Business Opportunity for an American Consumer Product in a Foreign Country - Case Study Example

Identify a business opportunity for an American consumer product in a foreign country. Executive Summary This international business project identifies a business opportunity for the American fast food company, The Counter, offering its distinct and vast range of burgers and classy wines & beers. It briefs the company product-line and the selected country, India, to enter into foreign market. The project discusses among others the Indian market size – its demographics, peoples’ socio-economic status to justify the business opportunity among other parameters. It analyzes the political and economic environment in India to make new product entry and its positioning viable from earning perspective. Recommendations are given at the end on the viability of the business opportunity. Introduction As this project is on identification of a business opportunity for an American consumer product in a foreign country, it will analyze this opportunity for an American burger chain, The Counter, for its custom-made burgers for the leading emerging market country, India. It will discuss the viability of introducing a yet another burger type, distinct with its unlimited variation range. Product Introduction The Counter’s custom-made burgers are a unique concept in the fast-food chains of burgers because their combination range offered to consumers is quite vast – more than 312,000 – to appease to customers’ taste-buds with their endless range of combinations. The concept is very challenging. The idea itself is innovative in the sense that The Counter dares to give a tryst to new delicacies by experimenting. Their menu offers Build Your Own Burger™ Sheet, with various Market Selection and Signature Burger/Bowl alternatives in their restaurants (The Counter, 2015). Currently, The Counter is operating from North America, Ireland, and Saudi Arabia, offering various reward points to the member customers on their purchases. Considering the appreciative remarks by the GQ magazine, as “one of the 20 Hamburgers to eat before you die” and “Best Burger” on OPRAH®, The Counter is expanding its outlet numbers all across the U.S. It is the right time that expansion happens further in foreign locations as well of this fast food and quick service restaurant chain (The Counter, 2015). Country Introduction Indian food market although boasts of consumers’ localized tastes but people have a liking for trying brands, and love to taste a range of products at various costs irrespective of the fact they can afford it or not. Most of such people belong to middle class. Incidentally, Indians spend nearly 40 percent of their average household income on food and transportation, while American people spend about 25 percent on these necessities (Court & Narasimhan, 2010). Size of Market (Demographics, socio-economic, and Urban/Rural State Indian market is huge in potential for getting familiar with yet another burger type and class to try. The Indian Small Town has captured the scene for FMCG products. Middle India boasts of towns with 1 to 10 lakh people, running ahead in value growth. Even towns populating below 1 lakh people have come forward to add-on the growth chart. The whole of urban India, from metro cities to smaller towns, is brimming with growth. Table no. 1 reveals the pan-India growth in FMCG sector from 2009 to 2011 along with growth in quarter 4 over quarter 1 of 2011. Sale per point of distribution growth is also projected for the same time period (The Nielsen Company, 2012). Marketers can exploit rural footprint in the next 10 years although big cities are a stronghold in capturing business volumes. Middle India is home to 100 million people, consuming 20 percent market share of FMCG products. It is expected that this market of 5.74 Billion USD will reach 80 Billion USD in worth by 2026 (The Nielsen Company, 2012). Rural population of 70 percent has not yet been explored by marketers because of poor infrastructure, but things have changed for the better in these rural areas. Sale of land by the farmers to the builders for development purpose has filled their vaults. Therefore, they are spending heavily on consumer goods. For any American company, this emerging market has huge potential and money to spend, be it food or fast-food industry or any segment of FMCG. Table no. 3 shows a comparative pan-India increase in spending on FMCG, recording a multiple increase of 3.2 in rupees billion from 2002 to 2010. Metro and Middle India has been leading, to be followed by urban and rural regions. Irrespective of different regional segments, Indian market is so wide with its 100-Million people that scope for leveraging remains always there (The Nielsen Company, 2012). Socio-Cultural Acceptance of Product - Is Adaptation Necessary, and to what Extent? Burger is such a food product, the appeal of which has got huge mass in the hearts of all age-groups. The trend of eating out is getting stronghold in small Indian towns. Burger is accepted as a quick-bite snack. Sometimes, it is taken during lunch and dinner hours as well by young people. Peoples’ liking for fast food is increasing day-by-day. In cities like Pune, 60 percent people like going out for eating, which indicates wider socio-cultural acceptance. Adaptation to fast foods is necessary to a reasonable extent only because people are increasingly becoming health conscious (The Nielsen Company, 2012). The strategic leverage of The Counter’s burger is that ingredients and their endless range can be customized to Indian taste-buds. Many American fast food companies have leveraged from this marketing tactic by offering people such herbs and spices that local people have a liking. To firm its roots in this food category, the company needs to do research on locally used herbs and healthy options so that the bad name of junk food attached to burgers’ category of fast food does not pose a serious challenge. A burger is a convenience product that can be made easily by mixing ingredients and spices. Time is ripe for a food brand like The Counter to challenge the established players with its innovative and varied range of burgers in Indian market (Nielsen, 2012). According to Saloni Nangia, president of Technopak, the business opportunities in India are as big as they are in China, as she remarks, “India also has a young age profile, many more people eating out and international influences coming in. Some of the international brands could replicate, to some extent, the China story in India” (Bagri, 2014). Bureaucratic Environment, Political and Economic Climate Legal and bureaucratic environment in the Indian scenario has changed for the better. The new political climate is quite