Regardless of mode of entry, operations in India probably should use a skimming price strategy. Skimming offers the lowest breakeven quantities. It permits the use of a large (or a small) salesforce. Most importantly, skimming generates cash for a variety of strategic purposes, all relevant to Blair Company operations in India. Cash will be needed to educate consumers via advertising and promotion and to attract, train, and support dealers (should the dealer option be chosen over the direct salesforce). Cash will be needed to expand market areas from two regions to four, from four regions to the entire nation, and, finally, to rural areas where market potential is huge. Cash also will be needed for new product development, to expand the Delight product line, and to add new lines. Line extensions will be needed when geographic expansion slows because sales increases cannot easily come from increased usage of the Delight purifier among existing owners.
Regardless of mode of entry, operations in India probably should emphasize a dealer network based on reasons outlined in part C. of this Note. Still, some large urban areas may use a direct salesforce who can prospect their neighborhoods and sell, deliver, and service products. The salesforce also can educate new users (and nonusers) and collect payments, if units are sold via hire purchase. Finally, the limited use of a direct salesforce or a factory owned retail outlet system may help Blair Company control dealers, much like the role of factory outlet stores in the U.S.
In summary, India seems a very nice fit for Blair Company’s international goals. However, the company decided to enter Brazil first, via a joint venture. The company chose Brazil largely because of geographic proximity—Brazil lies only two time zones and just a few thousand miles away from Blair Company headquarters. If things go well in Brazil, Blair Company then will enter Argentina—again because of proximity (and similarity with Brazil). India has been put on the “back burner” for the time being.
Students usually are disappointed to hear this. However, managers at Blair Company received favorable reports on the markets for water purifiers in all four countries mentioned in the case—Argentina, Brazil, India, and Indonesia. Political concerns ruled out Indonesia for market entry but the company still faced a difficult choice. The Indian market (not counting the rural areas) was bigger than Brazil and Argentina combined. However, managers viewed India as too challenging, beyond their capabilities to understand and to perform well in. Still, Chatterjee and a few other managers at Blair Company believed that a license arrangement to enter India would have been a better decision.
A good way of ending the class is to distribute the attached snapshot of Singer Company’s view of emerging markets. This brief description (taken from Singer’s Web site at http://www.singer‑nv.com/ sing3O5.htm) illustrates why emerging markets are so attractive to many companies and how one company is able to take advantage of the opportunity. Alternatively, the snapshot could be distributed (or the Web site identified) earlier, when making the case assignment.
* Teaching Notes prepared by Professor James E. Nelson, University of Colorado at Boulder.
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