We, the students of International Business have been assigned the task of developing an entry strategy for Britannia Industries Limited (BIL) to launch its trade in Argentina.

University Degree Business and Administrative studies

International Business - BIL’s entry into Argentina

Introduction

In order to expand on the understanding of the standards to be followed in order for a firm to venture into a new geographic market, we, the students of International Business have been assigned the task of developing an entry strategy for Britannia Industries Limited (BIL) to launch its trade in Argentina.

Executive Summary

With an auspicious target by the top management to make every third Indian a consumer (Makeover of Britannia, 2001), Britannia Industries Limited (BIL) has captured the ‘sweetness’ of the market, well surpassing its nearest competitors, Parley and ITC Foods by farthest margins.

Considering its accomplishment in the Indian context; recent buy-out of the Strategic Food International Company LLC and Al Sallan Food Industries Company SAOG; discontinuing its tainted partnership with Groupe Danone (Das Sharama Punyabrata, Personal Communication, 2009) and the establishment of its manufacturing capacity in Sri Lanka; it is evident that Britannia is on an expansion spree.

In order to capitalize on the opportunity, we propose a highly profitable Argentine market for Britannia to establish its business in the form of a Joint Venture with Arcor Group that shares a similar stature with Britannia’s portfolio in terms of repute, market share, product line and policy.

Argentina holds a profitable market for BIL, not only to increase revenue, but also to tap the market, otherwise unexplored by the firm. Post the severe slump in 2002, the sector is prospering at a y-o-y rate of 15.8% (Ebscohost, 2009). In 2007, the industry recorded a growth of 14.7% against 2006, thus manufacturing 3, 63, 234 tons of biscuits and cookies. In the aforementioned period, consumption rose by 116.8%.

Hence, the sector is experiencing an enlargement of the pie, creating a winning situation.

The report is a comprehensive study of the country’s political, economical, socio-cultural, technological scenario. Besides, it also does an analysis of the market situation conducive to set up the business; the particular strategy to enter the market; the marketing strategies undertaken; human resource, financial and organizational structure.

Company Overview

Starting in the year 1892 (Makeover of Britannia, 2001) as a small manufacturing unit in Central Calcutta with a capital investment of Rs. 295, Britannia Industries Limited (BIL) has a rich legacy of 117 years to become the present confectioner behemoth in the segment with a command of 30% share of the biscuit market against the other two major players, the contemporary Parle at 30% and the relatively new entrant ITC at a meagre 10% (Go INDIA 2009), constituting approximately 75% of the total segment. However, the firm earned its Public Limited recognition only on 21st March, 1918 (Britannia Background n.d.)

The present top brass constitutes nine members, with Mr. Nusli Neville Wadia and Ms. Vinita Bali serving as the Chairman and Managing Director respectively (Board of Directors, 2009). The firm, after having changed five owners (Makeover of Britannia, 2001) is currently owned by the Wadia Group (Das Sharma, Personal Communication, 2009). Britannia aims to entice its consumers through an undeniable emotional appeal instead of relying on rational tactics (Go INDIA, 2009).

Brands and Products

The seven iconic brands of BIL are Marie, Milk Bikis, Good Day, 50:50, Tiger, Nutrichoice and Treat, essentially in that order of origin (Parvataneni Anil, Personal Communication, 2009).

Indian Biscuit Market and Britannia

AC Nielson study in 2007 shows (Go INDIA, 2009) India at the number three spot, only after US and China, attracting revenue of Rs. 75 billion and constituting 13% of the total packed food industry.

Price remains one of the popular forms of segmenting in the biscuit market (Go INDIA,2009). Hence in accordance there are three categories:

Mass (34%)
Popular (37%)
Premium (29%) [Refer Appendix 1]

Urban market constitutes 60% of the sale. However Rural market is unpredictable with a penetration of 55% in Mass to 22% sale in the Premium segment.

