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 Café 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 Malaysia¶s 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 world¶s 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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many colleges and Universities are also located here which will allow OTWC to target the young generations. inspired by job opportunities. This is the good news for both foreign and local entrepreneurs. They even want to do what the rest of the world is doing. 2003). Today. but what¶s more is that they are willing to pay. the OTWC menu in India must cater to the Indian taste. With the money. and etc. McDonald¶s and Motorola have been taking advantage of these new policies and finding a new home in India. Michael Schumann. and broke public sector monopolies (Schuman. there is a new consumer culture emerging in India. abolished licensing controls on private investment. Narasimha Rao in 1991. UBMB3013 International Business Page 2 . they are willing to pay anything and everything. ³U. The revolution had opened the India¶s economy to foreign investment and trade. Time Magazine journalist. Thirdly. 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.S. Of course. According to Thottam (2003) in the Time Magazine entitled ³Where The Good Jobs are Going. The new policies has dismantled important controls. companies are expected to send 3. Indian consumers will definitely welcome the internationally popular OTWC to its country. primarily to India according to a study by Forrester Research.´ Increasingly in job opportunities enables Indian consumers to reinvest in the Indian economy.3 million jobs overseas in the next 12 years. Multinational companies such as Citibank. lowered customs duties. Furthermore. India¶s young are becoming world-class consumers. these two cities are also major hot spots for tourists.V. includes getting fast food in McDonalds. who recognize a multinational brand such as OTWC. wearing Levis Jeans. devalued the currency. For it. These companies owe their success to the rising young elite due to the mass outsourcing by foreign companies. 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. The Indian consumers today. have switched to spend more compare to previous. Indian attitudes towards money are also changing. dropped tax rates. asserts that with the changing Indian economy. Besides. India local producer to produce its own healthy and unique aroma of organic coffee bean to serve Indian households and to become low-cost leadership. They have increasingly wealthy and are willing to spend on everything.Old Town White Coffee.´ writes. mixing traditional menu items with those that a customized for the Indian tastes.

including a bicameral legislature. Democratic Republic with a Parliamentary form of Government. India¶s government was formed in 1947 after the country gained its independence from the Imperial Britain. the head of state and the head of government in India are different. act in accordance with such advice: Provided that the President may require the council of Ministers to reconsider. The current government of India is in favor of long-term foreign investment. in the exercise of his functions. Besides that. ³ There shall be a Council of Ministers with the Prime Minister at the head to aid and advise the President who shall. The current prime minister of India is the Dr. and has little power except when in emergency situations. The prime minister of India is the head of government. A company with a better understanding of political environment will lead to greater networking ability and adaptation. meaning it is a representative democracy with power divided between the state and federal government. Nevertheless. Under this constitution. The prime minister leads the executive branch of government in a parliamentary system.0 Contents 2.1. India is governed under the Constitution of India 1950. The current Indian president is Smt. Secular. ´ . and judicial branch (Trade Chakra. There are three branches which are stated in constitution of India.Article 74(1) in the constitution of India 1949 - UBMB3013 International Business Page 3 . 2008). head of the Council of Ministers and the leader of the majority party in parliament. The head of state is the President who serves more as a symbolic ceremonial figure. India is also the world's largest democracy country. Unlike America. Manmohan Singh. 2. India is a federal republic.Old Town White Coffee. Pratibha Devisingh Patil. which it was modeled after the United States constitution. India 2. 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. executive branch.1 Political System India is a Sovereign.1 India¶s Political Perspectives Political environment is an important issue to every business transactions.

