The company was established in 1980 by Eugene Mercan and the 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 1999, water purifier was added to product line by using brand name “Delight”. The company has identified a market for its water purifier in developing countries where there is a huge, profitable and attractive market for clean water. Rahul Chatterjee, an International market liaison has been gathering information about the Indian market for home water purification devices. Statement of the Problem
Mercan Systems would like to thrive in developing countries. They are seeking market entry elements and entry strategy to the Indian market for home purification devices. The entry strategies would then be compared with those of two other Mercan liaisons who focused on Argentina, Brazil, and Indonesia.
Indian Market for Home Water Filtration and Purification
The characteristics of this market is complex but Chatterjee found out that there are about four or five competitors in the market with only one or two companies in India’s 25 states. The market may be in its early growth stages and many Indians felt the need for improved water quality.
44million households comprising of:
•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 In addition, 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 while 10% of the target market owned neither a filter nor a purifier and seldom boiled their water. Market Segmentation
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 to use. 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 - These are 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. The remaining 10% of the target market owned neither a filter nor a purifier and seldom boiled their water.
Strategic alternative courses of action: Market Entry Options 1)Whether to go to Licensing
2)Whether to go to Joint Venture
3)Whether to go to Acquisition
Factor to Consider
Foreign Investment in India
Licensing: Involves supplying key purifier components and license fees will be calculated by per unit basis over the item of the agreement Joint Venture Company: Involves partnering with an existing Indian company and splitting profit equally. Acquisition: Involves purchasing an existing Indian company, then expand to include the water purifier with this arrangement. All profit will belong to Mercan Systems, Inc.
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...