Blair Water Purifiers India Case Study Analysis Executive Summary Blair company inc. was founded by Eugene Blair in 1975. The company’s mission is to provide equipment that will meet the needs of its target market in terms of filtration and purification of water for having high quality water. As part of the organisational goal, the company is also aiming to enter international market to be able to be known in both local and international level and position itself in the global competition.
As part of the geographic expansion of the company, they are trying to produce innovative products to meet future needs in terms of water purification and filtration. Rahul chatterjee, one of the company’s international market liaisons, had made two fact-finding trips to india to survey the indian market and competition for home water filters and purifiers, and the foreign investment issues in india. Based on these findings, he had to evaluate the feasibility of launching the company’s own “delight” home purifier in the indian market.
After several researches and analysis made on the data obtained, he provided his recommendations on the appropriate entry strategy for the indian market. Objective of the case analysis Our objective is to provide a strategic marketing plan for Blair Water’s entry into the water purifier market in India and also to discuss the advantages and disadvantages of the three modes of entry into a Indian market, the important elements of an entry strategy and also to develop a competition analysis matrix in the water purifier market which would also aid in developing the strategy .
Key Issues/Challenges Faced The key issues for Blair Water are: 1. What target market Delight is satisfying in India 2. How Blair Water will position the Delight Purifier in India 3. How it will manufacture and distribute the Delight Purifier in India Time is the main constraint. No matter what direction Blair Water goes in positioning Delight, the main goal is to do it fast, effectively, and efficiently. There is tremendous opportunity in the market, and there are hundreds of competitors. Current Situation Blair Water Purifiers India has dabbled the underdeveloped countries for years.
After years of research, Blair Company has decided to enter the Indian market for home water purification devices. Its goal is to “thrive” in less developed countries. There is a definitive demand for better water in India. In fact, newspaper, consumer activists, and government officials have expressed the need of quality Indian water. The government even set standards for water quality. Due to many variables, which reinforce the call for quality drinking water, Blair Water seems to have a bright future in India. The below table illustrates the current breakdown of the India’s population concerning water purification.
Take note that ten percent of the people are either unaware of the water problems or thought their water quality was acceptable or refuse to pay for products that they believed were mostly ineffective. The majority of the population utilizes a traditional method of eliminating bacteria by boiling the water. Water Purification Scenario in India| Method| Advantages| Disadvantages| % usage| Boiling| | Cumbersome, Time Consuming| 50%| Candle Filters| Low Price, Ease of use| Very Slow, Need to be cleaned very often| 20%| Water Purifiers| Better than the previous two methods| Expensive than the previous two. 20%| No Action| | | 10%| Strategy for Blair Water Purifiers For the water purifier industry majority of the sales were mostly in large urban areas. Only a small percent of the market was reached by existing manufacturers. So, if the right product is sold with the right attributes at the right place, then an outbreak of sales would surely occur. Hence based on the industry, we believe that the following are the most important factors for a company to enter the market. A right mix of these factors will also help to develop a category killer. 1. Product Performance 2. Cost & Price 3. Customer Service . Aesthetic Appeal 5. Warranty Competitor Analysis Much of the competitors, including Eureka Forbes, Ion Exchange, and Singer have been examined for their strengths and weaknesses. * Eureka’s Aquaguard is the signature national water purifier. Although it has tremendous brand equity, the product itself does not match the established name. * Ion Exchange was the premier water treatment company in India; however, due to weak effort in consumer awareness, the company’s market is very low. * Singer had success from its already established brand name as well as its intense effort to market its products.
The following table gives details on the features and pricing of the competitors products. Feature | Singer | ZERO-B | PureSip | Aquaguard | Price| 4,000| 2,000| 5,500| 2,000| Remove Sedimentation| Y| Y| Y| Y| Remove Heavy metal| Y| N| N| Y| Remove Odor| Y| Y| Y (Weak)| Y (Weak)| Remove color| Y| Y| Y| Y| Kill Bacteria & Viruses| Y| Y| Y| Y| Fungi| Y| N| N| N| Remove bad taste| Y| Y| N| n/a| Volume| n/a| 20 liters| n/a| n/a| Flow rate| 3. 8 liters/min| n/a| n/a| n/a| Life time| 40,000 – 70,000 liters| 1 yr (filter)| n/a| n/a| Maintenance Cost| n/a| Rs. 200/yr| n/a| n/a|
Require electricity| n/a| N| N| Y| Additional Feature| n/a| Iodine| n/a| stored safely| The above table clearly indicates that the competing products are not as sophisticated as Delight is. Delight is better than the competitors in all most all the listed parameters. Alternatives available 1. Utilize a catalyst to enter an established market. This catalyst could be in terms of: * A joint arrangement * Acquisition or * Joint Venture Company Criteria for choosing the best alternative The alternatives will be evaluated based on the following criteria: (reduce this? * Alternative satisfying the potential market * Alternative superior to competitors * Any specific benefit because of the alternative * Alternative meeting the needs of the target market * Alternative’s image reflecting its target markets’ needs * Can the alternative strategy reach its target market effectively and efficiently? * Financial implications Analysis of the alternatives 1. Licensing: * A joint arrangement would