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. b) The government permits foreign firms to hold up to 51% equity in Indian venture on a case-by-case basis. 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. The tariff system is based on the Harmonized System (HS) and tariffs are in the 40% to 60% range for basic raw materials. A certificate of origin is not required on imports originating from other countries. 60% to 100% for semi-processed goods. require approval by the Foreign Investment Promotion Board or a newly created committee for review of smaller investment projects. cutting red tape. a sophisticated legal and accounting system and a user-friendly intellectual infrastructure. a comprehensive WTO strategy. These include a free and vibrant press.2 Law Though liberalization. a packing list and bill of lading. not considered a priority industry eligible for automatic clearance by the Reserve Bank of India. Shipments to India require a commercial invoice. the prime minister called for a ³Second generation reforms´ to include improving the investment climate.1. The following are the foreign investment policies of India:a) All foreign investment projects. and 100% and above on finished and consumer goods. The Companies Act 1956 of India is an Indian law that sets down rules for the establishment of both public and private companies. economic policies for International business still have many restrictions. India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long-term investments. India In 1999. (Ravindran.Old Town White Coffee. c) Automatic approval is granted to foreign investments of up to 51% equity in 34 high- priority industrial sectors. a judiciary that can and does overrule the government. UBMB3013 International Business Page 4 . 2000) 2. Import duties are applied to almost all goods entering India. and better corporate governance. reform in agriculture and small scale industry.

1. However. 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 UBMB3013 International Business Page 5 . e) No specific tax incentives exist to attract foreign investment. many industrial and business are trying to restrain themselves from investing in the north-eastern parts of India because of terrorist threats.Old Town White Coffee. political instability in India has changed better since the previous general elections in 1999. advertisement through radio might not reach to certain citizens in rural area. radio. Sovereign Risk in India is therefore zero for both foreign direct investment and foreign portfolio investment. there are 4/5 households in rural area do not have electrical product such as refrigerator. 2009) Commercial Risk In India. not each and every product or service can be readily sold. etc due to poor infrastructure condition. With strong and healthy coalition governments emerging. India d) Foreign companies are permitted to acquire land and own buildings as long as permission is obtained from the Reserve Bank of India. (The Companies Act. As it is. 1956) 2. the political instability did not change India's economic because it delayed certain decisions relating to the economy. Thus. (India One Stop. By the way. For examples. It is necessary to study the demand and supply situation for a particular product or service before making any major investment.3 Political Risks and Causes Sovereign Risk India is a parliamentary democracy since India independence from British. 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. India does not face any real threat of serious revolutionary movement which might lead to the collapse of state machinery. (India One Stop. entering into India¶s consumer market involves some kind of gamble and hence involves commercial risk.

Hence. 2009) Risk Due To Terrorism In the past. However. India dead against a free economic world. political risk in India is practically absent. 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. (India One Stop. (India One Stop. 2009) UBMB3013 International Business Page 6 . some of the financial experts believe that the negative impact of terrorist attacks would be only in a short term phenomenon. Being a strong democratic nation the chances of an army coup or foreign dictatorship are minimal. India would continue to be a favorable investment destination.Old Town White Coffee. India has suffered several terrorist attacks on its territory which could have a negative impact on investor confidence. Nonetheless. In the longrun.

beliefs. In recent years. it is common that three or four generations of the family live under the same roof. 2. values and attitudes.2.1 Religions India is one of the most religiously diverse nations in the world.2 India¶s Culture Perspectives According to the Griffin. particularly in cities. some of these lines have blurred or even disappeared. being a multireligious society. For this reason. Zoroastrianism. a far more powerful division is the traditional Hindu bifurcation into nonpolluting and polluting occupations. The national language is Hindi and about 83% of the population speaks it. and attitudes that distinguish one society to another. Though English enjoys associate UBMB3013 International Business Page 7 . 2. Strict social taboos have governed these groups for thousands of years. Christianity. language. education. India. In India. There are three majors national holidays that are celebrated with zeal and enthusiasm across India are the Independence Day. Judaism and the Bahai Faith are also influential but their numbers are smaller. aesthetics. This is reinforced by the fact that many believe gods and spirits have an integral and functional role in determining their life. Culture is the collection of values. Islam is practiced by around 13%. as well as over 700 different dialects. behaviors. Children from an early age are reminded of their roles and places in society. manners and customs. In Hinduism. celebrates holidays and festivals of various religions. the Republic Day. However.2 Languages On average 50% of Indians are literate. W. The traditional of Indian culture is defined by relatively strict social hierarchy. Sikhism. Other than that. with some of the most deeply religious societies and cultures. India has 18 official languages primarily associated with the different states. The elements that used to measure a society¶s culture are religion. and Buddhism are influential not only in India but across the world. The patriarch often resolves family issues. (2010). and social structure. R. religion still plays a central and definitive role in the life of many of its people.2. the cow is regarded as a symbol of ahimsa (nonviolence). India 2. mother goddess and bringer of good fortune and wealth. customs. In rural areas. Jainism. and the Gandhi Jayanti. There are 80% of the people in India are Hinduism.Old Town White Coffee. cows are revered in Hindu culture and feeding a cow is seen as an act of worship.

