Fairchild Water Technologies, Inc. Essay

I. INTRODUCTIONFairchild Water Technologies was founded in 1980 by Eugene Fairchild. The accomp eachs first harvest-tide was a desalinator utilise by mobile floor parks in Florida to remove salt from well pissing supplied to residents. As the desalinator became a huge success, the comp either expanded into the coastal regions adjacent to the companys headqu trickers in Tampa, Florida, and then to vacate argonas in the s protrudehwestern United States. By 2002, they had expanded their carrefour lines to involve desalinators, particle filters, ozonators, ion exchange rosins, and purifiers. Their reapings were generally priced higher than their competitors, but regarded to be lord in terms of performance and quality.In the year 2000, Fairchild Water Technologies was anticipate to begin revenues of $400 zillion, and an estimated turn a profit of $50 million. For the past atomic public figure 23 years, they post a 12 per centum growth in their annual sales. In 1985, th e company managed to start its exports to Mexico, Belize, and afterwards to weewee bottlers in Ger some(prenominal). By 1990, payable to the rapid growth in export sales, the company established its external Division. gross revenue in the International Division grew to $140 million in 2000. About 50 portion of International sales came from Latin and mho America, $30 million from Europe, and $40 million from South Asia and Australia.In 1995, the companys Frankfurt, Germany office stressed the need to develop and martplaceplace products that behind consumer households. The first idea was to develop a home urine filter. By late 1995, the company was able to develop dickens models that were designed in the U.S. and introduced in Germany, Poland, Hungary, Romania, the Czech Re world, and Slovakia. The products were greatly successful. But, the quality of water in evolution countries required a purifier instead of filters. Thus, in late 1999, company executives initiated the suppuration of a water purifier which was given the brand name entertain.The Delight purifier was able to remove reasonable levels of sediments, organic and inorganic chemicals, microbials, cysts, and unpleasant tastes and odors. sound levels be those described by several World Health brass section (WHO) reports as appropriate for potable waters. Also, engineers had repeatedly assured Mr. Chatterjee, the companys international liaison, that wear downatory testing showed no product failure subsequently 5,000 hours of continuous use. Chatterjee used his expertise in the Indian mart to enjoin engineers into pursuing a point of use design instead of a point of entry design.More everyplace, Chatterjee provided engineers with roughly recommendations such as the aptitude to cater a picayune battery that will act a prop 1nt source in case of index number failure. Additional recommendations included the ability to add fluoride, vitamins, and flavors, flow rates, dimensions, and storage capacity. Through consumer surveys, Chatterjee was able to determine a grocery store preference for the countertop design over the wall- mount design.II foodstuff ISSUESFairchild Water Technologies is seeking to enter the Indian Market in the water purifier product category. They have had a successful track record in designing and tradeing home purifiers in European and South American Markets. In this case, they argon trying to enter the commercialize in a exploitation securities industry that is in the process Liberalization. Accordingly, they are facing triune marketing issues that are critical for the success or failure of their product. The controversy of marketing issues includes the following1. Select to forgo any entry into the Indian market2. write in code the market under a licensing agreement3. Enter the market by utilizing a articulation venture and a skimming pricing manner4. Enter the market by utilizing a joint venture and a shrewdness pricing met hodIn growth to these primary marketing issues, Fairchild Water Technologies had to decide whether they want to heading urban areas or pastoral areas where the quality of water is poorer and where 80% of the population lives. It was immovable earlier that the company would forgo the boorish opport building blocky for now, due to the deprivation of a much compulsory infrastructure. Also, the company established an preliminary to require in India, where labor is much cheaper when compared to the United States. However, the company would import fewer comp starnts that are critical for operations. Finally, it was recommended that Fairchild should seek an Indian henchman that is big abounding to have a diffusion and manufacturing infrastructure, but non too gravid where it commands the direction of the product line.III. SITUATION ANALYSIS TASKSA. Buyer Behavior some(prenominal) Indians emphasize the need for and improved water quality. Newspapers, consumer advocates, gover nment officials, and the general public are aware of the poor quality of Indian water. The majority of Indians have no choice but to consumer the water that is accessible to them. But, better educated, wealthier, and health-conscious Indians took some measures to improve the quality of water that is consumed by their families. It is estimated the number of such households is or so 40 million.Health-conscious households are similar to middle- and upper-middle class households in the U.S. and Europe. They cherish doodad and product variety, and consider consumption of material goods as a heart and soul to higher quality of life. Moreover, Chatterjees research suggests that product performance was essential consumers. Some product characteristics that were cited include the ability to remove sediments, bacteria and viruses, capacity, safety, and blame print space.Purchase price was important for market segments that boil water, boiled and filters, or only filtered their water. T he third well-nigh important factor was the easement of installation and service, along with style and appearance. The least important factor was guarantee and the availability of financing. Finally, there was an agreement among all segments that the purifier should have a imprimatur between 18 and 24 months, and to perform between 5 and 10 years without any issues.B Customer SegmentationThe Indian market could be segmented