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Blair Water Purifiers India

Group 5
Objective of The Case
• To make a recommendation on market
entry and on elements of an entry
strategy.
Indian Market for Home Water
Filtration and Purification
• Four or five competitors in the market.
• Only one or two companies in India’s 25
states.
• Its stage is in early growth stages.
• Many Indians felt the need for improved
water quality.
Target
• 40 million households of middle- and upper-
middle-class households in the United States
and the European Union
• 4 million households who had similar values and
lifestyles
• 50% of our target market used boiling to make
clean water
• 40% of our target market used a mechanical
device to improve their water quality
Traditional Method for Home Water
Purification
• Boiling -> two to five liters of water for 10
minutes, allow it to cool, and then transfer it to
containers for storage (often in a refrigerator)
This procedure is cumbersome, time
consuming, and ineffective in removing
physical impurities and unpleasant odors.
Before storage they will filter their boiled water
through “candle filters”. Water can become
recontaminated during handling and storage.
Mechanical Methods for Home
Water Filtration and Purification
• Candle Filters -> low price depend on material
(plastic, porcelain or stainless steel) and easy of
using. Candle filters were slow, producing 15
liters (one candle) to 45 liters (3 candles). It is
needed to be removed, cleaned, and boiled for
20 minutes. Price Rs.350 to Rs.1,100.
• Water Purifiers -> better than Candle Filters.
There are three steps, the first removed
sediments, the second objectionable odors and
colors and the third harmful bacteria and
viruses. Price is Rs.2,000 to Rs.7,000.
Foreign Investment in India
1. Joint working arrangement
• Supply key purifier components
• License fees will be calculated by per unit basis
over the item of the agreement
2. Joint venture company
– Be partner with an existing Indian company
– Share 50% profit
3. Acquisition
• Purchase an existing Indian company then expand
to include the water purifier
• All profit will belong to us
Three Business Plans for Indian
1. Apply for market entry to the Foreign
Investment Promotion Board, Secretariat
for Industrial Approvals, Ministry of
Industries.
2. Approval of any royalties and fees,
remittances of dividends and interest by
Reserve Bank of India, Ministry of
Finance.
3. “Virtually guarantee” by consulting firm.
Tax Rates and Average Return on
Assets
• Corporate tax rates in India probably were
somewhat higher than in the United States

