CREATING THE INDIAN MNC

As part of CIA III in International Business

To be Submitted to
PROF. KAVITA MATHAD

Presented by:
Anindya Biswas, 1572605
Ashwin Kumar C, 1527608
Anushree Choudhary, 1527634
Shamayita Guha, 1527651

EXECUTIVE SUMMARY

Globalization has introduced a new dynamism worldwide and its winds have reached the
shores of India as well. Aggressive competition coupled with the state of the art cutting edge
technology has added new elements paving the way for the growth of the transnational
companies. In the search for new markets, the Indian industry has displayed an enormous
amount of zeal and enthusiasm. In the recent years, the Indian firms have spread their wings
in the global market by aggressively buying as part of their strategy to establish the Brand
India across the globe. These buyers were not limited to just a couple of sectors but spread,
across a wide spectrum of industries ranging from pharmaceuticals to telecom, automobiles
and ancillaries to IT. The geographic spread was just as varied spanning the US, Europe,
Africa, China among others.
This report tracks this creation of the Indian multinational. It investigates the strategic
imperatives that have driven Indian investments overseas and the future course that these
strategic moves are likely to take. It also reviews the policy environment in which these
investments are flowing abroad, the changes that have taken place and the constraints that
remain.

TABLE OF CONTENTS
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Sr. No.

Chapter Name

Page No.

Executive Summary

Introduction

Product Profile

Profile of Exporting Countries

Blueprint of the Planned Business

Long Term Trade Opportunities

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Learnings

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CHAPTER 1: INTRODUCTION
Internationalization is a recent worldwide phenomena and India is no stranger to this event.
The Brand India is a known term nowadays ever since the Indian firms have started
competing aggressively in the International markets as well.
Before we move ahead, we must understand as to what makes a Multinational Corporation or
an MNC as we know it. According to Mr. Franklin Root (1994) an MNC is one that:
Engages in foreign production through its affiliates in several countries
Exercises direct control over the policies of its affiliates.
Implements business strategies in production, marketing, finance and staffing that
national boundaries.
A company can be classified as an MNC based on several factors and there are indeed several
criteria on which on can term a company as an MNC. It could be either the subsidiaries it has
in foreign countries or the number of foreign operations or it could be based on the proportion
of assets or revenues that it gathers from global operations or it could be based on the type of
recruitment policies that it has. It could even be on the basis of the nature of the global
stakeholders.
The report thus aims to find out what it takes for a native Indian firm to be truly international
and whether or not it has the scope to be so. We would be investigating the key sectors from
which the foreign investments are taking place and the markets that these investments are
seeking.
We shall also be having a look at the policy environment in which these investments are
floating as well as the changes that have taken place and the constraints that have remained.
The ultimate objective is to identify the way forward to satisfy the global aspirations of
Indian companies, the policy and regulatory framework that facilitates and the institutional
apparatus that can foster these investments.

CHAPTER 2: PRODUCT PROFILE

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We are exporting the Darjeeling White Tea which is a rare but very aromatic tea considered to
be very beneficial worldwide. The white variant of Darjeeling tea has a delicate aroma and
brews to a pale golden color with a mellow taste and a hint of sweetness. Darjeeling white tea
leaves are very fluffy and light; therefore, it is recommended to use more (by volume) when
preparing it than one normally would for other teas.
Specifications: This Indian white tea is made up a bud and two young leaves still with their
fine downy hairs that give them the distinctive silver color. White tea comes from the buds
and immature tea leaves that are picked shortly before the buds have fully opened. The leaves
and buds are allowed to wither and dry in natural sun.
Quality & Benefits: The leaves in this variety of Darjeeling tea contain high number of
antioxidants, namely catechins. These components along with other vitamins and minerals
will provide you with a variety of health benefits such as fighting off common cold
symptoms, promoting weight loss, fighting stomach problems, preventing cardiovascular
diseases etc.
Sources of Supply & Availability: It is harvested primarily in China, mostly in the Fujian
province, but more recently it is produced in Eastern Nepal, Taiwan, Northern Thailand,
Galle (Southern Sri Lanka) and India.
Growing at an altitude of almost 2000, it is the minimal processing to which this Darjeeling
tea is subjected that distinguishes the white variety from the more famous Darjeeling black
tea. Tea leaves are allowed to grow more slowly making this a rare, tasteful but expensive tea.
This white tea may be picked in the first flush (harvesting) from late February/early March to
mid-April, rendering a tea that is delicate and floral. It may also be picked in the second flush
from late May to June, resulting in a tea that has a nutty muscatel flavor that is quite
refreshing. We now buy from one or more of six private growers or grower cooperatives.
Contracts are secured six months in advance of harvest.