The BCR Category

Besides biscuits, the other two categories constitute of dairy and bread and cake and rusk (BCR) and churns 10% of the total revenue. [Refer Appendix 2]

Besides, few other categories include dairy whitener (1997), butter (1998), flavoured milk (1999) and ghee (2000) (Makeover of Britannia, 2001).

Financials

By the virtue of the significant strategic alliance between the Wadia’s and Danone in 1993, BIL did not experience any major setbacks (Parvataneni Anil, Personal Communication, 2009). The firm experienced a substantial growth of 17.5% from 27.5% in 2006 – 2007 to 45% in 2007 – 2008. The year – to – date growth, until 2009 is 24% (Go INDIA, 2009). Revenue by the end of the financial year 2008 capped at INR 26.2 billion and profit at INR 1.2 billion. Growth at the end of July – August 2008 surpassed 64%, an up by 19% (Super Brands, 2009). Around 7% of the firm’s revenue is invested on advertising (Go INDIA, 2009).

Lovelock & Lewes is the auditing firm for Britannia and the company is listed in NSE, BSE, and Bloomberg. The face value of the shares are pegged at Rs. 10 each (Britannia, Background, n.d).

Strategy

Marketing

Britannia has a conservative approach. Instead of creating new ones, the firm leverages on its matured brands and incisive advertising as means to flourish (Business Week, 2009). It has fewer categories and focuses on line extension. Britannia has significant presence along all the price bandwidth is considered among the top notch in all the segments. Accordingly, it targets the market and has successfully positioned its seven brands to cater to each.

The four variants under Tiger brand tackles the severe competition in the high – volume low – price segment. [Refer Appendix 3]

Whilst Marie, 50:50 and Milk Bikis take care of the Popular segment for Britannia; Good Day, Nutrichoice and Treat caters to the Premium segment (Super Brands, 2009); each generating one third of the revenue. [Refer Appendix 4]

Britannia has introduced Tiger Iron Zor, Nutrichoice 5 Grain in consistent with the growing demand of the health conscious consumers, and is to be credited for piloting the ‘no trans fat’ segment (Go INDIA, 2009).

Having strengthened the health – based nutritional strategy, Britannia now intends to maximize its capacity by leveraging on both the current one and its initial indulgence factor (Go INDIA,2009). Hence, currently the brand has two distinctive divisions; Health and Wellness and Delight and Lifestyle.

Packaging also constitutes a smart move to attract revenue in the recent market (Ebscohost, 2009).

The crux of the strategy remains to attract every third Indian to consume whatever they wish to, but only Britannia (Makeover of Britannia, 2001).

Branding

Image makeover of BIL was done in 1997 by Paris based Shining Strategic Design (Parvataneni Anil, Personal Communictaion, 2009). With study showing BIL to be identical with trust, quality, familiarity and strength, the new corporate personality has three colours:

Red – vigour and energy
White – purity
Green – freshness and nutrition [Refer Appendix 5]

In order to tap the market, Britannia even re – christened few of its brands.

In order to consolidate its prominent distinction into Health and Wellness and Delight and Lifestyle categories, Britannia has repositioned itself by modifying its tagline from ‘Eat Health Think Better’ to ‘Zindagi mein Life’. (Business week, 2009)

Competitors

The major competitors include (Go INDIA, 2009):

Mass – ITC
Popular – Nil
Premium – Beta Group (Europe based), Unibic Biscuits (Australian based)

Operation, Packaging and Distribution

Production facilities are located at Calcutta, Delhi and Rudrapur, contributing 25% of the production (Go INDIA, 2009). Outsourcing is done from 35 units. Offices are located in Bangalore, Mumbai and Chennai (Reach Us, 2009). To maximize revenue in the current recessionary period, Britannia has resorted to technology (Go INDIA, 2009).

