Overall Recommendation on Chennai Market

Coming to an end with the blog posts, it’s time to give my overall recommendation to the OCHO board, which is one which has to be made after considering all the findings which have been done through out this virtual field trip. There have been many factors which have lead to the recommendation that we at OCHO Chocolate should not try and enter in the market in Chennai, India.

This is due to a number of reasons, with the main one being how much we stand to lose by trying to put our product into the market in Chennai. This is because in New Zealand we are charging for our cheapest product $6.50 NZD, which equates to 303 Rupees, which is over 30 times the amount people in India pay for a standard chocolate bar, which is 10 Rupees. It is hard to find where we would be able to cut costs at trying to make this cheaper for people in the Chennai market and also more attractive for them, because of our stance of buying our cacao beans from the Pacific Islands at a fair price, not ripping them off. These other big companies which are in India like Nestle and Mars Inc. are likely to be doing many practices which are unethical so that they can have their prices so low while still making a profit, such as paying their workers very little and also by purchasing their cacao beans at an unreasonable price. This is how companies like this are able to charge such low prices, but this is not what we are about as we are trying to make a difference in the chocolate industry, by being ethical about how we make our product. This is one big reason why I feel we should not try and enter the market in Chennai, because it will be hard to make a profit.

Another factor which has led me to giving this recommendation of not entering the market in Chennai is because of the established market already in Chennai and India, which already booming. Companies like Mondelez International Inc., Mars Inc., Ferrero, Nestle and also Hershey have all made their mark so far in the chocolate market, so it will be hard for us to come in and try and convince the consumers to go for a different product like ours. This is because the consumers are going to need to be convinced that they should try a different product, which will be hard to make them choose us as we will have to charge at a much higher rate than what the consumers in Chennai are used to. This is another big reason why I feel as though Chennai is not the right market for us.

Even though there are many reasons which could make Chennai a great market for us, such as the increase each year that there is for the amount of chocolate being eaten (228 Thousand Tonnes of chocolate) and also that the people of Indian are open to trying new things, it will be hard to convince them to get stuck into our products. This is because it will be hard to convince them to change allegiances in terms of their chocolate loyalty when we have a product which is going to cost significantly more than the competitors in the market, due the ethics we like to have within our business. This is why I recommend that we do not try and enter the market of Chennai, India.

 

 

 

 

Standardisation vs Customisation

There is a bit of a dilemma when deciding whether or not to go with a standardisation approach when it comes to your companies marketing, or a customisation approach. This is because the two produce two different end products, which cater to specific peoples needs.

Standardisation is where a company uses the same marketing concept throughout all countries. This is because some international markets can be seen as similar, so it is an easy way to cut a cost for the business as they are able to cut down on the amount they use for marketing, which is a big benefit. Another benefit for standardisation is that the company is able to buy in bulk, and then distribute the packaging out to where it needs to go. This is also another way of cutting a cost, and also why standardisation is a great way to go. Another benefit of standardisation is that by having the one the world over, it allows the customer to know what standards they are to be expecting when purchasing the product. These are all great benefits which would help OCHO Chocolate in Chennai, as we are wanting to be seen as a brand which consumers can trust, as well as cutting costs on things where we can, to make up for our other expenses that other chocolate companies may not do such as paying a fair price for cacao beans. However, there are negatives to this which I feel as though would hurt our brand in the long run. The first is how direct it is. By having a standardised market strategy, it causes us to be not able to change our product, even though some markets may not like certain aspects of our product. This can cause a bit of disjoint between us and our consumer, because the people of India aren’t going to want exactly what a New Zealander wants, as these cultures have different principles. One example of this could be to do with colours, because in India there are different meanings for different colours, so by having colours which you would normally have on packaging in NZ, it could actually be offensive or mean something completely different in India to what we are trying to get across. This causes the brand to not be unique, which is what we are after.

