1. Problem/Issue Definition
Fairchild Water Technology was a company established in 1980 by Eugene Fairchild that focused on water filtration and purification systems. Fairchild was very successful in the industry and wanted to expand internationally and to be known as the producer of the best water purification systems in worldwide. As the international market liaison for Fairchild, Rahul Chatterjee was given the challenge of moving Fairchild from just “dabbling in developing countries to thriving in them.” There were other Liaisons in Argentina, Brazil and Indonesia, but India was the largest project for the expansion and it was Chatterjee’s job to manage India himself. There were many reasons why India was a choice market for Fairchild, all of which will be explained in the situation analysis, but most importantly Indians had a significant need for more sophisticated water purification systems. Since there are many different methods of purifying water, Chatterjee would have to convince the Indian people that Fairchild’s method was best. One of the most traditional methods, boiling the water, doesn’t rely on any system and was used by about 50 percent of the target market. Boiling was seen by the consumers as the most inexpensive way to get rid of bacteria, but this method left the purified product with a “flat” taste, was very time consuming and failed to remove physical impurities and unpleasant odors. Another 40 percent of the target market used candle filters. These simple mechanical filters were also very affordable costing only about RS350 to RS1100. The issue with the candle filters was that it was a very slow purification process. Others used water purifiers which were considered more sophisticated then candle filters, but the engineers at Fairchild were skeptical of the claim that these purifiers removed all bacteria and viruses. The remaining 10 percent of the target market didn’t own any system and Chatterjee believed that only a select few in this category would even bother to change their habits with the introduction of a new system. All segments of the market had similar requirements for a water purification system. The most important quality was the system’s ability to remove sediment, bacteria and viruses. Price, ease of use and simple installation were also important factors. The main problem facing Fairchild going into India was how they would expand their operations into India and enter the market there. The hardest thing for a company to do is overcome barriers to market entry and the question was how to enter the Indian market. Chatterjee had three options and he had to figure out which option would be best. The first option was a joint working arrangement. Option two would be a joint venture company and option three was acquisition. In a joint working arrangement it would supply key purifier components to an Indian company and they would be the ones to manufacture and market the product for Fairchild. The Indian company would just pay Fairchild a Licensing fee which would be based on a per unit fee over the term of the agreement. In a joint venture, Fairchild would essentially partner with a local Indian company for the purpose of marketing and manufacturing the product and the two parties would split profits per an agreement. Finally, an acquisition would have Fairchild buyout an existing Indian company whose operations would expand to include the water purifier and all the profits of the acquisition would in turn belong to Fairchild. Before a company goes into any country there are local rules and procedures that govern any company trying to import their product into the country. For example, the website for anyone trying to import a product to the United States http://trade.gov/faq.asp#import discusses the regulations for importing products to the USA. As discussed in Chapter 5, there are political and legal environments encountered when entering into other countries. Chatterjee knew...
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