Exporting Walton

Motorcycles to
Nepal

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 International Business
BUS-510

Submitted to:

Mr. Najmul A Sheikh

Course Instructor, BRACU

Submitted by:

Name Student ID

Mir Shadman Ali 17264023

Jobayed Bin Salauddin 173640

Md. Tanvir Hossain 17364051

Md. Wasil Billah 17364024

Golam Kassaf Chowdhury 17264004

Date of Submission: 22nd June, 2019

Table of Content
Executive Summary
4

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Brief Company Background 5

Porter’s Diamond 6-8

Rationale for Choosing Country and

9
Market
The mode/s that we are going to
9-10
choose:

Why Nepal? 11

Trade Policy 11

Environmental Challenges 12-14

References 15

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Executive Summary
Walton is a conglomerate based in Kaliakair, Bangladesh. Most of the subsidiaries and
affiliated businesses are under the Walton brand. The subsidiaries include Walton Motors,
Walton Mobile, Walton Electronics and Walton Hi-Tech Industries. Walton
produces electronics, motor vehicles, and telecommunications products.

In this report firstly we have mentioned the company background and its operations. Then the
analysis and explanation of marketing Walton motor vehicles mainly motorcycle is done by
using Porter’s Diamond. Also we have talked about several other alternative strategies
(mode) like forming a strategic alliance with a local company and Foreign direct investment
(FDI) which is Walton investing directly in Nepal.

We have chosen Nepal to expand Walton motorcycle business and operation in a foreign
country, as motor vehicle is a very promising and attractive industry in Nepal. Economic,
Political, and Cultural environmental challenges is explained to find the most effective
solution to increase sales. At last a conclusion is added to the report.

Nepal is seen as a lucrative market for different industries by several other Bangladeshi
companies, such as Pathao. If Pathao enters Nepal then there will be a great need of
motorcycles, creating a symbiotic relationship between Pathao and Walton. The proper
marketing strategy will help Walton to rule the motor vehicle market in Bangladesh and in
Nepal as well. There are a good number of brands that currently exists with the same
proposition of good quality, especially Indian motorcycle companies so Walton have to face
immense competition in near future. By proper market research, forecasting and effective
marketing strategies we have planned to market our motorcycles to Nepal.

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Brief Company Background
Walton is the one of the largest home appliances companies of Bangladesh. Walton had
entered into electronics business in 2000s with manufacturing of electrical and electronic
items and gradually expanded its operation in many other electronics field that provide the
foundation for nearly every aspect of modern life. Now Walton exporting their home
appliances over 20 countries in the world.

Walton consistently applies leading global technologies in manufacturing of its products. Its
product have already won the heart of the millions people of Bangladesh for their outstanding
designs, uncompromising quality and affordable prices. It has now become a trusted brand
name in every household of Bangladesh. Walton has directly and indirectly employed more
than 30,000 people in Bangladesh. Walton is committed to manufacturing environment-
friendly products through innovation and technological progress.

We have chosen Nepal for international operation of Walton Bangladesh Ltd in outside of the
countries. We have emphasize on the political relationship between these two countries.
Although there have been several political ups and downs in the history of Nepal. But, Nepal
now came into a stage of political stability. That’s stability made the political relationship
even stronger. As a result, Nepal is going to give duty-free access to 74 Bangladeshi products
in response of Bangladeshi government gesture of giving duty-free access of 108 Nepali
items. Bangladeshi is already Nepal’s largest trading partner in south Asia and duty-free
agreement will make our position in Nepal’s market even stronger. Though Nepal is a highly
potential market yet very few foreign countries are investing in Nepal. Nepal government
highly encourages foreign investments in manufacturing sector according to their foreign
investment act.

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Porter’s Diamond
Porter’s Diamond is an economic model developed by Michael Porter. This model is often
used to analyse the external competitive environment or marketplace, which helps companies
to determine the relative strength and explain why certain industries have become
competitive or possess regional advantages.

In this model, the regional advantages can be assessed by four factors, which includes:

1. Factor Conditions.
2. Demand Conditions
3. Related and Supporting Industries
4. Firm Strategy Structure and Rivalry
5.

