By the year 2000, Fairchild Water Technologies, Inc.
(Fairchild) was a mature
company experienced in the realm of water technologies and offering a diverse product line consisting of desalinators, particle filters, ozonators, ion exchange resins and water purifiers. Even though their prices were higher than those of many competitors, industry experts generally regarded the product line as superior in terms of performance and quality. Fairchild had experienced some early success upon entering the markets of developing countries and was now poised to become a leading competitor in these foreign markets.
Based on the information presented in the case study, I believe that Fairchild should aggressively enter the Indian market since there is a high likelihood that Fairchild could become the market leader in home water purifiers. Specifically, I would recommend that Fairchild enter the market under a joint venture using a skimming pricing strategy. Ultimately, this strategy should maximize profits and minimize the risks of entering the market of a developing nation. I will first outline why such a strategy is possible and then summarize the advantages (and disadvantages) of a joint venture. I will also outline how this strategy can be executed most efficiently.
1. In regards to market potential, there is a tremendous need for improved water quality in India. This need is exacerbated during the Monsoon season. Many Indian consumers had little choice but to consume the water as it was found. However, better educated, wealthier and more health conscious consumers took steps to safeguard their family’s health. It was estimated that there were 40 million such households in India and these consumers were similar in many respects to consumer in middle and upper class
households in the U.S. and the EU. They liked foreign brands as long as these products outperformed competing Indian products.
2. Fairchild developed the “Delight” purifier in 1999, which was a superior product in terms of performance, quality and reliability. It utilized a combination of technologies to remove four types of contaminants. Based on cost estimates, designs of competing products and needs of the Indian consumers, the “point of use” countertop design was chosen. Its Western, high tech appearance was appealing to customers and would distinguish it from competitors products.
It offered special features not included in
competitor’s products. Upward of 100 companies competed in the Indian market for home water filters and purifiers and three major competitors were identified: a.
The Aquaguard by Eureka Forbes was perhaps the market leader, being
the first to enter the market. Although it could kill bacteria with UV light, the product itself was the weakest strategic component.
The Zero-B by Ion Exchange was a good quality water purifier, but it had
only captured 7% of the market. The biggest reason for the small share was a lack of consumer awareness and a limited distribution network.
The Aquarius by Singer was an excellent product, however, it had
limitations and vulnerabilities in regard to life expectance, water pressure requirements and pricing.
3. Fairchild already had export sales experience since 1995, and they had successfully marketed two water filters in Eastern Europe. Since export sales grew rapidly, the company organized an International division in 1990.
Fairchild was also financially stable with sales revenues of almost $400 million
with an expected profit close to $50 million in 2000. Annual growth in sales revenues averaged 12% for the past five years.
Since the 1980s, “liberalization” resulted in major positive changes in approval
requirements for new commercial projects, investment policies, taxation procedures and, most important, attitudes of government officials.
Indian Tax policies now offered a wide range of tax concessions,...
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