be a fruitful method to initiate business in a foreign company due to its licensing of an Indian company to manufacture and market Blair Water’s product. This term would last for five years with the option to renew for three more. This is advantageous to Blair because Blair would get a kick back from all of the profits the Indian manufacturer would make. The expenses for Blair would be the licensing fees that are on a per-unit basis. * The advantage of a joint arrangement with a licensee would be the very minimal start-up costs. The primary risk could be as little as $30,000 in capital for production facilities and equipment, and another $5,000 for office facilities and equipment. * For a company attempting to saturate a foreign market, the initial risk cost) is very low! $40,000 would go toward fix costs; but it should decrease to $25,000 as soon as an Indian manager could be hired, trained, and begin running the operations. * The main disadvantage of a joint arrangement with a licensee would be the inability for Blair Water to control the operations in its foreign factory. The Indian national who was hired and trained to run the operations would only act as a liaison for the United States’ Blair Water. Blair would have no authority over its licensee’s operations. The average royalties Blair would earn from the licensee would be Rs. 00 (or $8. 57) per unit sold. * The Break even analysis for the same is below: * Capital cost of production facilities and equipment = $30,000 * Cost of office facilities and equipment = $5,000 * Annual fixed cost ranged between $15,000 – $40,000 * Average royalty = Rs. 300 * Total cost (min) = $30,000 + $5,000 + $15,000 $50,000 * Total cost (max) = $30,000 + $5,000 + $40,000 = $75,000 * Assumption: Exchange rate is 1$ = Rs. 35 * B/E (min) = ($50,000 x 35) ? 300 = 5,834 units * B/E (max) = ($75,000 x 35) ? 300 = 8,750 units 2. Acquisition Strategy * An acquisition entry would involve Blair buying a current factory or manufacturer’s company. The operations would be run by the Indian company; however, Blair would direct the business strategy and implement its own operations. Basically, in this approach, Blair is buying a company to sell its products. An acquisition would be advantageous because it will allow Blair to expand its operations as well as retaining all of the profits. Unlike a joint arrangement with a licensee, Blair Water would retain all of the profits its Indian based company made. * The major disadvantage of an acquisition would be the cost to buy an Indian company. An acquisition would be on the high-end of costs of all of the three catalyst approaches. The acquisition cost includes all of the factory costs, licensing costs, employees costs, and overhead costs. 3. Joint Venture A joint venture company operation would involve Blair partnering up with an Indian company. The profits of course would be divided between the two parties. * The joint venture company would continue to keep its name. This is what Blair Water wants, though. It is important for Blair Water to partner with a Indian national brand because the equity is already established – just like an acquisition. Unlike an acquisition, Blair does not have to buy the Indian company, and in turn saves a lot of start-up costs. * A joint venture company would be advantageous because it is the mix of both acquisition and joint arrangement.
It retains the low start up costs of a joint arrangement, yet establishes brand equity like an acquisition. Additionally, the profits for a joint venture would be higher than if Blair Water manufactured its product in the United States and imported it to India’s Market. * With a joint venture company, the marketing would be more geared in India – since brand equity is already reputable. The reason it would be cheaper for Blair to joint venture with an Indian company rather than import factors from two important concepts – cheaper labor in India, and nnecessary high costs of shipping Below tables illustrate the breakeven analysis for the company under joint venture mode in two region, four region and national presence. TWO REGION| Skimming | Penetrate | | dealer | sales force | dealer | sales force | Initial Investment| Rs. 4,000,000| Rs. 4,000,000| Rs. 4,000,000| Rs. 4,000,000| Fixed Cost| Rs. 4,000,000| Rs. 7,200,000| Rs. 4,000,000| Rs. 7,200,000| Contribution| Rs. 650/unit| Rs. 500/unit| Rs. 300/unit| Rs. 200/unit| B/E Investment| 6,154 units| 8,000 units| 13,334 units| 20,000 units| B/E Contribution| 6,154 units| 14,400 units| 13,334 units| 36,000 units|
FOUR REGION| Skimming | Penetrate | | dealer | saleforce | dealer | saleforce | Initial Investment| Rs. 8,000,000| Rs. 8,000,000| Rs. 8,000,000| Rs. 8,000,000| Fixed Cost| Rs. 7,000,000| Rs. 14,000,000| Rs. 7,000,000| Rs. 14,000,000| Contribution| Rs. 650/unit| Rs. 500/unit| Rs. 300/unit| Rs. 200/unit| B/E Investment| 12,308 units| 16,000 units| 26,667 units| 40,000 units| B/E Contribution| 10,770 units| 28,000 units| 23,334 units| 70,000 units| NATIONAL PRESENCE| Skimming | Penetrate | | dealer | saleforce | dealer | saleforce | Initial Investment| Rs. 0,000,000| Rs. 30,000,000| Rs. 30,000,000| Rs. 30,000,000| Fixed Cost| Rs. 40,000,000| Rs. 88,000,000| Rs. 40,000,000| Rs. 88,000,000| Contribution| Rs. 650/unit| Rs. 500/unit| Rs. 300/unit| Rs. 200/unit| B/E Investment| 41,154 units| 60,000 units| 100,000 units| 150,000 units| B/E Contribution| 61,539 units| 176,000 units| 133,333 units| 440,000 units| Positioning Strategy Position Delight for convenience and performance and taste. * Blair Water’s strategic plan must include how it wants to position its product, the Delight purifier. Due to the overwhelming need for the product to be useful, the performance characteristic must be Blair Water’s primary goal for a model. It must also be convenient. * According to research on current purifiers, customers prefer convenience of the actual purifier. The counter model is preferred over the wall model. Along with the model that sits up on the counter, it would be very convenient if it was portable. * The last element is taste. The majority of the population boils their water, and they are disgusted with the “flat” taste of their water.