by consumers ability and willingness to use a water refining device. Research shows that there are 40 million households that include middle- and upper middle class families, that value quality and a European / American lifestyle. In addition there is an untapped market segment in the rural areas that have a need for water purifiers, but are either isolated or do not have the means to buy a water purifier.C competitive MarketMainly, Fairchild Water Technologies will be competing for market share with companies that bring to pass and manage water purifiers . But, there is also a need to organise competitive methods that are currently being used by health-conscious Indian consumers. For instance, fifty percent of the target market practices a traditional method to purify water. A maid, cook, or family member would boil dickens to five lamberts of water, allow it to cool, and transfer the bottles to a refrigerator.Boiling water is seen as inexpensive, stiff against dangerous bacteria, and ingrained in peoples traditions. In fact, many consumers consider it to be more than effective than any separate product on the market. However, boiling affected the tastiness of water and made it directly. Also, boiling was considered to be burdensome, time-consuming, and inefficacious in removing physical residues and unpleasant odors. decennary percent of this target market took an extra step and boiled water through atomic number 48 filters, despite knowing that recontamination could occur.At the same time, somewhat 40 percent of the t arget market used a mechanistic device to improve the quality of water. Half of this pigeonholing used candle filters because of their low price and ease of use. The candle filter is made of two containers that sit on top of each other the top container has one or more porous ceramic cylinders known as candles. taper filters stored between 15 and 25 liters of water and cost between Rs. 350 for small plasticmodels to Rs. 1,100 for a large stain little-steel model. However, candle filter were slow, required cleaning, and needed candle replacement at least once per year.Half of consumers that field on improving the quality of their water use water purifiers, which are considered to be more sophisticated than traditional candle filters. Water purifiers utilize three processing stages. First, sediments are removed, followed by odors and subterfuges, and finally bacteria and viruses. eyepatch Fairchilds engineers were skeptical more or less the efficiency of these products, they ag reed that they are more helpful than candle filters. In fact, candle filters were proven to be ineffective in removing bacteria and viruses. Water purifiers were made from stainless steel and change anywhere between Rs. 2,000 and Rs. 7,000. Ten percent of the target market did not use any of these procedures and thought that their water quality was acceptable. Overall, Catterjee believed that 90 percent of the target market could be induced to change their current purification method.In addition to traditional water purification methods, it was determined that nigh 100 companies competed for share in the Indian home water filters and purifiers market. The near established water purifier was Eureka Forbes, which was established in 1982 as a joint venture between a Swedish company and an Indian company. The company marketed water purifiers, vacuum cleaners, mixers, and grinders. Aquaguard, the brand name used for purifiers, was extremely established and many consumers mistakenly u sed it to refer to the entire product category. Aquaguard was the market leader, but its manufacturing company had introduced a new product called Puresip that used polyiodide resin instead of ultraviolet rays to kill bacteria and viruses, which meant that water, could be stored for later use. Also, Puresip did not require any electricity to operate, but it was sold in small home appliance stores instead of a direct sales force. Aquaguard sold for approximately Rs. 5,500, speckle Puresip sold for 2,000. Puresip sales were growing at a much disruptiveer rate than Aquaguard.Aquaguard was mounted on a kitchen wall, and required plumbing and a twometer long power source. The unit would stop functioning if power supply dropped to 190 volts or lower. The flow rate was considered to be slow at one liter per minute, and had enough carbon to last only for one week. Aquaguard targeted households that make more than Rs. 70,000 per year, and spent 11% of its sales revenues (Rs. 120 million) o n sales activities about Rs. 100 million were spent on sales commissions, and about Rs. 1 million was spent on advertising. Eureka Forbes was well established, had a extremely motivated and well managed sales force. However, they had limited reach in rural areas that represents 80% of the countrys population.Another direct competitor is Ion alternate and its home water purifiers with the brand name ZERO-B (Zero-Bacteria). In 1985, the company became a wholly owned Indian company, and it serves customers in a diverse group of industries including thermal power stations, fertilizers, refineries, textiles, automobiles, and home water purifiers. Zero-B used a halogenated resin technology that was able to remove impurities, eliminated odors and tastes with carbon, and killed bacteria using iodine. The unit stored 20 liters of water for eight hours without the risk of recontamination, and sold for Rs. 2,000, but required a yearly replacement of halogenated resin at Rs. 200. Chatterjee e stimated the Zero-B had about 7% market share, and lacked consumer awareness, had limited distribution, and limited advertising. There were rumors that Zero-B intended to implement door-to-door sales strategy with an expected marketing expenditure of Rs. 3 million.The third and most recent competitor to enter the Indian market was Singer, a hyponym of the Singer Company located in the United States. The company provides a variety of products to the Indian market such as sewing machines, irons, mixers, toasters, and color televisions. The company had estimated sales of about Rs. 900 million.The Singer Company manufactured a home purifier called Aquarius. The product sold for Rs. 4,000, required no electricity, had a sensation countertop model, had a flow rate of 3.8 liters per minute, and a life span of 4 to 6 years. The product looked