Factor condition
To understand the role of factor conditions we need to distinguish between basic and
advanced factor conditions. Porter argues that basic factors which include natural resources

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and unskilled labor do not generate competitive advantage as they can be obtained by any
company. Only advanced factor like skilled labor, specialist knowledge, and capital
conditions can generate competitive advantage. The economy of Nepal matches with the
economies where Walton Bangladesh currently operating. Sudan, Myanmar, Qatar and UAE
(already in operation) and they are planning to enter number of least developing countries
like Yemen, Ethiopia, Nigeria and Bhutan. Nepal is also being considered as least developing
countries and thus the entry into Nepal is well-justified as same goes with other LDC.
UNCTAD explains, “When it comes to profits, the evidence is that the rate of return on FDI
in less-developed countries (LDCs) is often much higher than investment in developed
countries, or emerging economies”.

To maintain good control over the local distribution, we will employ territory managers in
different areas of Nepal. Also considering this factor we will employ local talents in our
management trainee posts to have a good overview and know-how about the Nepal market.

Demand Condition The main factor of demand conditions is home market demand.
Demand conditions include such factors as market size, market growth rate, and market
sophistication. Early home market saturation is another factor which can cause firms to
innovate.

Motorcycles in Nepal are in the maturity stage. People in Nepal depend on two-wheeler mode
of transportation and it has a huge demand in Nepal. That is why Walton Nepal is taking
three categories of motorcycles to Nepal ranging from 107cc to 138cc. transportation in rural
areas of Nepal is scarce, which is why Walton Nepal is taking 107cc motorcycles to satisfy
their needs in an economic way. The Scooty industry is in the growth stage of its life cycle
and another potential market for ladies. Though Walton does not produce any Scooty, but it is
under development and will soon to be launched in Nepal for females. As females in Nepal
are more liberalized than before.

Related and Supporting Industries The presence of internationally competitive

suppliers within a nation can be helpful to the companies using those suppliers. This is
because it gives cost-effective access to inputs. Alongside this, it gives early access to new
products and encourages the rapid sharing of information. Though Nepal is a highly potential

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market yet very few foreign countries are investing in Nepal. The highest investor in Nepal is
India with 46.32%, China 10.46% and US 6.84% of total investment. Other investor countries
include South Korea, Norway, UK and Canada. Only these major players have invested in
Nepal’s market, but these investments are mostly in the power development sector. Their
presence in the manufacturing sector of Nepal is still insignificant. Moreover, the huge
investment in hydro-electricity and optical fiber internet connectivity in 75 districts within
2015 will create a booming demand for electronic appliances and information related
gadgets. Nepal government highly encourage foreign investments in manufacturing sector
according to their foreign investment act

Firm Strategy, Structure, and Rivalry

The competitiveness of firms in one nation is determined by how those firms set strategy and
structure themselves. Competitiveness is also determined by how much competition there is
between firms in the industry. How firms are structured and set goals will differ from nation
to nation. It will be determined by a multitude of social, political, and legal factors.
Market share analysis of motorcycle industry in Nepal is divided into 4 major categories:
150cc segment, 125cc segment, 100cc segments, and scooter segment. 150cc motorbike’s
customer segment prefers high quality and smooth performance. Here Bajaj is leading the
market with High-low pricing strategy. Bajaj capitalize on the fact of high selling figures
during festival season. The tendency of Nepali customer to react positively in different
discounts and offers worked in the favor of Bajaj. Yamaha is holding the second position in
spite of their high price skimming policy. Yamaha is targeting premium quality motorbike
admirers. In both 125cc and 100cc segment the penetration pricing is working. Nepalese
don’t have a high budget in general. For this reason, they are choosing hero motorbikes in
both the cases for affordable price and high mileage. Hero is leading both 125cc and 100cc
segment by 30.79% and 49.88% respectively. But penetration pricing strategy did not work in
150cc segment. In scooter segment Honda is leading the market by 53.17% shares. They are
providing lots of varieties and colors which customers of this section are taking positively.
Scooter segment customers consider safety at first and style in their second priority. For those
reason Honda’s high low pricing strategy is a success here.

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Rationale for Choosing Country and Market
There are several alternative strategies or mode/s that can be adopted by an organization
when the organization decides to increase its international business activities. Some of these
strategies are:

1. Importing and Exporting - When citizen, business or government of a country buys

goods or services from foreign country that is importing. On the other hand, exporting refers
to the sales of domestically produced goods in foreign country. An organization can do its
international business activity through importing and exporting.