India has been influenced by many cultures including the English. India itself has a very diverse culture and history. political. it is the most important language for national. India status. the Iranians. and commercial communication. yet it is slowly fading away. Arabians and Afghanistan. The caste system though no longer sanctioned by the government still exists to a certain extent. UBMB3013 International Business Page 8 . Central Asians.Old Town White Coffee. Therefore.

The secondary target markets are the tourists in the areas. OTWC can easily gain the brand loyalty. a small scale Roasting Plant will be set up where the teams have the responsibility in the daily production and distribution operations. the locations of OTWC shops are being selected because both locations are home to the call centers. This strategy was practically used by Starbulks at year 2010 and was successfully entered into India¶s coffee market. thus might be a lot of well educated and highly paid consumers stay at the particular locations. The below chart is showing the OTWC separated branches in India.Old Town White Coffee. With superb marketing strategies. They will normally choose a familiar and well-known brand rather than the unknown brands UBMB3013 International Business Page 9 . Tourists will recognize OTWC. The primary target market for OTWC shop in India is the youngsters. Besides. 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. This target group is being selected because they are well educated and normally comes from middle to upper middle income group. both male and female from the ages of 16-38. as it is a multinational company. In New Dehli. India 3.1 Entry Modes OTWC will start-up its businesses in Mumbai and New Dehli by using Foreign Direct investment (FDI) mode.0 Strategies 3.

the wireless internet is necessary important and must be provided in each stores. the product is a centre focus of the marketing mix.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. Packaging is also needed to take into consideration because it helps to attract customers. or have business meetings. coffee-related accessories. One of India¶s favorite fruit flavors in mango. Some of the facilities should also be provided. (Kotler & Armstrong. no amount of promotion. 2010). For branding. the brand logo in India will be remained as same as in Malaysia outlet. India 3. price cutting or distribution will pursuade people to buy. Indians will feel that they are being cheated out of their money if skim milk is put in their beverages. Besides that. According to Kotler (2010). and baked goods. 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. OTWC shop will sell a variety of coffee and tea beverages along with different types of snacks such as pastry. so that customers can bring their laptop to continue their work or might spend more time in the stores. For examples. There are some common tastes and preferences of the Indians are known already. especially ginger and black clove.Old Town White Coffee. OTWC India will customize their menu to meet the tastes of their new target market. If it fail to satisfy the needs of consumer. For example. confection. UBMB3013 International Business Page 10 . This includes the addition of more tea items taking in accordance that Indians are known to be more a ³tea-drinking´ population. For packaging in India. 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. the skim milk option will not be offered in India because dieting is not a commonly accepted practice in the country. and etc. work. green. Indians tend to take more cream in their coffee. A new menu will be formulated after several months of research and development. Indians also like spices in their tea and coffee. Also. as well as adding some new flavors in their coffee selection. and in fact the mango is India¶s national fruit.

save money in transportation and tariffs. Later on. The costs of production must also take into consideration because it involve the start-up capital. 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. Pricing Strategy Price is the amount of the money customers have to pay to obtain the product. Thus. For a each stage of the life cycle. the star-up price will be set at about RM 3. The use of these pricing will ease the company¶s slide into the market place. it can also stimulate consumer demand. 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. 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. The equipment and other necessary supplies will be shipped from Malaysia keeping in mind there is a tariff on all these items. The value that received from the product must be highest than the value that customers pay for exchange its goods and services.70 per drink using the concept of zone pricing to make the coffee affordable to the target audience. plus the superb UBMB3013 International Business Page 11 . OTWC prices will be 20% lower than those existing local competitors such as Barrista Coffee Company. with a popular multinational brand. Of course. the price strategy might be different. and imported goods. Of course.Old Town White Coffee. Thus. meaning temporary price reduction will be given in certain festivals or events to build patronage and store traffic. promotional pricing strategy. With using the promotional pricing strategy. better gauges of the numerical figures in the inventory policies should be made after observing consumer trends. Used effectively. competitive pricing will be implemented for the success of the venture in order to gain competitive advantages and market shares. Exchanges will be done in rupees so that would be about Rs 55. 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. However. and gain tax benefits. Although. 2006). transportation cost. The inventory policy is to keep the stores stocked but not overstocked to ensure freshness of products. Pricing strategies usually change as the product passes through its life cycle (Kotler & Armstrong. it is possible to get a cup of coffee for merely Rs 5 at small stalls on the street.

