Term Paper on "Best Export Strategy to Expand Highest Quality Table Wines to India"

Term Paper 9 pages (3137 words) Sources: 20

[EXCERPT] . . . .

Export Strategy

Expansion of Highest Quality Table Wines to India

India: Business, Economy and Trade Policy.

Many Indian businesses "Look East" toward ASEAN, the Association of South East Asian Nations. They believe that in the long-term the ASEAN countries will offer better opportunities than the West (Maizels, 2000. PG 12).

Until quite recently ASEAN countries looked askance at India, even though some ASEAN countries have sizable Indian communities. Their doubts were due to India's long embrace of socialism and its stifling bureaucracies. The years since about 1994 have seen substantial changes in attitude, although incidents such as the Indian government's refusal to allow the Tata business empire to forge an alliance with Singapore Airlines still causes heads to shake in Southeast Asia.

In 1992, the ASEAN accorded India the status of Sectoral Dialogue Partner. This basically meant that the two sides could engage each other in trade and investment in specific sectors such as tourism, science, and technology (Battese & Coelli, 1995-page 38). More formal recognition came in early 1996, when the ASEAN boosted India to Full Dialogue Partner, a status so far conferred only on the United States, Canada, the European Union, Australia, New Zealand, Japan, and South Korea. India's policy makers have doubts about too close a relationship with the ASEAN. They are worried about the so-called "Flying Geese" development model that has brought the ASEAN so much of its prosperity since 1980 (Barshefsky, 1999. Pg 5). This model proposes that the ASEAN countries became a captive base for first the Japanese and then the South Korean investment and trade, and from these built their own captive bases in countries like Myanmar and Cambodia.

This model is a variant of the Value-Added Ladder model in which the ASEAN economies move into those areas of manufacture that Japan and Korea vacate so that their internal economies can climb the rungs of the technology ladder. These metaphors being mixed notwithstanding, India's economists debate whether the general idea; technological advances being shed continually downward; is really appropriate for India. The countries that make up the ASEAN are diverse and in different stages of technological and market sophistication. They cannot provide leadership to any but the meekest national entities; hence their ventures into Myanmar and Cambodia. Also, given India's sheer size, depths of poverty, and uneven regional development, Indians believe it unlikely that India can practicably hitch itself to any one particular developmental theory (Bhagwati, 1999-page 16).

The Federation of Indian Chambers of Commerce and Industry (FICCI) secretary-general, Amit Mitra, cites a different model that may be more appropriate for India, the "Cultural Affinity" model. Because of similar social behaviors and cultural attitudes, Europe and America were able to engage in investment and trade with each other to great mutual benefit over an extended period. Mitra believes that the same model holds true of India and Southeast Asia, but not of East Asia (Lanjouw, 1997-page 45).

Moreover, the geographical proximity between India and the ASEAN reduces transportation costs. India's advances in software technology and relatively cheap labor add to its complementarities with the ASEAN ((Maizels, 2000. Pg 13). The ASEAN's place in India's trade matrix has improved significantly. The Indian business community shows signs of seeing the opportunities with the ASEAN, initially in trade and investments (Green, 1994. Pg. 100). The Confederation of Indian Industry (CII) has an office in Singapore discussing deals. The FICCI has an office in Indonesia for the same purpose. In a 1996 FICCI seminar on expanding ties with the ASEAN in Singapore, India's external affairs minister, Pranab Mukherjee, spoke of the need for cooperation in the field of small and medium enterprises. He suggested that Indian enterprises set up two or three major impact projects every year either in India, in one of the ASEAN countries, or in third countries with ASEAN collaboration.

Import Statistics, Distribution, Regulations and Profiles

Fig. 1.1 Trade Policy and Statistics at a Glance

(International Monetary Fund, Direction of Trade and Statistics Yearbook, 2005)

Approximately 75% of India's people live in rural areas. Agricultural development and the near absence of agricultural income tax have led to rising disposable incomes. Together with the integration of rural areas and urban centers brought about by modern infrastructure and job mobility, utilization patterns in rural India have changed dramatically (Mumford & Smith, 1996-page 77).