2. Licensing - Licensing refers to a business agreement that involves with two companies.
Under licensing agreement one company gives permission to another company to use their
patents or copyright. In licensing, a company grants another foreign company to manufacture
or market their products. For example: Singer.

3. Strategic Alliances - In strategic alliance two or more companies jointly cooperate for
common benefits. A joint venture is a type of strategic alliances where two or more
companies form a new company for specific project or business activity and share the
ownership of that new company.

4. Foreign Direct Investment - Through foreign direct investment an organization can

conduct its international business activity. FDI refers to an investment that is made by a
company or individual in one country into another foreign country where the company or
individual has interests to do business. For example: Honda is doing FDI in Bangladesh.

The mode/s that we are going to choose:

The operation of Walton Bangladesh ltd. in Nepal is focused on not only doing business and
making profit but also changing the lifestyle of the people of Nepal. As Nepal is a least
developing country, we have plenty of opportunity to implement our goal. The economy of
Nepal matches with the economies where Walton Bangladesh currently operating. Sudan,
Myanmar, Qatar and UAE (already in operation) and they are planning to enter number of
least developing countries like Yemen, Ethiopia, Nigeria and Bhutan. The products and
service we are going to offer in Nepal is targeted to enrich their lifestyle at an affordable cost
and ensuring the International standard quality.

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While choosing Nepal for the international marketing operation of Walton Bangladesh Ltd.,
we put high emphasize on the political relation between these two countries. Although there
have been several political ups and downs in the history of Nepal but now Nepal came into a
stage of political stability. That stability made the political relation even stronger. As a result
Nepal is going to give duty-free access to 74 Bangladeshi products in response of
Bangladeshi government gesture of giving duty-free access of 108 Nepali items. This good
news was delivered by Bangladesh embassy in Nepal. The 1st secretary of Bangladesh
embassy in Nepal also added, “Agro-processes food items being produced by Pran Company
and refrigerator and other electronic home appliances manufactured by Walton Bangladesh
Ltd. are among the items in the zero tariff list from Bangladesh side”. Bangladesh is already
Nepal’s largest trading partner in south Asia and this duty-free agreement will make our
position in Nepal’s market even stronger.
Though Nepal is a highly potential market yet very few foreign countries are investing in
Nepal. Moreover, the huge investment in hydro-electricity and optical fiber internet
connectivity in 75 districts within 2015 will create a booming demand for electronic
appliances and information related gadgets. Nepal government highly encourages foreign
investments in manufacturing sector according to their foreign investment act.

Importing and Exporting: Participating in “Export Fair” is one of the best ways to
introduce a new product in international market. In this fair many dealers come to visit
different stalls to find out what is new in the market and then decide with whom they will do
their business. To introduce our products in Nepal’s market at first we will participate Export
Fair in Nepal. In the fair we will meet many dealers. We will provide them some free sample
of our brand particularly in Walton motor vehicles and get feedback from them. When we will
find suitable dealers for our product, we will export a minimum quantity of our brand at the
initial stage. Then we will observe our product’s position in India’s market. We will try to get
feedback from the customers who will use our product. After few months of observing our
products’ condition in the market and conducting a market research if we find that our
product is preferred by the customers and if the demand of our product in the market is
positive in Nepal then we will increase our export quantity. We will also appoint some sales
agents in Nepal who can sell our product in their market and provide us the authentic
information about our customers’ perception about our product and also provide information
about the market condition. In this way we will enter into Nepal local market with our
product and expand our products in the markets through exporting.

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Strategic Alliances & Foreign Direct Investment - We will also conduct market analysis
to make future plan for our Walton motor vehicles business segment in Nepal. In future, if we
find that our brand has successfully made a good position among all foreign and local brands
in Nepal’s market then we will go for joint venture or foreign direct investment based on the
situation.

Why Nepal:

i) New market opportunity.

ii) SAARC country.

iii) Relationship among two countries (political, social).

iv) Least developing country

v) Other local companies started to export in Nepal eg.- Pran.

vi) Zero Tariffs Bangladesh government is in a contract with Nepal about zero tariffs
for motor vehicles products. If the contract goes successful, Walton will have
more opportunity of business in Nepal and more profit will come for the business.

