Global Market Development the Intent

Global Market Development

The intent of this analysis is to evaluate the business development strategies that C-level executives use today to evaluate growth opportunities globally. Included in this analysis is the Porter's Five Forces Model of Competition, which is pervasively used throughout the consumer products industry. The purpose of this analysis is to consider alternatives for manufacturing and selling detergents in India and Pakistan, with manufacturing completed throughout the Asian region. Porter's Model is an invaluable framework for evaluating the growth strategies for selling detergent in India, manufacturing in the Asian region to save on logistics and supply chain costs.

Porters' Five Forces Model of Competition applied to Detergent as a Growth Strategy

The five forces that comprise Dr. Porter's model are industry competitors, pressure for substitute products, bargaining power of suppliers, bargaining power of buyers, and the influence of potential entrants. Figure 1 shows the Porter Five Forces Model graphically. Each of these areas is now discussed in bullet form in the following series of sections.

Assessing Detergent Industry Competitors

Highly fragmented series of competitors throughout all nations currently sell detergent, forcing any company entering the global arena to compete on pricing and quality first. Pricing specifically in India will require the development of supply chains within that nation. It is highly advisable the company move quickly into a Joint Venture with an established detergent distributor to get a quick handle on the needs in the Indian and Pakistani markets.

Regionalized competitors in the United States are pervasive, as there are known high levels of customer loyalties with regionalized brands. This is especially true throughout the Midwest and Southeastern United States. The dominance of Proctor and Gamble is evident in shelf space and presence in the majority of grocery stores, super stores and markets.

Proctor & Gamble has launched a price war in India this year, charging 49 cents per soap container (22 rupees), attempting to force out key competitors including Lever Brothers and others. This price war makes the addition of supply chain joint ventures throughout India critical.

Pressure from Substitute Products

The cleaning rituals in India are overflowing with symbolism for the religions of the region and need to be considered as both a level of performance to accomplish, in addition to recognizing that existing cleansing rituals are also substitute products. The use of detergents and soaps are not as popular in the urban areas, where salts, soaking, and highly ritualized and religious cleaning steps are followed. In the urban areas of India however, there is greater westernization and the use of hand and clothes washing detergents.

Substitutes also abound in the local Indian and Pakistani marketplace as there are strong regional brands, yet not single brand dominates the entire marketplace. This translates into the opportunity for launching a strong national brand that takes into account the cultural differences and nuances of this country yet also brings in greater potential capture of new customers.

Bargaining Power of Buyers

There is significant power from buyers within the Indian and Pakistani markets as the markets are by definition extremely price-sensitive. Competitive factors also include the highly religious nature of cleansing clothes, dishes and themselves within the rural sections of India and Pakistan. To attract these buyers, regional variations must be carefully studied and the detergent products must be aligned with the religious beliefs of the specific religions who are members of the potential target market.

Buyers prefer local manufacturing and require bleaches that produce exceptionally high levels of white contrasts. This is a critical point for the growth of any development strategy within India and Pakistan. Buyers are not as particular as westernized buyers relative to the consistency of bleach however. The Indian purchaser of detergent does not mind if there are small packets of powder instead liquids, and there is more of a focus on minimizing waste instead of large purchases that are beyond many of the Indian's budgets.

Bargaining Power of Suppliers

Highly dependent on the very volatile commodity of chemicals and detergents throughout the region, suppliers have a strong influence on the overall direction of the market. This has been further strengthened by Optical Brightening Agents, which is the key driver of new adoption of detergents throughout all regions of India and Pakistan.

Suppliers have relatively complex supply chains to get access to several different types of chemicals and borax needed to sell the wide variety of products the chain providers.

Highly dependent on the price of borax and other whitening products, which is used in many Proctor and Gamble products. Detergent market growth in India is predicted to be 6 to 8% according to many industry sources.

Potential Entrants

Proctor & Gamble, Lever Brothers, and brands from Europe are continually working on Joint Ventures to move into the Indian and Pakistani markets. Of these, Proctor and Gamble has the majority of the existing market share, with approximately 10% of the total Indian market.

There is a wide variety of smaller and lesser-known competitors throughout the two countries. Pradeep, Meeem Perfumes and Cosmetics, Gloebal Chem, S.R. Soaps, and over fifty other smaller companies all compete for Indian consumers. The quality level and the ability of these new entrants to ensure a consistent stream of products is unknown. What further makes this new entrant's success uncertain is the supply chain for key detergent chemicals and additives being sporadic and difficult to predict. As a result each of these companies often have several quarters or even years of sales, and when their supply chains become impacted by a lack of chemicals and substrates country-wide. This high cyclicality in overall availability of key ingredients for detergents causes a high turnover rate of manufacturers within India and Pakistan. To be a potential entrant that stays the course in the Indian market, any market entrant must have an established and stable supply chain that can compensate for the wide variations in demand and raw materials within the entire region.

Competitive Strategy for Market Entrance

In summary, the following conclusions emerge from the analysis of entering the Indian and Pakistani markets with detergents:

New Entrant and Supplier analyses show that the establishing of a stable and reliable supply chain into the region is a critical success factor in the growth of new entrants. This was found from seeing the transitory nature of smaller competitors and the high dependence they had on in-country production of materials for detergents.

Pricing is in freefall and to move into the Indian market, the price per packet must be at or below 22 rupees. To make this happen a Joint Venture is critical in the development of distribution networks throughout each region of the country is essential. These Joint Ventures for distribution rights also minimize risk and provide an opportunity to learn about the Indian's markets critical needs and how to eventually create a subsidiary in the region. It is not recommended that a subsidiary be created; instead a Joint Venture with the largest distributors in the region will minimize risk.