Customisation is a strategy where a company believes that all countries and cultures are different, therefore the marketing in these different markets should be made specifically for that market. The huge benefit of this is that the consumer is getting exactly what they are after, because since the marketing has been customised specially for a certain market, it draws to them. This however does lead to more expenses to the company, as they would then have to be employing more people into figuring out what the culture is like in specific markets and also how it is best suited for them to go about marketing the product. However, the positives way out the negatives in our case with OCHO Chocolate. This is because our main market which we are in in New Zealand is so different on so many levels to that of Chennai in India, our product may not even get off the ground if we try and market our product to an Indian like we do to a New Zealander. We need to customise our approach, so that it can really attract to the people of Chennai.

 

Here is a link to our website to find out more about our story:

https://ocho.co.nz/

Here is a link which talks more about what certain colours mean in Indian Culture:

http://www.sensationalcolor.com/color-meaning/color-around-the-world/india-country-symbolic-colors-1935#.XK0rtEQzbBI

Entry Methods into Chennai

In this day and age there are multiple different ways in which you can enter into a foreign market, however theres only a few which should be considered when talking about our products at OCHO Chocolate. In this case these are Direct Exporting, Piggy Backing and also Partnering. I feel as though these options may not seem like the most exciting options, but they all have their positives and negatives which I will get into further.

Direct Exporting is when you sell directly into a market you have chosen using only your own resources. To put this in terms with us at OCHO Chocolate this means that we would continue making our chocolate and products here in New Zealand, and then ship our products over to Chennai and have some sales agents selling them over there to companies. We would have to have an office over in Chennai as well, so that we could have somebody on the ground over there making sure orders are being delivered to the right places, and also so there someone businesses can easily access if / when problems occur. This way would mean essentially that we get all of the profits, as there is no middle man or partner in which we need to pay. However, I feel as though this isn’t the best way to enter the market in Chennai for us, and heres why. I feel as though this way will be far more expensive than the other two, as we will be having to ship our goods over from  New Zealand which is a cost which could be avoided. Also we have this risk of our product being damaged while travelling over, or even or product having other things happen to it which ultimately downgrade our usual high standard. Since we are not quite an established and hugely successful brand yet, we don’t need to have unnecessary risks which could ultimately put is way behind where we already were. This is why I feel this is not the right option for us.

Piggy Backing is when a company approaches another company which is already established in international markets and see if their product can be included in the already established companies  inventory. This would work well for us at Ocho Chocolate, as this method allows us to have not much risk in terms of losing money as our costs will be much lower. It will also be a great way to enter the market internationally as we would be able to partner up with a big company in India, say Nestle for example, and they would be able to start producing our product or at least stock it for us. However, I feel as though this method is not the way in which we can best succeed at OCHO Chocolate. This is because, for all the less risk which we are doing by going this direction means that essentially we will also be losing a lot of revenue, as the company we are working with will command a hefty percentage as they are essentially doing most of our work. There is also no way to know that the other company won’t eventually copy our idea and start selling a product very similar to ours. This is why I feel this isn’t the best way for us.

Partnering, (which I feel is the best way for us to enter the market in Chennai), is when there is something like a co-marketing arrangement or a strategic alliance for manufacturing, which would be very useful in terms of India. This strategy is useful for companies which are from a different culture, and that the partnering company will be able to help with this as they will be familiar with the market which we are looking to enter. In our case, this entry strategy would be perfect for us as we would be able to keep our principals of still purchasing cacao beans from the Pacific Islands at a fair price and other principals, while also getting the help we need in terms of how to get into the market of Chennai. We may even be able to do our manufacturing with a big company, such as Nestle, in India, as they would make our chocolate how our recipe says, cacao beans bought fairly and all. We would have to have somebody on the ground over there to make sure all these things go smoothly and the standards we are after are still being met, which can be done. This is why I feel as though this is the best strategy of entry.

 

Here is the link to find out more about different market entry strategies:

http://www.tradestart.ca/market-entry-strategies

 

Cultural Challenges of Entering Chennai

There are quite a few cultural challenges we will face out Ocho Chocolate when trying to get our product going in Chennai. One of which is the language barrier. This is because the most commonly spoken language in Chennai is Tamil, which is not much use to us when all of our branding and writing on our products is in English. We would have to have our ingredients and other write ups on our product written in Tamil for our products which would be sent over to Chennai. This is because if were to send over our products how they are now in English, locals in Chennai may just look past it as they may if issues with it such as wondering how much sugar is in it and otherthings. We will need to adapt to the market situation in Chennai, as we want to make our product as appealing as possible for the people in this market.