Britannia has revolutionalized with introduction of Nano packs containing between a range of 2 and 10 biscuits per pack and priced at Rs. 2, Rs. 3, Rs. 4 and Rs. 5 (Go INDIA, 2009), aimed at both the Urban and Rural segment for convenience and budget constraints respectively.

Britannia has excellent Urban distribution though the same in the Rural segment needs an overhaul (Business week, 2009).

Overseas Ventures

Britannia has undergone a Joint Venture with Khimji Ramdas Group of the Middle East in 2007 and has recently bought out Strategic Food International Co. LLC and Al Sallan Food Industries Co SAOG of Dubai and Oman respectively (Das Sharma Punyavrata, n.d.). In 2008, BIL established its manufacturing facility in Sri Lanka.

Accolades

The company has been inundated with various domestic and international recognition and accolades. [Refer Appendix 6]

Promotional Activities

Britannia followed an array of successful campaigns that ramped up its revenue. Some of these are:

Various CSR approaches recognized by international organizations (Go INDIA,2009)

‘Britannia Khao World Cup Jao’ during 1999 and 2003 World Cup Tournament (Board of Directors, 2009)
Lagaan match in 2001 (Board of Directors, 2009)

CSR Activities

Britannia provides Tiger biscuits as mid day meal to school children by joining hands with Global Alliance for Improved Nutrition (GAIN) and Naandi Foundation. The initiative is applauded by World Bank Institute (Go INDIA, 2009).

Country Analysis

Political

Officially called the Argentine Republic (CIA, 2009), Argentina is a Republican government that earned its independence on 9 July, 1816 from Spain. The final Constitution, after successive revision was laid on 1 May, 1853 and again revised in 1994 (U.S State of Govt, 2008). The branches constitute Executive, Legislative, Judicial and Administrative. There are two predominant and several provincial and national political parties. Argentina follows the universal suffrage and is considered mandatory. Buenos Aires, the capital, is the only autonomous city. However, The Plaza de Mayo and Congreso areas in the capital are often subjected to stern political unrest and demonstrations causing halt to public life (Department of foreign affairs and trade, 2008)

Election in Argentina occurs every four years. The last election held on 28 October, 2007 (CIA, 2008) was significantly important. The popular vote went in favour of Cristina Fernández De Kirchner, the first lady President of Argentina and wife of the former president Nestor Kirchner (U.S State of Govt, 2008). By the virtue of being elected for the first time and as allowed by the Constitution, Ms. Kirchner is eligible for a second term if re - elected in 2011. Popularly known as, ‘Christina’, Ms. Kirchner resumed office on 10 December, 2007, defeating Elisa Carrió, her closest competitor of the ...

This is a preview of the whole essay

The political history of Argentina unveils certain interesting facts. Despite having lost the election on 27 April, 2003 against the incumbent Carlos Menem (PJ), (U.S State of Govt, 2008), the then Governor of Santa Cruz, Nestor Kirchner was sworn into President ship after a run-off election and an overpowering public hold on 25 May, 2003. [Refer Appendix 7]

After assuming her capacity, Ms. Kirchner is likely to work on foreign policy, including sustaining relationship with Venezuela and Brazil and also ramp up the same with the Office in Washington. Bestowed with a substantial political lineage (BBC News, 2009), the main task ahead of Ms. Kirchner is to deal with galloping inflation in Argentina.

Notwithstanding the otherwise stable government, the pitfall comes in the form of the political pressure groups present in Argentina. [Refer Appendix 8]

Argentina is an active part of 65 (CIA ,2009) international organizations. [Refer Appendix 9]

Argentina encourages Australian / Argentine dual nationalities, (Department of foreign affairs and trade, 2008) albeit only for 60 days beyond which one needs to depart.

Entry and exit conditions (Department of foreign affairs and trade, 2008) like customs, quarantine regulations and currency is in a state of flux and constitutes a series of legal procedures. Local laws in Argentina are stringent and poses severe threat to those violating it and can be subjected to imprisonment between six months to four years (IMF, 2008) if found guilty to have committed offence against national flag and sexual harassment.

