B7 TCI Packaging Division
B7 TCI Packaging Division
B7 TCI Packaging Division
Global Marketing, Strategic Perspectives Case Study Analysis TCI Packaging Division
10/22/2013 Submitted to: Dr. M.R. Suresh
Submitted by: Group: B7 Siv Sagar Saha (12048) Saumya Ranjan Khatoi (12104) Gaurav D. Jhunjhunuwala (12138) Ritesh Jaiswal (12153) Samuel R Chintalapudi (12161) Sarthak Rohatgi(12182)
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2. CASE FACTS
2.1 TCI and its Growth TCI was established in 1910 as a cigarette manufacturing and marketing organization. TCI is now more than eight decades later, a 1.5 billion dollar enterprise and a multi-product, multitechnology, and multi-market group. TCI is one of the most diversified and professionally managed business houses in India and has investments in seven main businesses. These are tobacco, cigarettes, packaging and printing, hotels, seeds and edible oils, paper and board, financial services, and international trading. It has a distribution network that encompasses the entire sub-continent. The annual report for the year ending 1992-93 showed that the company had earned a profit after tax of Rs 155 crore from a gross income of Rs 3810 crore. 2.2 TCIs Packaging and Printing Division TCI's Packaging and Printing Division [PPD] is presently India's largest manufacturer of value added folded cartons. It meets not only the packaging needs of the cigarette division wide range of brand leaders in domestic and export markets covering industries like liquor, foods, detergents, personal products and matches. PPD's facilities have been upgraded with new computer-controlled machinery to meet international standards. PPD had technical collaboration arrangement with Box-Liquid Corporation, USA, to manufacture and market Wunder-Pac" Bag-in-Box [BIB] packaging system.
2.3 Product Development Team Mr D K Sharma is the Marketing Manager of PPD and head of the new product development team. He joined TCI 14 years ago and has done Post Graduation in Management. The other members of the team are:
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2.4 Production of Cashew Kernels Production of Cashew Kernels goes through many processes. Firstly, Cashew nuts are conditioned by sprinkling water and are kept for 24 - 72 hours after which they are sun dried or roasted. The roasting could be done either by the drum roasting method or the oil roasting method. The roasted cashew nuts are then shelled manually with wooden hammers. In this process, kernels get separated from the nuts. The kernels are then dried immediately and a process called 'borming' is done. This process helps to prevent insect attack on cashew kernels. Finally, the outer skin of the cashew kernel is peeled off manually. The production of cashew nuts in India has been highly unorganized. The cashew kernels exported from India can either be from cashew nuts produced indigenously or from cashew nuts imported from countries like Guinea, Nigeria, Ivory Coast, Indonesia, Tanzania, and Vietnam 2.5 Cashew Exports from India Cashew kernels occupy a prime place among India's agricultural commodity exports. The total value of cashew kernels exported from India rose from Rs 258 crore in 1988 to Rs 601 crore in 1991. There are two major international markets for cashew kernelsthe New York market and the London market. The graph below shows the trend of Indias export of cashew kernels in quantities and for 1992 it is only for 9 Months (Till the end of the month of September).
70 60 50 40 30 20 10 0 1947 16.9
1972
1978 Year
1991
1992
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Indian exporters are now facing pressure from the importing countries to adopt alternative packaging methods because of different reasons like lead solders contamination, Disposability etc. which leads to issue related to investment in new technology, tin manufacturer, high cost of new packs, shorter time period to adopt the new packing system etc. To overcome the problems in the tin containers and to evolve new methods of bulk packaging for cashews, the Association of Exporters and the Council for Cashew Exports and Promotion (CCEP) formed a committee and was expecting the recommendations of this committee.
3. CORE ISSUES
The following are the core issues to be dealt in the case: Problems faced in cashew packaging Stake of different stakeholders in cashew packaging Attractiveness of the cashew packaging industry
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4. ANALYSIS
We have analysed the case on the basis of Strategic Responses in Host Country Regulatory Environment model and the questions that have been raised in the case. 4.1 Strategic Responses in Host Country Regulatory Environment
Firm / Enterprise related Variables Firm resources, capabilities, competencies TCI is a multi-product, multi-technology and multi-market group and a star trading house. TCI PPD is presently India's largest manufacturer of value added folded cartons and having its facilities have been upgraded with new computercontrolled machinery to meet international standards.
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Country screening approaches US are the main importer of TCI cashew nuts and it exports to other countries also like the Netherlands, Japan, Singapore, Australia, UK, USSR and Hong Kong. TCI is aiming at doing business in Must Win-Market.
Mode of Entry The Mode of entry adopted by TCI is Direct Exporting which has Advantages like More control and sales push of the products etc. and Disadvantages also like less profit because of agents, high risk involved etc.