Another cultural challenge we will face when trying to enter the market of Chennai is trying to get around the corruption which is in place in India. This is due to the BBC reporting back in 2015 about how hard it is for small foreign businesses trying to establish a market for their business in India due to middle men in India wanting something extra to get them to do the work. This is because Indian locals know they are able to try and exploit foreign businesses, as they don’t know much about the culture and aren’t big enough to do anything about it. We will need to keep this in mind, because we will have to way up whether or not it is worth paying a fee which isn’t necessarily legal, but if it means actually getting our business set up then we may just have to do it. However, this goes against our beliefs as a company, so I’d assume we would just wait it out and hope the work gets done on its own time.

A third cultural challenge which we will need to overcome is finding a price which fits with what the people are willing to pay for chocolate. This is because the price of chocolate in India is far lower due to being produced differently to ours. This allows them to be cheaper, as they also have factories producing it in India. We need to some how sell our product as being worthwhile to purchase, as people in India aren’t usually willing to spend so much money on goods which can be seen as luxury goods.

These are three challenges which we at Ocho need to consider and find ways to overcome when we look to set up a market in Chennai.

 

Here is a link to the BBC article which was mentioned in the blog:

http://www.bbc.com/capital/story/20150826-the-challenges-of-setting-up-shop-in-india

 

Cultural Profile of Chennai

India has a culture which is far different from New Zealand’s, which is something we must factor in when considering Chennai as a potential market. This is because we may need to make adjustments to our product as a whole and even potential marketing tactics also.

The Hofstede’s theory is something which is very useful when comparing India’s culture with New Zealand. This is because we are able to see what trends there are in the Indian way of living, compared to New Zealand. In terms of the 6-D Model, India and New Zealand have some similarities, but also some glaringly obvious differences. These help understand the cultures in India and also in New Zealand.

The ones I’d like to touch on in this post are ones which I feel are more relevant to our end result, which is to figure out whether or not Chennai is a good market for Ocho Chocolate. Uncertainty Avoidance is one which I feel is crucial when trying to find a marketin Chennai. This is because if it is in India’s culture to be uncertain about trying new products, then we may struggle trying to get off the ground. However, India tests medium to low in this category, which shows that they are willing to try new things. A word which is used in Indian culture a lot is adjust, meaning that there is nothing in India which impossible. This is great for us as this means they be more willing to try our product. Another section which I feel is important when looking at India’s culture is the indulgence section. This is because India has score very low on this with a score of 26. This means that they feel as though indulging themselves is wrong, which means that they try and control their impulses. This may present an issue for us hereat Ocho, because chocolate is more often than not an impulse purchase when in a store, or when we feel like indulging. Because it is in India’s culture to not do impulse purchases or indulging themselves, we may need to look at other ways of getting our product in their hands.

India is a country which relies heavily upon religion. Although India is a secular state, which means  no religion is viewed above any others by the government, the country is made up 79% of Hinduism. This is followed by Islam on 14%, and then Christianity, Sikhism and Buddhism making up the rest. This is important to take note of, as some of these religions, such as Islam, have beliefs in which they can’t eat certain things or even eat at certain times. This is something which needs to be looked at, as our sales may drop because of this or during this period, which is something we may not be able to afford. Colours also matter in these religions, especially in Hinduism. Colours such as red, yellow, saffron, green, white and blue all have significance to this religion, but in a good way, which is something we need to look into further.

It is known that the people of India have quite the sweet tooth, which is evident in the growing demand for chocolate in the country. In 2016, according to QZ.com, India as a whole ate 228 thousand tonnes of chocolate, which is up 50% from 2011. Premium chocolate is also gaining popularity in India, due to affluent middle class purchasing more chocolate due to the demand for it, and more likely the more disposable income that they have. One of the main types of this premium chocolate which is becoming more and more popular is boxed chocolate, because of how easy it is to use as a gift. This is all from mordorintelligence.com, which is renowned for doing this type of research. These are all great signs for us, as we are located in the premium end of chocolate, and we also sell all of our products in boxes or gift shaped parcels, which would give us a direct market to look into. The major players in the chocolate industry in India currently are Mondelez International Inc., Mars Inc., Ferrero, Nestle and also Hershey. In a study conducted by Mintel, it found that the most popular chocolate were produced by Nestle and also Mondelez, which is sold at 5 Rupees and 10 Rupees. To put this in New Zealand Dollars, it is $0.11 and then $0.22. This is not even a scratch at what we charge for our product, with our cheapest product costing $6.50 NZD. We would be needing to find ways to make this affordable to the people of Indiawhile also making a profit, which may be hard to do. This is because we aren’t willing to sacrifice our ethics and morales just to make a profit in a market such as India. 