impressive, according to Chatterjee, and wasdescribed as state of the art by a trade article. The resin used by Aquarius was essential by NASA and was proven 100 percent effective against bacteria and viruses. Aquarius had hoped to interchange 40,000 units over the next two years. Singers distribution transmit were superior to competitors and included 210 company owned showrooms located in major urban areas around the country. The product was also sold by 3,000 breakaway dealers, who were supplied by 70 distributors. Distributors earned a margin of 12 percent of the retail price, while dealers earned a margin of 5 percent. on with many other products, Zero-B and singer accounted for 60,000 units in sales for the year 2000, while the remaining 190,000 units were sold by Aquarius and Puresip.E SWOT1 Strengthsa. proved track record in exploring and entering new marketsb. Superior product qualityc. Market knowledge and ability to produce innovative products2. Weaknessesa. need of knowledge about the Indian marketb. Large segments in the market live in remote areasc. Variable needs in the market, depending on the city or metro politan aread. Lack of established manufacturing and distribution capabilities3. Opportunitiesa. Return on assets in India averages 18% compared to 11% in the U.S. b. little wages, and central location to wealthier South Asian Countries c. Liberalization trends in India and market developmentd. There is no significant dominance by one brand4. Threatsa. Legal environment and expensive litigationb. Large number of competitorsc. Some established brands with extensive knowledge about the Indian marketIV. STRATEGYA. dodge recommendation & decisiona. Select to forgo any entry into the Indian marketADVANTAGESAvoid the risk of entering the market in a developing country, where there is fluid some skepticism about the extent of economic liberalization. Avoid competing with over 100 products that are currently available in India. Expand market strawman in countries such as Mexico, Germany, Poland, etc.DISADVANTAGESForgo the opportunity to sell products for over 40 million households.Lose the opportunity to have large profit marginsLose the opportunity to manufacture in a country where labor is cheapLimited market presence in South easterly Asia, where the majority of the worlds population lives. Increase market presence and brand awareness.b Enter the Indian market under a licensing agreementADVANTAGESLow capital investment is requiredHigher strike on investment and lower amount of riskHuge market speciality and opportunities to expand in rural areasDISADVANTAGESLimited control of the manufacturing and distribution processForgo the potential of large gains in exchange of a royalty feeLimited exposure to the selling process in a developing marketLimited ability to manufacture excess product linesc Enter the Indian market through a joint venture and by utilizing a skimming pricing approachADVANTAGESLarger potential gains and a 50/50 split in profitsAbility to influence manufacturing and distribution strategies Ability to expand into rural areas and increase manufa cturing capacity Develop a market knowledge for growing and developing economiesDISADVANTAGESRequires a large investmentHigher prices than competitorsUncertainty of markets in developing countriesHigh competitiond Enter the Indian market through a joint venture and by utilizing a penetration pricing approachADVANTAGESProfits are split between the two companiesAbility to control manufacturing and distributionDeveloping market with large potentialHigher margins and low manufacturing costsGain market exposure and law of proximity to emerging economiesDISADVANTAGESRequires a large capital investmentUncertainty of developing marketsLower pricing strategy and lower contribution margin per unit sold Ability to find the right company to partner withRecommended throw of Action Fairchild Water Technologies should pursue a licensing agreement with an Indian company.B Goals and Objectivesa. Pursue a licensing agreement with a partner that is able to sell at least 75,000 per year b. Increase s ales by 10 % on an annual basisC Target MarketThe target markets for Fairchild Water Technologies are the 40 million households in India, which cherish a comfortable, convenient, and healthy lifestyle, and are similar in many aspects to middle- and upper-middle class households in the U.S. and Europe. Also, Fairfield Water Technologies should target consumers that move from lower to middle class, as the Indian market develops and continues to grow.D Marketing Mixa. Product / Price StrategyFairchild Water Technologies should manufacture a portable purifier that offers Indian consumers the convenience and effectiveness of a quality purifier. The purifier should have a backup battery, a selling price of Rs. 5,000, and a proven ability to kill bacteria/viruses, fast flow rate, and allow for the ability of storing water without the risk of contamination.b. Distribution and SalesBy entering into a licensing agreement, Fairchild Water Technologies decreases the amount of risk, but it has l ess control over the distribution and sales of its product. Fairchild could seek a partner that is willing and have the capability to sell 75,000 units on an annual basis, with a 10% increase in the units sold for every year. This approach would still guarantee Fairchild Water Technologies some sizable profits.c. Advertising and PromotionBy selecting a licensing strategy, Fairchild Water Technologies would not commit itself into having an advertising budget. On the other hand, the licensee would be obliged to advertise the product in order to fill the minimum quota for annual sales. This allows Fairchild to have an average profit of 300 Rs without committing any resources into salaries or advertising budget.E Control PlanThe licensing agreement would embroider a language that guarantees Fairchild Water Technologies annual sales of 75,000 units, with a 10% increase in units sold thereafter. The agreement should have an opt out clause for both parties after three years, while holdin g the licensee to violate on the technology and patent if they choose to opt out of the agreement. Fairchild must monitor sales on a monthly basis, and conduct meetings in order to ensure that sales in the Indian market are heading in the right direction.