Establishing an Indian MNC of Gems and Jewellery in Belgium, UAE and Nigeria

INFRASTRUCTURE
Partner Network: Strong communication among partners

OFFER
Customer Relationship: Steps taken to build long-term relations Value Proposition: Unique designs of Indian tradition, fashionable, stylish

CUSTOMER
Target Customer: Dealers / Retailers with well established brand names in the host country

Core Capabilities: know how of the jewellery designing

Value Configuration: stress on Innovation

Distribution Channel: Effective and efficient channel; via airways

Cost Structure:

Revenue Streams:

FINANCE (to be done by Vineeth)

Entry Barriers

Instability of the government Tough competition existing in the host market Tough competition existing in the home country Tough competition from other nations like China and Thailand

Segmentation: basis of Brand Name of the Dealer / Retailer, his knowledge about the end consumers, years of experience in the field Targeting: those brands who in turn target ACHIEVER customers segment according to VALS2 segmentation
Positioning: Fashionable products with high quality

Product: Price:

Gold Jewellery without studded gems Gold Jewellery with studded gems according to the prevailing rates of Gold and other studded gems lower than the competitors

Distribution: via airways, up to FOB

Promotion:
Displays at trade fairs Buy-back allowances Dealer loadersCompetition: International: Thailand, China Home Country: Nashik, Mumbai, Bangalore Belgium: Gala Jewellers, RELL Diamonds & Jewels, Classic Diamonds (India) Ltd., Cartier Joaillerie International, etc UAE: Samra Jewellery, Taiba Gold Jewellery, Damas Jewel, Rejee Jewellery, etc Cheap labour Unique Indian traditional designs Adaptability to design the local needs of the customers at minimal price Continuous innovation

Competitive Advantage:

Firm Strategy, Structure, Rivalry High quality products Stylish, fashionable Target Belgium & UAE via exports Rivalry from China, Thailand

Factor Endowments Land Labour Capital Enterprise

Demand Conditions Huge demand Target customers are very conscious about fashion

Related and supporting industries Manufacturer of Cutting & Polishing equipments Mining Retail industry

Benefits Size of economy Likely economic growth

Costs Legal costs Corruption (though very less but still exists)

Overall Attractiveness

Risks No Political risks No Economic risks being it a part of European union No Legal risks as strict rules to safeguard property rights

Benefits Size of economy Likely economic growth

Costs Corruption Legal costs Inequality among genders

Overall Attractiveness

Risks Political risks: social unrest No Economic risks Legal risks: failure to safeguard property rights

Entry Barriers

Instability of the government High number of criminal incidents and loots Highly corrupted political parties and civil servants Fear among the suppliers to keep precious and high-valued items

Segmentation: basis of Brand Name of the Dealer / Retailer, his knowledge about the end consumers, years of experience in the field Targeting: those brands who in turn target ACHIEVER customers segment according to VALS2 segmentation
Positioning: Fashionable products with high quality

Product:

Gold Jewellery without studded gems Gold Jewellery with studded gems according to the prevailing rates of Gold and other studded gems lower than the competitors

Price:

Distribution: via airways, up to FOB Promotion:

Displays at trade fairs Buy-back allowances Dealer loaders Insurance of the products

Competition: No competition Competitive Advantage:

Cheap labour Unique Indian traditional designs Adaptability to design the local needs of the customers at minimal price Continuous innovation

Firm Strategy, Structure, Rivalry High quality products Stylish, fashionable Target Nigeria via franchise Rivalry from China, Thailand Factor Endowments Land Labour Capital Enterprise Demand Conditions Huge demand in other branches of the company

Related and supporting industries Manufacturer of Cutting & Polishing equipments Mining Retail industry in other countries

Benefits Size of economy Untapped market

Costs Corruption Lack of infrastructure Legal costs

Overall Attractiveness

Risks Political risks: social unrest/ anti-business trends Economic risks: economic mismanagement Legal risks: failure to safeguard property rights

Enthnocentric staffing policy Function as a multiple CEO rather than going for a single CEO Later will move on to be polycentric

Advisory Board

Head Finance

Head Marketing

Head Operations(Exports)

Head Human Resource

Executive(Do mestic)

Design and Development Executive(Interna tional) International Business Developments Manager HR International Division

Belgium

UAE

Nigeria

International Business Development Manager

Belgium

UAE

Nigeria

Compliance with labor laws of Belgium , Nigeria and UAE Enforce Standardization of work practices Recruitment would be culturally sensitive Training for the international business traveler who would further train the executives of the host countries

Goal Setting
Parent company role conception should be communicated well to the HCNs. The HCN receives role expectations and enacts role behaviors in his/her cultural environment.

Performance Appraisals
Performance Appraisal of the HCNs would also be country specific and would be customized.

Compensation would be given on the going rate basis

This rate is calculated by conducting a salary survey and salary benchmarking. A separate budget would be provided for meeting the expenses related to the ad-hoc visits by the IBDM to the host countries, Visa processing Fees and other administrative expenses.

