) 468 x 60 banner = around Rs 2270 (RM 153) /month per ad b.) Vertical: (i) 160 x 600 wide skyscraper = around Rs 3176 (RM 214) /month per ad (ii) 120 x 600 skyscraper = around Rs 2270 (RM 153) /month per ad c.) Square: 300 x 250 medium rectangle = around Rs 1362 (RM 92) /per month ad (Cultupropedia.com, 2011)

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Besides that, the OTWC brochures and promotional coupons will also be sent from one area to anthers and from house to house. Furthermore, the company website, e-mail address, and hotline of OTWC in India should also be provided and might need to print together with the above advertising and promotional strategies in order to make convenience for the target customers in getting further information. Moreover, OTWC is also committed to giving back to the communities. Thus, OTWC India should sponsor scholarship for the local students because this will give OTWC positive publicity. As everyone knows, India has produced a largest number of films in each year. Based on the report, there are about 15 million people see films in India everyday (Cultupropedia.com, 2011) and therefore product placement or movie theater advertising are good ways that can be used to increase reach and exposure among Indias citizens if OTWC can appear in the script or program setting. Given the limitation of product placement, consumer may not see it because it just appears on screen in few seconds only. (Belch & Belch, 2008) Distribution strategy Place includes company activities that make the product available to target consumers. According to Kotler (2010), the distribution decisions are often interdependent with the other marketing mix variable. An organisation distribution strategy is determined by two major factors, including coverage and control. This mean that the coverage of the selling areas must be largest enough in term of population, demand or purchasing power of customers. Both proposed locations of OTWC shops will be at the highly urban locations in Mumbai and New Delhi because the purchasing power of Indian consumers in urban areas is relatively higher than rural areas (Knowledge Wharton, 2007). Besides, both locations are home to many call center locations, technology companies, major tourist hot spots, colleges and universities, and shopping centers. The OTWC in Mumbai will be located at Nariman Point near Churchgate and Gateway to India, which is a major tourist spot. In close proximity to Nariman Point are many technology companies and call centers. Nariman Point and the nearby area of Colaba are home to the higher-class affluent society. The Architecture around the area is very modern and developed. The roads are in good condition to maintain easy access to the location. (A map of the location can be seen at pages [iii] in Appendix)
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The OTWC in New Delhi will be located in Connaught Place, which is a large commercial shopping area in New Dehli. Most of the call centers and big companies are also in the Connaught Circle. New Dehli is the nearest big city to the world famous Taj Mahal, therefore also being the popular place for tourists from all over the world. The OTWC Zone Office will be located in this OTWC store. (A map of the location can be seen at pages [iv] in Appendix)

3.3 Staffing policy Staffing policy is defined as the customary means by which a company staffs its offices (Wild, Wild, & Han, 2010). Staffing policy is concerned with the selection of employees for particular jobs. This involves selecting individuals who have the skills required to do particular jobs at one level (Schein, 1985). Research has identified three types of staffing policies in international businesses which are the ethnocentric approach, polycentric approach, and geocentric approach. (Ondrack, 1985)

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