So have income expectations. In 1992 -- 1993, rural markets accounted for over 70% of the sales of portable radio receivers, mechanical wristwatches, bicycles; in fact just about every popular consumer item except condoms: between 60 and 70% of sales of quartz watches, sewing machines, and table fans; 40 to 60% of black-and-white televisions, motorcycles, pressure cookers, ceiling fans, and cassette recorders; and 20 to 40% of small color televisions, mixer-blenders, and electric irons. Rural expenditure on packaged goods is growing at 23% per year starting from the rather impecunious baseline of 1992 (Blackhurst, et al., 2001. Pg 203).

Indian companies and multinationals alike have set rural marketing as the key to their overall market strategy (Crabtree & Malhotra, 2000-page 5). Some companies have successfully used innovative techniques to capture the rural market share. For example, ITC; a highly diversified conglomerate that goes well beyond consumer products; has initiated various support programs for tobacco and sunflower planters, giving itself (and the growers) a clear edge in the cigarette and cooking oil markets (Kaul, et al. 2003. Pg 34). PepsiCo has similarly involved potato and tomato growers in its bid to capture the snack-food market. Indeed, PepsiCo pays more for both than the government, which has caused considerable ink to flow onto the pages of the virulently anti-subsidy business magazines. Unilever's Indian ventures; Hindustan Lever, Lipton, and Brooke Bond; have extremely well-developed distribution networks in rural areas (Anderson, et al., 1999. Pg 14).

Marketers have devised some innovative, even quite striking, ways to reach rural customers. They would not dare miss any one of the 5,000 rural fairs and festivals held annually all over the country (Crabtree & Malhotra, 2000-page 7). These fairs attract about 100 million people; almost the entire rural middle class; an audience that is a marketer's dream. Many multinationals have designed products or changed their brand names to give them a rural flavor.

There has been a lot of debate about the precise number of potential consumers in India's wine market. Major factors that obstruct wine consumption are poverty, age limitations and specific state alcohol prohibition (Dixit, 1998. Pg 10). Almost half of the Indian population meets the minimum drinking age of 25 years; though, that number is significantly increasing as the Indian population matures (Birdsall, & Lawrence, 1999. Pg. 130). This development creates an opportunity for younger generations to obtain a taste for wine, breaking from a custom of hard liquor. Even though many Indian religions encourage self-restraint from alcohol, few have formally banned its use. Three Indian states uphold prohibition laws and others have set severe regulatory measures on alcohol sales.

SWOT Analysis

Fig 1.2 SWOT Analysis

Trade Policies

Through FTA linkages such as ASEAN+3-3 or ASEAN+1 and also bilateral FTAs which a number of major Asian economies have created among themselves, a virtual Asian economic community is already taking shape. It has been argued that: India's unilateral liberalization policies since the early 1990s, and purposeful and strategic pursuance of its Look East policy has resulted in considerably greater integration with the rest of Asia than is commonly realized or acknowledged. Closer cooperation among ASEAN, Japan, South Korea, China and India would provide considerable win-win opportunities and will have far ranging implications for the world (Maizels, 2000. Pg 89). Governments, think-tanks and private business in these countries are becoming mindful of this extraordinary development. At the India- ASEAN Business Summit in October 2004, Prime Minister Manmohan Singh said that: Asian economic community is an idea whose time is fast approaching. And we must be prepared for it collectively. The emergence of a large middle class (and consequently a large market) and civil society in Asian countries would create dynamic impulses towards pan- Asian economic integration (Birdsall, & Lawrence, 1999. Pg. 102).

The announcement at the Laos ASEAN summit in November 2004 of an East Asian summit (EAS) in 2005 has given impetus to further thinking about closer association and future integration of the major economies in East Asia. The earlier proposal of an East Asian Economic Grouping is being revived in the process. The question of membership at the summit was left open at the Vientiane summit as there was no consensus on this issue, and it was to be finalized by Foreign Ministers of ASEAN during early 2005 (Han Feng, 2002. Pg 65). A view was increasingly expressed in ASEAN circles that it would make eminent sense if India, Australia and New Zealand were included in it. In his parliamentary speech on 4 March 2005, Singapore's Foreign Minister George Yeo said: Singapore supports the inclusion of India, Australia and New Zealand in the East Asia Summit. Their inclusion will keep ASEAN at the centre (Cullity, 2002-page 17).… READ MORE

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