These are all big factors which play a role in deciding whether or not Chennai is a market which we can realistically be set up in and targeting.

 

 

Here is a link to see more on the Hofstede’s Insight website where you can compare countries from all over the world:

https://www.hofstede-insights.com/product/compare-countries/

 

Here is a link to see more about the growing chocolate trend in India:

https://www.mordorintelligence.com/industry-reports/india-chocolate-market

Demographic and Economic Profile

It is fair to say that the city of Chennai is just a slightly bigger market than the one we are used to here in Dunedin and New Zealand for that matter, in large part because of the population. India as of 2019 has a population of 1.339 Billion people, with Chennai making up 9.8 Million people of that. This makes Chennai over double the population size of New Zealand, which should suggest there is plenty of mouths to be filled with Ocho Chocolate. Chennai ranks 31st in the world for biggest cities by population (World Atlas, 2018).  The population in Chennai has had a steady increase over the past few years of 2.5%, which is predicted to only continue. This means that Chennai’s population is only going to get bigger, which should be great for us, right?

There are many industries which Chennai rely upon for its economic backbone. One of these is the automobiles industry, as Chennai has been referred to as the Detroit of Asia, which really puts in perspective for me how important this industry must be. Plenty of world renowned names have centres in Chennai, such as Caterpillar, BMW, Mitsubishi and many others. Electronics Hardware is another industry which is massive in Chennai, as well as Software services. There is starting to become a trend here, which shows that Chennai is used as a place to help produce some of the most essential things in peoples lives today. Chennai is also referred to as the Banking Capital of India, which also help the economy for Chennai. Other industries which exist and are large in Chennai include, Petrochemicals & Textiles industry, Entertainment Industry and also Medical Tourism industry. There is many industries which are existent in Chennai, which could be a factor as to why their population is so high. I’d like to think workers in this industry are going to be wanting/ relying on a nice Ocho Chocolate bar to get them through their day in years to come.

The average salary for someone living in Chennai is Rs 547,267 (Payscale, 2019) which when converted to New Zealand dollars is $11,745. This in New Zealand terms is just not even a salary which one person could live on. The best comparison I have for this salary in New Zealand terms, would be working all year to in return get what a student gets yearly for their student loan, which we all know is extremely tough to live on. However, compared to the average yearly salary in India as a whole, which is Rs 28,702, it is a hell of a lot bigger. This number in New Zealand Dollars is $616. This is extremely low, to put this in perspective, our cheapest product currently is our Love Heart shaped chocolate goods which are $6.50, a person on this salary could buy 94 of these products before they have no more money left from their salary. This is crazy, and really makes me wonder how we will get our chocolate sold over in India, and especially Chennai.

In India the only legislation there is in terms of legality of food, comes from the FSSAI (Food Safety and Standards Authority of India). This association sets the laws and rules on all food in India. They state that any chocolates sold in India must not have any vegetable fat, as well being free from rancidity or odour, insect and fungus infestation, filth, adulterants and any harmful or injurious matter. This is great for us, as we would easily be allowed to sell our product in India.

 

Here’s a link to check out more about the FSSAI:

https://www.fssai.gov.in/home

And a link to our website at OCHO Chocolate:

https://ocho.co.nz/

 

 

Travel & Budget Requirements

The Managing Director here at Ocho Chocolate Company has decided it’s time to see where else in the world needs to be tasting our wonderful product, and they want to know what the potential would be like in Chennai, India. There are many costs which are involved in an exercise like this, as I will be having to live in Chennai for at least a couple of weeks because these sorts of things don’t just happen overnight! Things like flights, accomodation, food and other things will be needed accounted for, which my Managing Director will be paying for so long as I plan what is needed. So this blog is going to go into detail about what we need in for this trip and what the prices will be.