• The average return on assets for all Indian


corporations in recent year was almost
18%, for United States corporations was
about 11%.
Blair Company, Inc.
• Established in 1975 by Eugene Blair
• First product was a desalinator
• In 1996, the product line included desalinators,
particle filters, ozonators, ion exchange resins,
and purifiers.
• In 1996, sales revenues was almost $400 million
(annual growth average 12% for past five years),
with an expected profit close to $50 million.
• In 1994, water purifier was added to product line
by using brand name “Delight”.
Delight Purifier
• Used a combination of technologies to
remove four types of contaminants found
in potable water: sediments, organic and
inorganic chemicals, microbials or cysts,
and objectionable tastes and odors.
• This technologies to purify water to a level
beyond WHO standards.
• There were two models that were
countertop and wallmount.
Competitors
There are three major competitors. There are
2. Eureka Forbes
• Joint venture company in 1982 between Electrolux
(Sweden) and Forbes Cambell (india).
• First brand name was “Aquaguard” (used ultraviolet
rays to kill bacteria and viruses) Rs.5,500
• Second brand name was “PureSip” (used polyiodide
resin to kill bacteria and viruses) Rs.2,000
• Used 2,500 person salesforce (directly on
households) to sale Aquaguard and independent
dealers to sale PureSip
Competitors (con.)
1. Ion Exchange
• Began operation in 1964, they use brand name was
ZERO-B (Zero-Bacteria)
• ZERO-B purifiers used a halogenated resin
technology.
• It helped prevent iodine deficiency diseases and
permitted purified water to be stored up to eight
hours without fear of recontamination
• Every year needs to replace the halogenated resin
at a cost of Rs. 200.
Competitors (con.)
1. Singer
• Might be a suitable partner to manufacture and
distribute the Delight purifier
• The product contained nine stages (removed
sediments, heavy metals, bad tastes, odors, and
colors, killed bacteria and viruses, fungi, and
nematodes)
• Life of flow rate at 3.8 liters per minute was at
40,000 liters (4.4years for 25 liters per day), but
slower liters per minute was 70,000 liters (7.6 years
for 25 liters per day).
• They described their product as “state of the art”.
• Singer was a well-known and respected brand
name in India
Competitors (con.)
• The Delta -> carbon copy of Aquaguard.
• Alfa Water Purifiers
• Symphony’s Spectrum
• The Sam Group -> “Water Doctor” purifier
• Batliboi
Other Information
• Sales volume of ZERO-B and Singer was
around 60,000 units in 1996.
• Sales volume of Aquaguards and
PureSips was 190,000 units.
• More than 100 Indian companies made
and marketed candle filters.
• All of purifier sales came from large urban
areas and only ten to fifteen percent of the
entire Indian population could be reached.
Recommendations
1. Strategic focus on rural or smaller urban
areas would not be wise, at least at the
start.
2. Cost of skilled labor in India was around
Rs.20 to Rs.25.
3. Blair Company should find an Indian
partner.
Place [distribution channel]
• Eureka Forbes
– 2,500 persons sales force
– Independent dealers
• Ion Exchange
– Door-to-door sales force
– Consumer advertising
• Singer
– 3,000 independent dealers
– 210 owned showrooms
– 400 salesmen
Product & Price
Feature Delight Singer ZERO-B PureSip Aquaguard
4,400 -
Price 5,900 4,000 2,000 5,500 2,000
Remove Sedimentation √ √ √ √ √
Remove Heavy metal √ √ X X √
Remove Odor √ √ √ √ (Weak) √ (Weak)
Remove color √ √ √ √ √
Kill Bacteria & Viruses √ √ √ √ √
Fungi √ √ X X X
neriatodes √ √ X X X
Remove bad taste √ √ √ X X
Volume 2 liters n/a 20 liters n/a n/a
Flow rate fastest 3.8 liters/min n/a n/a n/a
40,000 liters, 70,000
Life time n/a liters 1 yr (filter) n/a n/a
Maintenance Cost n/a n/a Rs.200/yr n/a n/a
Require electricity √ n/a X X √
Battery, too
high stored
Additional Feature standard n/a Iodine n/a safely
Promotion
• TV advertising
– Eureka, Ion Exchange, Singer
• Newspaper advertising
– Eureka, Singer
• Outdoor and transit advertising
– Singer
• Magazine
– Eureka
Calculation
• Licensing
– 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
= $75,000
– Exchange rate is 1$ = Rs.35
– B/E (min) = ($50,000 x 35) ÷ 300 = 5,834 units
– B/E (max) = ($75,000 x 35) ÷ 300 = 8,750 units
Calculation (con.)
• Joint Venture
– Four regions [110,000 units]

Skimming Penetrate
dealer saleforce dealer saleforce

Initial inv. 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
Contri. Rs.650/unit Rs.500/unit Rs.300/unit Rs.200/unit
B/E inv. 12,308 units 16,000 units 26,667 units 40,000 units
B/E contri.
10,770 units 28,000 units 23,334 units 70,000 units
% market
9.79% 25.45% 21.21% 63.64%
Calculation (con.)
• Joint Venture
– Two regions [55,000 units]

Skimming Penetrate
dealer saleforce dealer saleforce
Rs.4,000,000 Rs.4,000,000 Rs.4,000,000 Rs.4,000,000
Initial inv.
fixed cost Rs.4,000,000 Rs.7,200,000 Rs.4,000,000 Rs.7,200,000
Contri. Rs.650/unit Rs.500/unit Rs.300/unit Rs.200/unit
B/E inv. 6,154 units 8,000 units 13,334 units 20,000 units
B/E contri. 6,154 units 14,400 units 13,334 units 36,000 units
% market
11.19% 26.18% 24.24% 65.45%
Calculation (con.)
• Joint Venture
– National market [430,000 units]
Skimming Penetrate
dealer saleforce dealer saleforce
Rs.30,000,000 Rs.30,000,000 Rs.30,000,000 Rs.30,000,000
Initial inv.
fixed cost Rs.40,000,000 Rs.88,000,000 Rs.40,000,000 Rs.88,000,000

Contri. Rs.650/unit Rs.500/unit Rs.300/unit Rs.200/unit


B/E inv. 41,154 units 60,000 units 100,000 units 150,000 units
B/E contri. 61,539 units 176,000 units 133,333 units 440,000 units
% market 14.31% 40.93% 31% 102.3%
Pros & Cons
• Licensing

pros cons

- Low risk - Cannot control

- Low cost - Lose image


- No need to study India's
culture
Pros & Cons (con.)
• Joint venture & Acquisition

pros cons

- Controlable - High cost

- High risk

- Low return

- Long-term payback period