It is essential to complement these needs through the Delight. These three elements must be incorporated in the Delight’s positioning. * The Indian market has expressed the primary needs of convenience, performance, and taste. Delight must satisfy those needs or it will be contested with competitors’ purifiers who in fact meet those needs. Assumptions * In 1996, $1 = Rs. 35 Recommendation and Implementation Blair Water’s strategic plan is to begin business in India – where it has followed through extensive R&D to conclude the need for water purifiers in the Indian community.
First off, it appears that Alternative 2 is not a feasible alternative for Blair Water. The cost ramifications for the door-to-door sales force is entirely too much for a start-up business coming into a foreign market. After establishing a good business rapport in India (which may take several months to several years), saturating the rural market may be feasible. However, Blair Water’s strategic plan does not align with this alternative. Alternative 1, utilizing a catalyst is the most constructive alternative, especially using the joint venture.
Due to the higher profit margin by foreign investors in India than American corporations, it would be advantageous to have the company partner up with a foreign corporation in India. Another important note would be the cost savings by not importing the US products. Importing goods from the United States to India would not be a feasible option because of the extremely high shipping rates. The labor in India is cheaper as well, so cutting these two huge costs would be advantageous to Blair Water’s strategic plan to utilize a foreign company to begin its business in India.
The cost-to-benefit of the first two options for alternative 1, joint arrangement and acquisition, do not coincide with Blair Water’s strategic plan to feasibly begin a business in India. The plan is to come into India with a product that will sell immediately and earn profits. The latter two options would not earn a high enough ROA for Blair’s financial needs. The following is a synopsis of the joint venture company option: Although a joint venture company may have to split the profits with the Indian national company, the initial costs are reasonably cheap.
It must be emphasized, in this case, that Blair Water is attempting to saturate the Indian market, but it must start somewhere. It is impossible to tell if Blair would be successful at establishing immediate rapport with its target market and be able to sell its product successfully without already established brand equity. The following table illustrates how a joint venture company is the best option for Blair Water. The payoff of a reasonably cheap initial cost with reasonable profit gains along with already established high brand equity is precisely what a foreign investor needs when starting up in a foreign market.
It would be very risky and costly for a US corporation to go all out in saving initial costs (such as a Joint arrangement) or go all out in profitable gains (acquisition). | Start-up Costs| Initial Brand Equity| Profits Earned| Joint Arrangement| Low| High| Low| Acquisition| High| High| High| Joint Venture| Medium| High| Medium| The joint venture should be implemented in one of India’s six Free Trade Zones to optimize profits. India is taxing foreign investors on interest, dividends, and royalties received and on capital gains received from a sale of assets.
However, foreign investors were offered tax concessions, including liberal depreciation allowances and generous deductions. Furthermore, the government offered even more complimentary tax treatment if foreign investors would locate in one of India’s six Free Trade Zones. Although the tax rates seem to be high, by implementing a factory in the Free Trade Zone, tax costs will diminish. Along with that, one scope to ponder is the ROA in India for foreign investors. The return on assets for Indian corporations neared 18 percent, compared to only 11 percent for American corporations.
In conclusion, if Blair Water implements a joint venture in India (in the Free Trade Zone), it would earn (on average) more profit than if the company was based in the United States, the start-up costs would be reasonably inexpensive, and it would save millions of dollars to establish the brand equity it will already have established in their target market. Alternative 3, positioning itself to the actual needs of the market can be combined with the joint venture company. Alongside a company that has already established good brand equity, Blair must implement its positioning strategy so it satisfies the market.
R&D has provided Blair with the data necessary to formulize and produce a product that will satisfy Indians. However, it is just as important to advertise and position the Delight Purifier. The specific needs are emphasized as performance, convenience, and taste. Blair Water must implement a joint venture company and position the Delight Purifier as a convenient purifier that has maximum performance to filter the best tasting water in India! It is necessary for Blair Water to seek business with a joint venture company that has already established brand equity for the water purifier target market.
Another important note is to partner with a business in the Free Trade Zone. The latter will enable Blair Water to retain more of its profits. Assuming Blair Water has conducted the R&D for its target market and has produced a marketable product, the Delight, the first step for Blair Water to position itself and its product is to seek a joint venture company with brand equity. So our final Recommendation is to target the large cities of western India and to position the product as “Performance, Convenience and Taste”. We also feel that the company should have a joint venture with an Indian company in the free trade zone.