 

First things first, we need to get to Chennai. I’m gonna go ahead and announce that I will be flying over to Chennai by plane, as I’m not so keen on travelling by boat or pigeon or whatever other way is available. I’ve planned that I’ll be going for three weeks, which I feel will be a perfect amount of time to be scoping out the potential market in Chennai. The dates which have been decided on are that I’ll be leaving on May 4th which is a Saturday, and returning on May 25th which is again a Saturday. For the first flight, I will departing from Dunedin, with stopovers in Auckland and also Kuala Lumpur. The flights will be with JetStar for the first flight, then Emirates for the rest of the flights. The total time of duration for all these flights is 26 hours and 25 minutes, which will be fine as I’ll be able to watch that many movies on the plane, I hope. The cost for this is $1,587 (according to Expedia), which also includes a checked bag. The flight for the trip home home again has the same stop overs in Kuala Lumpur and also Auckland, with the duration this time being 24 hours and 10 minutes. The price has gone up for the flight home, as it is priced at $2,011 NZD (according to Expedia) but thats to be expected. This brings to the total for the flights to $3,598 NZD which I feel is reasonably priced. Now to get on to the accomodation, where it starts to get interesting.

I’ve got this feeling that I’ll be needing to find some accomodation which is in the centre of Chennai, so that I am able to get around the place easy enough with out getting lost, which may be easier said than done. The accommodation I have gone is The Park Chennai, which is located only 100 metres from the town centre, so it’s well and truely in the thick of it. This will be handy for me when inspecting the markets and also surveying people in the city. There should also be no need for taxis during the time I spend here. Other perks of the hotel are that there is a free airport shuttle from the airport which is great as that is another cost which is avoided. This will also be a great chance to talk to people on the shuttle

about what their thoughts are on our product. Ocho Chocolate for everyone. The hotel also has conference centres which could be used for presentations and business meetings if we are able to get that far in the timeI am there, but I’m not optimistic this will be necessary. There is also a restaurant at the hotel, which also provides a free breakfast which I will be gladly taking. Can’t say no to free food. The total cost for the 20 nights of this trip comes to a total of $2,036 NZD (according to their website) which I feel is a great price as it is right in the heart of Chennai and also has some extra perks with it. Exciting times ahead now.

My mouth starts to dribble a bit when I start to think about the food planning for this trip, but I need to put this aside and get to the nitty gritty. Breakfast doesn’t need to be covered as it comes free with the hotel so that’s not necessary. For my budgeting on the costs of meals for lunches and also dinners while in Chennai is www.numbeo.com as it provides a great average on the cost of meals after looking through restaurant websites. They say that average price for a meal in Chennai with two coarse in just your middle of the pack restaurant would cost around $10.00 NZD. This is for both lunch and also dinners. A meal at a place like McDonald’s for 1 person averages at $5.00 NZD. I feel as though these need to be factored in, as after travelling overseas before I have found that I like to have a change up of meals, and have something that reminds me of home so shops like these will be visited. And really, who doesn’t like McDonald’s. So for the 21 days that I’ll be away, I am budgeting that I’ll be needing $350.00 NZD for food, but I’m going to through in another $500.00 NZD just incase there is a change in decision on where to eat, other snacks and also for meals at airports. This brings the total to $850.00 NZD which is very respectable.

The last thing which needs to be factored in for the trip is applying for a visa. This is because some countries require you to pay a fee when doing work in their country. However in India, I would only need the visitors visa as I am not actually doing any business while in Chennai, just scoping out a potential market. However if we choose in the future to do business in India, then we would need to apply for a work visa.

After looking at these factors for this trip and adding them together, it brings the total budget to $6,484 NZD. I feel as though this is a very well priced business trip for 21 days, as I haven’t really gone for the cheapest options. However, I’m going to add in another $2,000 to the budget just incase unexpected situations pop up. These sorts of things always happen. This now brings the total to $8,484 NZD. This is a number that not only I am happy with, but also the Managing Director will be happy with.