OTWC is going to prove that the it is worth enough to pay at higher price for getting a better quality of product. which include newspaper advertising. Basicly. the promotion for the store must be very focused on the target markets. 2011) UBMB3013 International Business Page 12 . According to Belch & Belch. and environment. For examples.) 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. (2009). the success of the Barista Coffee Company is a good example. 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. The indicative advertisement rates per month for general formats are given below:a. In the other word. billboard advertising should be located at the highly traffic areas to increase customers awareness and further leading Indian consumers to the store locations.) 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. 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. television ads. 2008). service. promotion is used by the firm to communicate their product or services with the public. and etc.Old Town White Coffee. The types and availability of media for marketing purposes in India are very similar to Malaysia. 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. India marketing strategies and reasonable prices.com. Since.) Square: 300 x 250 medium rectangle = around Rs 1362 (RM 92) /per month ad (Cultupropedia. this is a test venture and there are only two locations of OTWC shop being opened. For it.

(Belch & Belch. 2011) and therefore product placement or movie theater advertising are good ways that can be used to increase reach and exposure among India¶s citizens if OTWC can appear in the script or program setting. e-mail address. the distribution decisions are often interdependent with the other marketing mix variable. including coverage and control.com. colleges and universities. Besides. The roads are in good condition to maintain easy access to the location. there are about 15 million people see films in India everyday (Cultupropedia. Moreover. Given the limitation of product placement. demand or purchasing power of customers. India has produced a largest number of films in each year. Based on the report. OTWC is also committed to giving back to the communities. and shopping centers. 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. In close proximity to Nariman Point are many technology companies and call centers. Furthermore. India Besides that. The OTWC in Mumbai will be located at Nariman Point near Churchgate and Gateway to India. both locations are home to many call center locations. the OTWC brochures and promotional coupons will also be sent from one area to anthers and from house to house. The Architecture around the area is very modern and developed.Old Town White Coffee. major tourist hot spots. 2008) Distribution strategy Place includes company activities that make the product available to target consumers. As everyone knows. the company website. Nariman Point and the nearby area of Colaba are home to the higher-class affluent society. An organisation distribution strategy is determined by two major factors. (A map of the location can be seen at pages [iii] in Appendix) UBMB3013 International Business Page 13 . Thus. OTWC India should sponsor scholarship for the local students because this will give OTWC positive publicity. consumer may not see it because it just appears on screen in few seconds only. which is a major tourist spot. 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. 2007). According to Kotler (2010). This mean that the coverage of the selling areas must be largest enough in term of population. technology companies.

1985) UBMB3013 International Business Page 14 . and geocentric approach. & Han. New Dehli is the nearest big city to the world famous Taj Mahal. Most of the call centers and big companies are also in the Connaught Circle. polycentric approach. This involves selecting individuals who have the skills required to do particular jobs at one level (Schein. (A map of the location can be seen at pages [iv] in Appendix) 3. Research has identified three types of staffing policies in international businesses which are the ethnocentric approach. therefore also being the popular place for tourists from all over the world.Old Town White Coffee. 1985).3 Staffing policy Staffing policy is defined as the customary means by which a company staffs its offices (Wild. which is a large commercial shopping area in New Dehli. India The OTWC in New Delhi will be located in Connaught Place. 2010). Staffing policy is concerned with the selection of employees for particular jobs. (Ondrack. The OTWC Zone Office will be located in this OTWC store. Wild.

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