CHAPTER 3: PROFILE OF EXPORTING COUNTRIES

Area
Total
Water (%)
Population
2016 estimate
Density
GDP (PPP) 2017 estimate
Total
Per capita
GDP (nominal) 2017
estimate
Total
Per capita
Gini (2014)
HDI (2014)
Currency

4,324,782 sq.km
3.08
510056011
116.4/sq. km
$20.75 trillion
$40600

$16.97 trillion
$33300
30.9
medium
Increase 0.865
very high
Euro (EUR; Eurozone)

FDI Scenario:
Europe attracted 4,341 projects (+10%) and 185,583 jobs (+12%) while global FDI flows slipped 8%
to US$1.26 trillion. Fifty percent of investors see Western Europe as the most attractive region in the
world for FDI.
China is no longer Europes main competitor (38%, -6 points): the new challenger is North America
(39%) with an increase of +8 points. Fifty-nine percent of investors (up five points from 2014) believe
that Europes attractiveness will keep improving in the next three years.
Fifty-two percent of FDI projects and 30% of jobs created by FDI are captured by the top three
destinations: the UK, Germany and France. The UK, with 887 projects and 31,198 jobs, retains a
strong lead, but France (608 projects, +18%) has closed a little on Germany (763 projects, +9%).
Western Europes mid-sized FDI markets (Spain, Belgium, the Netherlands and Ireland) deliver mixed
performances. Central and Eastern Europe, Russia and Turkey attract 96,087 FDI jobs (52% of
Europes total), outpacing Western Europe.
Europes industrial appeal rebounds in 2014, with more FDI manufacturing (+20%) and logistics
(+27%) projects. Automotive (+18%), food (+43%) and machinery and equipment benefit the most
from this trend. Services have a mixed year: software projects (+27%), financial intermediation
(+37%) and back-office operations (+15%) all grow strongly while business services (-24%) and
R&D (-1%) slide.

Fifty-nine percent of investors are confident about Europes prospects in the upcoming 3 years. Only
32% of investors have plans to establish or expand operations in Europe over the next year, while
64% dont.
Foreign investors see bureaucracy (20%) and slow economic growth (17%) as the biggest flaws in
Europes attractiveness, overshadowing the geopolitical unrest at Europes frontiers (11%) and big
deficits (10%). The big trends that business leaders believe will drive European renewal the digital,
health care and energy transformations take decades to build momentum, but nonetheless, they
want to catch those waves.

CHAPTER 4: BLUEPRINT OF THE PLANNED BUSINESS

Mission: Four Season Inc. seeks to serve Tea distributors and aromatic tea enthusiasts by
exceeding minimum acceptable quality standards and by providing the highest quality
product at the lowest possible price. We value our relationships with current and future
customers and hope to communicate our appreciation to them through our outstanding,
guaranteed product quality, personal service, and efficient delivery
Market Segmentation: Our major potential customer segment for our product would be:
Consumer Packed Importers: This is because they are either large traders or have local
processing/packing facilities. Most other countries rely on other EU countries to supply their
packed tea. Some countries import almost exclusively consumer-packed tea. Examples
include Portugal (99% of imported volume in 2014), Greece (91%) and Estonia (86%).
Re-Exporters: This is another segment towards whom we are looking at. Countries such as
UAE are newly into the re-exporting business which makes them our valuable employees as
well.
Competitors: The main competition would be the brands who already have a presence in the
market and have a greater bargaining power such as Unilever (owner of the world-famous
brand Lipton), Twinings, DE Master Blenders and Tata Global Beverages.
Supply Chain Model: The supply chain model for our export business would be as follows
which also shows the mode of entry that we would be adopting to enter the European
Market.

The tea value chain is characterized by a high degree of vertical integration, meaning that
major companies control various production stages upstream and downstream, including the
ownership of plantations and manufacturing operations. Tea is generally exported with
minimal processing to importing consumer countries, where it is blended and packaged.
Roughly 70% of global tea production is traded at auctions. The rest is effectuated through
private sales, mostly by small companies, selling their own brand.
The EU retail channel consists of hypermarket and supermarket chains, smaller chains and
independent grocers and specialist tea (and tea) sellers who may also sell online. Retail
consumption accounts for 91% of tea consumption, whereas out-of-home consumption
(tea/tea bars, restaurants, work place) around 9%.
Competitive Advantage: Ours is a superior product offering because of the rarity of the tea
blend and because we purchase from growers who rely on organic methods of growing tea. In
addition, prompt preparation and shipment provides importers with a product that is of a
better quality than our fellow competing tea exporters.
Marketing Strategies
Promotion Strategies: Our plan for promotion activities is as follows:

Personal Selling which includes phone expenses, travel for Four Season Inc.

employees and for importers who we invite to Brazil: 35,000 annually.