encouraging for the multinationals’ entry. All this was expected to happen with the political change in the country, with coming in power at the center the erstwhile leading opposition party, the Bhartiya Janata Party after 2014 General Elections. Voters have given a clear mandate in favor of a single political party. Such an environment at the center of politics is very conducive for not delaying issues of foreign investment by creating bureaucratic hurdles. Economy is back on the track with the promises made to foreign investors by the present Prime-Minister, Mr. Narender Modi (Tecnopak, 2014). Managerial and Labor Climate A political set-up can impress upon product, labor, and capital scenario. A democratic country like India poses fewer challenges in comparison to a socialist country like China where workers’ rights are limited; they are not allowed to form trade unions. This hampers their career growth (Khanna et al., 2005). Any foreign investment in a democratic country like India, therefore, ensures that investors’ rights are legally protected. Competition in the Market Indian fast food market is very competitive with such players as KFC, McDonald, Dunkin’ Donuts, Wimpy, and Subway. The Counter has its own distinct set of combinations, when it comes to variety along with its sophisticated industrial set-up, and equally distinct wines and beers. The Counter comes with “custom built burgers and custom built life.” It is open to franchising, only for a Custom Built Life™ by offering a partnership through its spirited brand. The company boasts of a premier gourmet burger type, which will have a totally new attraction for the young Indians. So there will be competition, but with a difference in traditional taste buds (The Counter, 2015). Product Introduction Strategy The Counter needs to introduce their product range to the Indian consumers by focusing on speed and scale. Scale can be achieved by zeroing on groups of certain types of consumers over pan-India multiple markets. This methodology promises income generation. Capital investment for igniting growth can be justified this way. Another marketing tactic is to function at a relatively local level, attaining scale in certain areas and divisions by partnering with locally adapt companies. They can assist in product introduction and development. Methods of Marketing and Distribution Once deciding on product introduction strategy, it can add strength to market positioning and distribution. Selecting right methods of marketing and distribution can help in targeting consumers successfully. For its beer and wine brands, it can achieve price points for creating demand by changing the business model, as did Beer maker, SABMiller, by restructuring its plants for cost-efficient, locally available ingredients like Cassava and sugar by replacing barley and maize. It should depend on local distributors (Court & Narasimhan, 2010). Financial Viability There should be no doubt that if new product is introduced tactically, resulting in huge growth, profits are not far behind. A lot depends on the managerial capabilities and suitable environment. Middle India, the leading FMCG market segment, is expected to grow from present 5.74 billion USD to 80 billion USD in 2026. This projected market growth ensures huge earning possibilities (Nielsen, 2012). Recommendations It is the right time for the custom-made burger company of the US, The Counter, to expand in foreign location of Indian Territory. The product strength lies in offering endless range of variations of ingredients. The Indian food market is well ripened to attract foreign players, as it is growing at a yearly speed of 25-30 percent. There is going to be huge demand for the brand conscious product-line of The Counter’s burgers, wine and beer. Ideally, it should partner with local agencies for getting marketing and distribution leverages. Market is going to expand from big to small towns where middle class populations have shown interest in outdoor dining ambience. Indian food market offers growth drivers such as widening scope of middle class, the niche customer segment, youth, single families, good infrastructure, and a rush of malls and multiplexes. Managerial talent nurturing can be a challenge, which needs to be developed for reaping long-term growth. Testing local ingredients to satiate local taste buds can increase product demand. The country is well positioned to welcome foreign players, offering congenial work and political environment, reducing bureaucratic hassles. Getting well rooted to this foreign land requires The Counter to introduce its product-line tactically, and working strenuously on its marketing and distribution methods. The option is franchising should be considered at a later stage. It would be a better product positioning tactic to enter into partnership with local brand to create customer and brand loyalty. The company can continue with the marketing tactics it has been employing in the US to attract customers. It should introduce its product range initially in selected metros and expand later in smaller towns. References Bagri, N.H. (2014). A growing taste for US fast food in India. CNBC. Retrieved from http://www.cnbc.com/id/101321608 Court, D., & Narasimhan, L (2010). Capturing the world’s emerging middle class. Insights & Publications. Retrieved from http://www.mckinsey.com/insights/consumer_and_retail/capturing_the_worlds_emerging_middle_class D’essence (2011). Quick service restaurants in India. Retrieved from http://www.dessencehospitality.com/downloads/QSR-V6.1.pdf Khanna, T. Palepu, K.G., & Sinha, J. (2005). Strategies that fit emerging markets. Harvard Business Review. Retrieved from https://hbr.org/2005/06/strategies-that-fit-emerging-markets Nielsen (2012). Emerging consumer demand: Rise of the small town Indian. Confederation of the Indian Industry. Retrieved from http://www.nielsen.com/content/dam/corporate/india/reports/2012/Emerging%20Consumer%20Demand%20%E2%80%93%20Rise%20of%20the%20Small%20Town%20Indian.pdf Technopak (2014). Trends Technopak 2014. Technopak. Retrieved from http://www.technopak.com/files/Technopak%20Food%20Services%20Trends%202014.pdf The Counter Burger (2015). The Counter. Retrieved from http://www.thecounterburger.com/ Appendix http://www.mckinsey.com/insights/consumer_and_retail/capturing_the_worlds_emerging_middle_class http://www.mckinsey.com/insights/consumer_and_retail/capturing_the_worlds_emerging_middle_class http://www.thecounterburger.com/ http://www.thecounterburger.com/ http://www.thecounterburger.com/ http://www.nielsen.com/content/dam/corporate/india/reports/2012/Emerging%20Consumer%20Demand%20%E2%80%93%20Rise%20of%20the%20Small%20Town%20Indian.pdf http://www.dessencehospitality.com/downloads/QSR-V6.1.pdf Read More