Trade Policy:
Multilateral:
Nepal has ratified the South Asian Association for Regional Cooperation (SAARC)
Agreement on a South Asian Free Trade Area (SAFTA). Signed at the 12th SAARC summit
held in January 2004, the SAFTA agreement came into effect in January 2006 and subsumed
the ongoing trade liberalization process under the South Asian Preferential Trade Agreement.
Under SAFTA, the eight SAARC nations (Nepal, Bhutan, India, Bangladesh, Pakistan, Sri
Lanka, Maldives, and the Afghanistan) have pledged to cut tariff rates on a product-by-
product basis. Following the third round of trade negotiations, more than 5,000 items are now
entitled to preferential duty treatment in one or another of the participating countries.
Bilateral:
Nepal has signed bilateral trade treaties with 17 countries including the United States, United
Kingdom, Yugoslavia, India, Russia, South Korea, North Korea, Egypt, Bangladesh, Sri
Lanka, Bulgaria, China, Czech Republic, Pakistan, Romania, Mongolia, and Poland. The
treaty signed with India in 1996, and amended in 2009, is the most important in terms of
trade volume and relationship. Except for some items under quantitative restrictions, the trade

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treaty puts Nepal in a unilateral duty-free trade regime with India, which accounted for more
than 66 percent of total Nepal’s trade in FY 2010/11.

Environmental Challenges
Nepal is an independent and federal democratic republic country. It is in the process of
establishing a state system but number and boundaries have not been finalized. It is a land-
locked country in South Asia with a population of 26.4 million. Nepal is an agriculture
dominated country, however due to globalization and technological advancement potential
business sectors in Nepal are rapidly rising. The key business sectors in Nepal are Agro-
business, Hydropower, Tourism, Herbal, Sugar, Match, Flour, Carpets, Paper Garment and
Textiles, Cigarette, Cement and Brick, Leather and leather goods, Soap, Health,
Telecommunication and Mines. Despite being a small country, Nepal is diverse in terms of
topography. Mountains and rugged hills cover almost 77% of the total area. Bordering China
to the North and India to the South, East and West, most trade is done via two industrial
giants. Due to the rapid industrialization of India and China, Nepal has potential to become
one of the fastest growing nations in the world. The major industrial centres of Nepal are
Biratnagar, Birgunj, Kathmandu, Bhairahawa, Janakpur, Hetauda, Nepalganj, Patan and
Pokhara. There are around 150 ethnic groups in Nepal as of 2011, these groups coexist in
Nepal, each with their own complex customs. Nepal has estimated water potential of 83000
MW, out of which 40,000 MW is technically and economically viable. However, Nepal to
date has been able to develop only approximately 680 MW of power. As per an Economic
Survey published by Ministry of Finance for FY 2015/16, the total exports were Rs. 74.2
billion while the total imports were Rs. 789.3 billion. Being an economically developing
country, Nepal has recently emerged as a key destination for foreign investors. Nepal strives
to promote foreign investment in a focused, comprehensive and structured manner with a
main focus to provide quality input and support services to its prospective foreign investors.

However, there are a number of issues which you must consider when you are looking to set
up your business in Nepal.

Economic environmental challenges:

Lack of adequate infrastructure: Nepal is a landlocked state, which makes market access a
challenge. Surface transport into and out of Nepal can be difficult, and there is only one
reliable road route from Bangladesh India to the Kathmandu Valley. Political unrest and

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general strikes can disrupt the movement of goods in and out of Nepal. Nepal’s border was
virtually shut down from September 2015 to February 2016 due to political turmoil and
protests at key border points. The primary seaport for entry of goods bound for Nepal is
Kolkata, India, about 460 miles from the Nepal-India border. With a single international
airport in the country, challenges in the air transport sector are also acute

Lack of Electricity: Electricity is a major pre-requisite for the Industries. But for the past
few years, there has been acute shortage of electricity in Nepal. Therefore, most of the
industries are dependent on captive generators that run-on petro-fuel to meet their electricity
needs. Due to the lack of domestic sources, the country depends entirely on imports of petro-
fuel. This has raised the cost of doing business in almost every sector.