Print Advertising in three specialty publications and direct mail: 7200 monthly.
World Wide Web presence: 12,000 to produce a new site and 500 annually to
maintain the site.

Positioning Statement: For our European exporters who use our tea to supply to branded
companies providing the tea under their brand, we assure that Four Season Inc. tea leaves are
the highest quality and best flavored available. Unlike many exporters, our tea leaves have
exceeded the minimum acceptable quality standards and are shipped within one week of
preparation. Our products are perfectly suited for the niche market which constantly strives to
offer certified for the premium customers.
Pricing Strategy: Because Four Season Inc. adheres to higher quality standards, the price of
our tea is slightly higher (four to nine percent) than the market average. The import market
largely determines the price of imported tea in the European Union. Tea, on the import
market, now sells for US$ 2.08/kg bag. According to Four Season Inc. pricing strategy, Four
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Season Inc. tea would sell for approximately US$ 2.23/kg bag. Importers have to this point
been willing to pay the additional cost.
Sales Strategy & Alliances: Through personal contact we need to confirm in writing orders
for larger quantities of our product from the British, Irish, Polish and the Dutch importers.
Our most valued alliances are those we have developed with importers in the United
Kingdom. They have the ability and willingness to purchase larger quantities of our products
and recommend us to other importers.
Personnel Strategy: Four Season Inc. management would consist of only full-time
employees. Additional assistance would be acquired on a part-time basis and/or through the
use of consultants, specifically in legal matters. We currently lack a full-time professional
who can deal with the changing legal and financial aspects of international business. We have
relied on legal consultants but are now analyzing the possibility of adding an additional
position to deal exclusively with international issues. In addition, as we continue to grow and
hire more personnel, we may hire a controller.
Financial Plan: We want to finance growth through a combination of long-term debt and
cash flow. Purchase of the larger facility and equipment will require approximately eighty
percent debt financing. Additional technology will be primarily financed with cash-flow.
Inventory turnover must remain at or above four or we run the risk of backing up orders and
jeopardizing our freshness guarantees. We have had no problems with accounts receivable
and we expect to maintain our collection days at 30 with thirty percent of sales on credit.
In addition, we must achieve gross margins of thirty-five percent and hold operating costs no
more than sixty-five percent of sales. We expect to close the first year of production in the
new facility with quite exemplary sales and to increase our sales in the second and third
years. Net earnings will be above industry average.

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CHAPTER 5: LONG TERM TRADE OPPORTUNITIES

The long run trade opportunities for specialty and certified tea such as our rare and aromatic
white Darjeeling tea are multifold of which some are mentioned below:

There are opportunities for suppliers who are able to react to the changing market
circumstances. Demand is increasing for teas with specific health benefits and flavors.
Suppliers of high-quality (e.g. whole-leaf, single-estate) and certified teas will be able

to find market openings.

The availability of opportunities in specific EU countries depends largely on the tea
culture in those countries. In most countries, especially in the UK and Ireland, most
tea (95%) is sold in the form of teabags. This means that, in these countries, whole-

leaf teas operate in a small niche market.

With the local and regional markets that are also growing, they can provide good

opportunities, including in the higher end of the market.

Conditions in the EU economic market are expected to improve. In 2015, the
combined gross domestic product (GDP) of all countries in the EU is expected to
increase by 1.8%. In 2016, the GDP is expected to grow by 2.1%. This development is
expected to have a positive impact on the demand for tea, especially in the higher end
of the market. This segment will continue to provide good opportunities for SMEs in
developing countries. In the long term, tea consumption will continue to focus
increasingly on quality, health and flavor.

Good opportunities are available for supplying specialty teas that are traded in smaller
volumes. Examples include high-quality orthodox teas (whole-leaf, single-estate), as well as
flavored, custom and/or sustainable products. More volume-driven traditional (e.g. certified)
markets can also provide opportunities, although competition is higher and margins are lower.

CHAPTER 6: LEARNINGS
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The major learnings that has developed from the entire assignment are the following:

For a firm to go international it is highly important that they know all the details of
the importing country in terms of its geography, culture, legislation rules as well as

FDI as they are some of the significant factors that influence market responsiveness.
Another important aspect of the internationalization process for a firm is that the fact
that the management of the firm should have accurate or almost accurate estimates of
the who are their potential customers, how they would be positioning themselves,
what would be their promotion and pricing strategies which also influence the

visibility and therefore the success rate of the internationalization.

Attention to should be paid to understanding the legal taxes as well as import and
excide laws with respect to the importing country should be noted of as they vary
from one country to another and without having sound knowledge of the same one

would not be able to export or import.

Furthermore, we learnt about consumer

preferences

dictate

the

future

internationalization prospects of a firm and that the USP of the product being exported
should if not be on the same lines but align themselves on similar grounds.

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