Host Country related Variables Sophistication of Legal system TCI had to face many issues because of difference in laws; mainly the issue has been faced by TCI in the field of quality because the TCI mainly concentrated on developed nations, where the quality standards were very high. Role of government in host country TCI exports mostly to developed countries and it imports also cashew for further processing from other countries so, the role of host country play a major role. If, the government of host is supportive then it is advantageous for the TCI and if the country is having unfavourable business environment it is detrimental for the TCI. Cultural dimensions Cultural dimensions can also affect the way a company operates in other country. Type of material used for packaging, the process adopted for the manufacturing of packs etc. can be greatly influenced by the other country culture. Intensity of local competition TCI has been facing tough competition from both domestic and international players. With the entry of Brazil its business adversely affected because Brazil had the advantages of proximity, low prices, and better delivery of
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4.2 Questions & Answers Q.1 What are the problems faced by the cashew industry regarding packaging of cashews for exports? The problems faced by the cashew industry regarding packaging of cashews for exports are as follows: Lead Solder Contamination: The process of production of tins involves usage of lead solders which makes the tins leak-proof. The lead solder used for this purpose has 50 per cent lead and 50 per cent tin mixture. This concentration of lead is considered to be health hazardous. Also, fears were expressed about the lead solder getting in touch with the cashew kernels near the mouth as they were tightly packed. The increased health consciousness and awareness of lead poisoning world over had made the importers of cashews to pressurize the exporters to adopt alternative bulk packaging methods. Pest attacks in godowns: Sometimes smell of cashews attracts the rats, which in case destroys the cashews. Cashew should be packed in such a way that they should be smell proof from pest. Disposability & Shelf Space: The tins which reach the destinations of the importing countries, after being emptied, are to be stored and then scrapped. Since these tins are not collapsible, they occupy a huge floor space in storage. In some countries, the importers were asked to pay for scrapping and disposing of these tins. Recyclability: In most of the western countries, consumers are forcing the markets into becoming 'green' and more environment friendly. In fact, they have formulated guidelines for packaging and are demanding recyclable packs. Safety aspects with respect to sharp edges of Tin: Tin packaging was considered to be unsafe as the tins, when cut, have sharp edges and may injure the person handling them. Even though this problem had prevailed in the past, the importers were now keen to get rid of this problem by having a safe pack.
Association of Exporters and Council for Cashew Exports and Promotion (CCEP) has formed a committee and certain recommendations were suggested:
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Q.2 Is the cashew packaging market attractive enough? The following are the key factors that help determine the attractiveness of the market: Market size Market growth Pricing trends Intensity of the competition Overall risk in the industry Opportunity to differentiate products and services
Based on the existing scenario its not attractive due to the restrictions imposed by the importers. The present situation may lead to the importers preferring other countries if the packaging method is not altered. This shows that for existing players this has become a very important issue to handle immediately. But there is Scope for the new players to come up with new packaging. That may help in getting the upper hand on existing market players. Any new breakthrough innovation could open up a new market in this arena. They have to consider the cost factor. And ensure the packaging system doesnt exceed the cost of investment. With increasing Cashew kernel exports Cashew Packaging market is growing too. The cost benefit analysis has to be rationalized of course. Brazil has been a tough competitor in the market with rise in the Cashew kernel exports world over. There is all the more reason for new players to crop up in this market of bulk exporting for cashew packs.
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Q.4 What should be the marketing strategy for their new pack? TCI can implement 4Ps to know the feasibility of the BIB (Bag- in- Box). The implementation of 4Ps as a marketing strategy by TCI are as follows: Product: The BIB(Bag-in-Box) is a made from Aluminium and HDPE(High-density poly ethylene)and the salient features of BIB are Convenient to use, Hygienic, Tamper proof. The expected changes to be made in the vita pack system to accommodate this new pack were also minimal.
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Price: The BIB (Bag-in-Box) packaging is Lower cost than tin containers and its very Cost effective one more advantage of HDPE is Durable and Recycled Plastic, it needs Minimal changes to be made from Vita pack system. Promotion: TCI have to get EIA (Export inspection Agency) certification. TCI will show the Association of Cashew Exporters and CCPE (Council for Cashew Exports and Promotion) the Cost advantages of this new pack. By explaining how it is addressing the Importers standards it can create awareness of its usage. Place: The location is selected where the exports of cashews are take place like US, Netherland, UK etc. and potential markets should also be taken into considerations.
With all the new technologies at its disposal, TCI needs to test its latest product in the lead markets like U.K./Western Europe and America to find out the imminent success or failure before full-fledged commercial production for next season beyond just 4Ps. The strategy should also focus into the following areas: Cultural and regional implications of packaging and labelling should be kept in mind to avoid any problems in unexpected ways. Labelling must help consumers understand and buy better products by conveying rudimentary instructions for their usage. The package colour and text have to be integrated into the companys promotional strategy and therefore may be subject to specific tailoring that differs from one country to another. TCI can get rid of the existing tin cans by exporting to low volume and low standard markets like Africa, South East Asia, West Asia etc. PPD itself can become a company solely focused on packaging. Therefore it can focus more into R&D and cater to packaging of various agro and other products and can caters its own marketing needs.
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5.2 Cage Framework The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic differences or distances between countries that companies should address when crafting international strategies. TCI should adopt CAGE model to understand different markets in which it is dealing: USA & INDIA Cultural distance: Lesser language barrier as English is known to both the countries Administrative distance: No common currency but the problem is less as US Dollar is an international currency
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NETHERLANDS & INDIA Cultural distance: No language barrier as English is known by almost all of the Dutch population Administrative distance: No common currency Geographic distance: Differences in the climate do exist between both the countries and both the countries are far from each other Economic distance: GDP of Netherlands is 772.2 billion USD.
JAPAN & INDIA Cultural distance: Language and Religion followed are different in both countries Administrative distance: Lack of common currency Geographic distance: Differences in the climate do exist between both the countries and both the countries are far from each other Economic distance: GDP of Japan is 5.96 trillion USD.
UK & INDIA Cultural distance: Language barrier is very less as English is known to both the countries. Followers of Indian religions (Hinduism, Sikhism, Muslims, and Jainism) are in good numbers in UK Administrative distance: Lack of common currency Geographic distance: Differences in the climate do exist between both the countries and both the countries are far from each other Economic distance: UK is one of the developed countries of the world with GDP of 2.4 trillion USD where as India has GDP of 3.91 trillion USD.
MALAYSIA & INDIA Cultural distance: No Language barrier Administrative distance: Federal government, cordial political association, fixed currency Geographic distance: Both the countries are not very far from each other. Both the countries share similar climate Economic distance: GDP of Malaysia is 303.5 billion USD. It is a developing country with a relatively stable economy.
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