Lack of Manpower: Qualified workers are in short supply.  Nepal produces technical
manpower, but a lack of economic opportunity and low wages compel millions of workers to
seek jobs overseas.  Businesses often complain of having to constantly recruit and re-train
new staff. Rigid labor laws make it difficult to terminate employees.  Moreover, militant and
highly politicized unions commonly abrogate negotiated agreements to press new demands,
making it a challenge to assemble and retain qualified staff.  A new Labor Act was enacted in
August 2017 replacing the previous one from 1998. This Act should make the employer-
laborer relationship more systematic and help ease some of the rigidities, e.g. ability of firms
to retrench workers in response to market demands, clarity on provisions related to
occupational health and safety, collective bargaining, dispute resolution and reduced wages
during strikes.

Small market: Nepal's market is small and limited. There is no access to all parts of the
country. As small quantity of goods is to be produced for small market, the production cost
reaches high.As a result the price of the goods also goes high.Since Chines and Indian goods
enter Nepal at lower price, Nepalese industries cannot compete with the Chines and Indian
goods.This also has shrunken the market of Nepalese industries.So small market is also a
problem for management.

 Corruption: Investors have identified corruption as an obstacle to maintaining and

expanding direct investment in Nepal.  There are frequent allegations of corruption by GON
officials in the distribution of permits and approvals, procurement of goods and services, and
award of contracts. Nepal’s ranking on Transparency International’s Corruption Perceptions

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Index improved from 131 out of 176 countries in 2016 to 122/180 in 2017 largely due to the
successful completion of elections.

The political/Legal environmental challenges:

Political instability: Including 25 governments in the past 27 years, had created an uncertain
environment for foreign and private investment. With the successful conclusion of local and
parliamentary elections in 2017 and a majority government in place in early 2018, this
environment is expected to improve. However, the new Constitution of 2015 also committed
Nepal to a federal set-up with a central/federal government (based in Kathmandu) and seven
Provincial or State governments, besides 753 units of local government. The division of
power and responsibility across these three tiers of government is still being worked out, and
can create additional administrative, bureaucratic and possibly even policy-level costs,
hurdles and delays.

Non-transparent legal system: The GON claims to be open to foreign direct investment, but
implementation of its policies is often hindered by bureaucratic delays and inefficiency. 
Foreign investors frequently complain about complex and opaque government procedures
and a working-level attitude that is more hostile than accommodating. Lack of inter-agency
co-ordination is often touted as another hurdle.

Indian Domination: Bordering China to the North and India to the South, East and West,
most trade is done via two industrial giants. For Nepal, it’s probably no surprise that
neighbour India is far and away the biggest economic partner, accounting for 53.7% of all
exports, according to the CIA.

Customs tariffs: High customs tariffs imposed on most manufactured products increase the
price of U.S. products in the Nepali market.  Additionally, cheap consumer goods imported
from India also present market challenges for Bangladeshi products

Cultural environmental challenges:

There are around 150 ethnic groups in Nepal as of 2016, these groups coexist in Nepal, each
with their own complex customs. The major ethnic groups in Nepal are: Brahman, Chettry,
Newar, Gurung, Sherpa, Magar, Tamang, Tharu, Rai, Limbu and Muslim.

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References:
1. Asian Development Bank, Country Assistance Plan- (2000-2002) Nepal, December, 1999
available at www. adb.org
2. Asian Development Bank, Second Industrial Sector Study, Nepal, 1991
3. Bettman JR (1979). An information processing theory of consumer
choice.AddisonWeslyPublishers, Reading, MA.
4. CAAN (2001) Civil Aviation Authority of Nepal, Annual Report of Nepal
5. Central Bureau of Statistics (1999), Report on the Nepal Labour Force Survey 1998/99,
November,Kathmandu, p. 67.
6. Central Bureau of Statistics (2012), Population Census 2001, Kathmandu.
7. Culture of Nepal - history, people, clothing, traditions, women, beliefs, food, customs,
family. 2014. Culture of Nepal - history, people, clothing, traditions, women, beliefs,
food, customs, family. [ONLINE] Available at: http://www.everyculture.com/Ma-
Ni/Nepal.html. [Accessed 20 August 2014].
 https://www.academia.edu/9897356/Walton_Bangladesh_operation_in_Nepal?
fbclid=IwAR2xS30qVQWEtOLLFb9-4EXeJicw8NCwqYJ6Y_BxLf_HRTTkvmOP0cHCcjA

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