Blair Water Purifiers, India There

Blair Water Purifiers, India

There are two sets of key issues in the potential entry of Blair Company, Inc.', and its projected entry into the Indian consumer water purification market in India. The first set of issues involves the structure of the company. The second set of issues involves the positioning of the product in the market.

Concerning the issues of company structure, several alternates are possible. There are advantages and disadvantages to each of the three possibilities Chatterjee identified.

The first alternative was a joint working arrangement. If this manner of entry were chosen, the Indian company, to which Blair would supply key purifier components, would remit license fees to Blair for, typically, five years with an additional three-year renewal option.

In a joint venture, Blair Company would partner with an existing Indian company to produce the water purifiers. The third option would be for Blair Company to purchase an existing company and expand its production to include the water purifier. In either the joint working arrangement or purchase, Blair would received the profits; in the partnership, a division would need to be worked out; if there were a problem with this later on, because India is a signatory to the Geneva Convention covering Foreign Arbitral Awards, conceivably that sort of problem could be worked through in that way, instead of through lawsuits which can take enormous amounts of time in India. The same option would be available regarding Blair's patents.

Among these three options, Chatterjee had recommended that Blair Company should find an Indian partner. While this might obviate some of the repatriation problems for profits, it also was the least streamlined of the possibilities. Like any merger or marriage of individual corporate entities, it offered not only the obvious potential for management and profit problems, but also the not inconsiderable aspect of cultural conflict. The water purification market in India is a large one already, with potential for additional growth. However, India is also a traditional country and the fact that so many households still depend on the candle method of filtering, cumbersome and sometimes ineffective (odors, bacterial contamination especially in storage) indicates that there is likely to be some market resistance to new technologies. It also makes it likely that the 'early adopter' segment of the consumer population is the most likely market. In any case, in order to maintain complete control of its market entry, it would be more advisable for Blair Company, Inc., to acquire an Indian company with most of the components -- manufacturing, distribution -- already in place. It would be a more expensive entry, but an acquisition would give Blair the assets of that company, and its existing market for whatever else it manufactures -- small appliances, small electronics or whatever the case may be -- in the event that Blair's water purifiers were unable to penetrate the market and Blair decided to withdraw.

Another advantage to entering the market in this manner would be the substantial boost the company could receive from the politicians who had reinforced the need for improved water quality. While the politicians were speaking, doubtless, about municipal water treatment facilities, it is conceivable that they would endorse various interim steps, such as tax deductions for installing water purifications in the home and so on. This sort of support on the political front would be less likely if Blair maintained merely a license agreement, virtually repatriating all profits, or even a partnership, again giving the appearance that Blair was not completely committed to the Indian water purification market and was in it only for the short haul and the repatriation of profits, with little other input into Indian's economy or way of life.

In the end, despite its greater cost, if Blair decides on the penetration form of market entry, especially, this would seem to be a wise means of proceeding. Indeed, it would appear to be possible to purchase some of the proposed partners instead.

That they were medium-sized firms would make it possible for Blair to stamp the firm in its own image, while retaining the name and consumer goodwill already established.

Chatterjee also recommended that Blair enter the market in a skimming manner. However, the wisdom of that approach is predicated upon there being sufficient market, reachable at a price that allows large profits quickly, so that if the market is refined to one or two major players, Blair would already have realized all it wanted from the Indian market. His choice of the partnership arrangement does mesh well with a skimming market entry. Moreover, there are currently many companies in the market, although most are involved with the older candle technology. As India upgrades its electrical delivery, and as more and more good-paying jobs are lured to the nation driving up personal income and the desire -- not to mention need -- for personal convenience in accomplishing the tasks of life, then candle technology is likely to be as popular as the hand-cranked wringer washing machine. In short, setting Blair up to compete with the has-beens in the marketplace seems shortsighted and ultimately doomed. It would depend on getting into and out of the market at exactly the right moment.

On the other hand, buying a company, as noted, would give Blair other product lines in the event that their water purifier market entry did not achieve its goals. In addition, it would also give it both the manufacturing and marketing substance to enter the market in a penetration manner. The largest company in the market is Singer, a company that makes a formidable opponent, especially in terms of its advanced technologies and marketing muscle, not to mention its name. In fact, Singer's strong brand identification is another reason for Blair to purchase a company that already has reasonable brand identification in India.

Chatterjee's decision to revise his original plan to begin with rural areas and then move into the cities was the correct one. It is not only distribution in any LCD that is the problem to outlying districts; those areas also offer bigger promotional and, in cases such as technology, educational challenges than the cities. For that reason alone, beginning with a major rollout in major cities is a better plan. Singer will make a powerful entry into the Indian market; Blair can, if it is clever, ride Singer's coattails into the market. Blair can allow Singer's market position to determine its own. Chatterjee had noted that if the quality was better, Indian consumers were willing to pay for foreign technologies. While the recommendation is for an Indian company to produce the purifiers, there is not reason not to use the fact that an Indian company has acquired the American technology. Singer will certainly do it. The rationale for buying a company (beyond the ultimate profit safeguards, or at least 'stop loss' aspects) is to be able to both trade on Indian-ness and have staying power in the market. In addition, as the market matures, there will be many small companies that cannot compete with giant Singer; an Indian company that begins by positioning itself as number two to Singer, and adding another element (perhaps a slightly lower price for similar value, etc.), is likely to retain that spot as the weaker companies fall away.