The United States Embassy (IMF, 2008) office in Argentina provides aid in establishing a congenial relationship between the two nations and its people.

According to the 2005 study of Freedom in the World, Argentina is identified as free in Civil Liberties and Political Rights with an index of 2 (Library of congress, 2008) Reflecting a score of -0.33 in the continuum between -2.5 – 2.5 in the government’s effectiveness (Library of congress, 2008), Argentina ranks low and displays inefficiency.

Economical

Considered one of the world’s richest economy a century back, Argentina is currently plagued by severe issues like consistent fiscal and current account deficits, mounting external debt, recurring economic crisis, capital flight and galloping inflation (CIA, 2008). What accelerated the already worst condition were mounting public and external indebtedness, a brutal depression that marred the country’s culture, economy and politics in 2001. [Refer appendix 10]

However, the next five years saw the real GDP grow at 9% annually, lending the credit to factors like revised monetary and fiscal policies, debt restructure and reduced debt burden, preceding inactive industrial capacity and others. President Nestor Kirchner, though considered creditworthy, could do very less to the untameable inflation (CIA, 2008). The current real GDP growth status is 7.1% (est. 2008) while the Purchasing Power parity is $575.6 billion (est. 2008).

Ranked 36 among 177 countries in the Human Development Index Rank, 1% of the population struggles with $1 per day and 14.3% lives below the poverty line (Ebscohost, 2009).

Services sector contribute a considerable 56.7% to the economy followed by industries at 34.1% and agriculture 9.2% (est. 2008). Of the total 16.27 million urban workforce (est. 2008), 76% is involved in services, followed by industries at 23% and agriculture at a meagre 1%.

Though not substantial, yet the Argentine government enjoys a revenue of $86.3 billion (est. 2008).Unemployment rate is 7.8% (September, 2008) and Public Debt is 51%.

The export partners are Brazil, China, US and Chile (NTI, 2008). The major exported commodities are:

Petroleum and Gas
Soyabean
Corn

The import partners are Brazil, US, China and Germany. The major imported commodities are:

Petroleum and Natural Gas
Organic Chemicals
Plastics

The exchange rate, as per December 2007, finally plummeted at Ps 3 = $1 (Ebscohost, 2009) [Refer Appendix 11]

Socio - Culture

‘Two to Tango’ – the famous dance form is an Argentine souvenir. Soccer is believed to be their second religion. However, lesser known, Argentines also excel in Polo. The penchant is expressed in ‘gaucho’, the sole and independent ranch – hand cowboy of the South Americas. (BBC News, 2009)

The country is rich in festive celebrations throughout the year. Every province established in Argentina celebrates many national festivals in their own unique traditions. (Govt. of Argentina)

Argentines are again also very fond of food and traditional beverages. They follow their own typical Creole custom of cooking various dishes and traditional sweets pleasantly blended of available products of European dishes. There are strict health and food standards. And, in general it is observed that most of the buyers in Argentina prefer buying the goods and commodities which are meeting the US standards and certificates. (WTO, n.d) In terms of Medical care, the country follows reasonable standards, but most of the foreign medical brands are difficult to be found. (Dept. of Foreign Affairs and Trade, 2009)

The country holds a population of around 40.3 million (July 2007est.) having an annual population growth rate of 1.05% which is found to be one of the lowest among rest of the Latin American countries. There is a huge influx of immigrants from the neighbouring countries like Paraguay and Bolivia. The distribution of various ethnic groups is in such a way that Europeans occupy 97% with many of them possessing the Spanish and Italian descent, whereas Mestizo, Amerindian, or other immigrants groups constitutes just the 3%.The major mass of the population includes catholic and Jewish, which is found to be the highest in whole of Latin America. Most of the residents are located in major part of the cities or towns from which one third of them is inhabited in Buenos Aires area. (Bureau of Western Hemisphere Affairs, Dec. 2008) Argentines mainly speak Spanish, which is the official language of the Argentine Republic. The other traditional languages established in the country are divided on the basis of the regional distribution and occupancy of various immigrants from the neighboring countries. (Govt. of Argentina, n.d.)