Belgium
Ad Valorem Applies the EU common external tariff (CET) Single duty system

UAE
Account for 4% of the CIF value (cost, insurance freight) of the goods or services deposited at the customs. Reimbursement of the duty deposit is available for 30 days.

Nigeria
Import duty varies from 5% to 60%, averaging 12%. All imports are also subject to a 7% port surcharge and a 5% VAT. The paperwork necessary for exporting and importing is lengthy.

Uncut, polished diamonds, gold are sourced from Surat. Consultancy for setting up of factory premises and other areas of work. TQM policies. CAD/CAM setup and availabilty.

Selection of Factory Premises Planning & Layout of Factory Interior Work of the Factory Selection of Machinery Manufacturing Process Selection of Workers Quality Control Jewellery Designing & CAD/CAM Invisible Setting

Particulars Gold 50grams Pure at 1540 per gram Making, Wastage, Crafting Charges at 5% of pure gold Ex-Factory Inland Transportation Clearing and Forwarding charges Port and Loading Charges

Rupees 77000

52 Rupees/ Dollar

65 Rupees/ Euro

3850
80850 500

100 100

F.O.B Price
M.O.Q - 10 Pieces

81550
815500

1568.269
15682.69

1254.615
12546.15

Projected Exports Income statement in rupee terms In million

Particulars Total Income

2009-10 102.18

2010-11 118.7

2011-12 149.4

2012-13 193.9

2013-14 237.22

Total Expenditure

87.33

93.9

108.2

117.5

133.9

Interest

4.2

6.7

11.6

19.2

23.2

Gross Profit

10.65

18.10

29.6

57.20

80.10

Depreciation

1.31

1.33

1.49

3.23

5.25

Income Tax

0.434

0.912

1.66

3.15

4.72

PAT

8.90

15.85

26.45

50.82

70.13

Foreign exchange Figures converted at current exchange rates

Handling of Foreign exchange inflows and the fluctuations/volatility in the exchange rates.
The payment terms are solely on the basis of Letter of Credit.

The company would in its growth stages utilize the external currency borrowing mode to minimize currency risks and foreign exchange issues.
The negotiating bank would conduct the entire process of the receipt of the remittance in the foreign exchange dollar/euro terms. The period of presenting and clearing of L/c would be 2 days after the successful transfer of documents to the exporters opening bank. The issues of foreign exchange would be dealt in by following a hedge policy of foreign exchange in the local markets.

The company would adapt the following foreign exchange management policy:

Due to the volatility and fluctuations in the foreign exchange markets, especially in the US Dollar. The importers from Nigeria and UAE would open an L/C in US Dollar terms, and the importers from Belgium would open an L/C in Euro terms and the pricing of the products would be done in the same way. The company would adopt a 45 day forward policy by entering into an agreement with the domestic bank to book the US dollar and EURO at a rate comfortable to us as concerned with the pricing of our products to the importer. The policy would be more to safeguard the interests of the company rather than speculating the movements in the markets.

The remittances arising out of exports would be maintained in EEFC account in order to fund the possibility of import of raw material in the future.

Particulars
Contribution from partners Domestic Operations External Currency Borrowing 1.Nigerian Naira loan from Diamond Commercial Bank, Lagos (Required for setting up stores in the growth phase) 2.Euro loan from Fortis Bank, Brussels for setting up a diamond polishing unit in rd Belgium in the 3 year of operations.

Amount
20,00,000 Rupees 30,00,000 Rupees

75,00,000 Naira (26,15,000 Rs)

3,00,000 Euro (2,00,00,000 Rs)

Particulars

Amount

Marketing, Export promotion and establishment expenses Procurement exports of raw material for

10,00,000 Rupees 40,00,000 Rupees

Use of External Currency Borrowing 1. Nigerian Naira to set up the retail outlets and franchises in the growth stage 2.Setting up a diamond polishing unit in Belgium in the 3rd year of operations.

75,00,000 Naira (26,15,000 Rs) 3,00,000 Euro (2,00,00,000 Rs)

Country specific Problems and Issues to be faced and Nigeria possible solutions
Scams/Fraudulent business activities emanating from Benin

The High Commission of India in Nigeria (accredited to Benin ) has informed at late that there have been several complaints/enquiries from companies overseas regarding cases of forgery, cheating perpetuated by dummy companies allegedly based in Republic of Benin (Cotonou ). The Company would verify the credentials of Nigerian importers by contacting The Department of International Economic and Trade Relations of Republic of Benin adopting the measures to safeguard itself and also utilize the opportunity of dealing with Nigerian Importers The Indian Government is promoting the gems and jewellery sector by inviting delegates from various developing countries. A delegation from Nigeria and other African countries would be invited to visit the various hubs of jewellery Industry including cities like Mumbai, Surat, Chennai, Kolkata etc. The company would promote its products and identify clientele in such exposures and also win their trust by showcasing the wide variety of products and the excellent manufacturing facility.