Technology

Argentina entails several industry types like food and beverages, mining, information and communication technology, oil refining, machinery and equipment, textiles, chemicals and petrochemicals, all contributing to around 22.5% of countries GDP growth. (Bureau of Western Hemisphere Affairs, Dec. 2008) The country embarks tremendous growth in terms of authentic improvement and progression towards software and IT services. It is estimated that by the end of 2011, Argentina would leverage its account in IT from just US$300 to US$3000$ through exports, generating a huge employment for around 70000 workers. The main factor behind such a high forecast is due to the fact that Argentina is the only country in whole of the Latin America which has the largest population of Internet users growing at 40 percent annual rate. And there are lots of new investments happening in the country in the industries (e.g. tourism, retail, construction, financial services) with rising junction and convolution of technologies.

This is the only country in South America to exercise the nuclear energy having two operational nuclear plants with many future projects in progress. The country makes huge business in terms of exports selling research reactors to countries like Egypt, Jordon, Libya, Egypt and CNEA (National Atomic Energy Commission). The country is a sole member of organizations like BWC (Biological and Toxin weapon convention) and MITC (Missile Technology Control Regime). (NTI, 2009)

The country has created a strong legal framework to support and initiate science, technology and innovation. There is separate cabinet for science & technology GACTEC established in 1996, for preparing and renewing the national plan for ST&I and working out the annual budget for various research activities subsidized by the federal government. The country has also launched various promoting plans in order to boost the public and private sector SME’s and R&D activities. Technological advisors program under FONTOR is one such example, which intends to eradicated and isolate various limitation and obstacles faced by small firms to innovate and expand strategically. (World Bank, 2005)

Market Analysis

Food & Beverage Market in Argentina

The Argentine Food and Beverage market is promising and is gifted with wealthy human and natural resources. An illustration is provided below:

The market is a healthy mix of competition between recognized and local start – ups, the later accounting to almost 59 corporations. Leveraging on the traditional taste, both these firms have been able to penetrate deep successfully. The perfect combination of global and local giants like Néstle, Cargill, Arcor and Aceitera, have only added to the richness. (Ebscohost, 2009)

The Argentine food and beverages sector has earned the global applause of being innovative and quality conscious. The segment has grown consistently beyond 10% since 2002 due to domestic and foreign investments. [Refer Appendix 12]

Why Britannia in Argentina?

Britannia is India’s leading brand in the confectionery segment (NTI, 2009) and exports to Africa, Middle East, and South East Asia, only after USA. The firm has also set up its own production in Sri Lanka with an aim to provide ‘healthy snacking’ (Britannia Overseas, 2009).

However, Britannia has not yet ventured in to the equally prospective South America. A 33.9% market is dominated by sweet biscuits, whilst 44.1% is a mix of salty and sweet (Taste and Preference, 2008).

ProsperAr ( ProsperAr, 2009) provides nine reasons to demonstrate the conduciveness of the market. [Refer Appendix 13]

Why Arcor Group?

Arcor Group is the Confectioner giant in the Argentine market. Since its inception in 1951, the firm’s constant pursuit towards, quality, innovation is incredible and produces 100 (Food and Beverage Industry, 2009) new products every year. Arcor has 30 production facilities in Argentina (Distribution, 2009) with 13 distribution units that cater to the host market alone besides Brazil, Chile, Mexico and Peru.

With an impressive 1,500 variants, and total sales over US$ 1.85 billion and an export of US$310 million, the firm offers 20, 000 employments and has a presence in 120 countries across the globe with offices in fourteen cities across all the five continents (Distribution, 2009).

Arcor is in partnership with Mundo Dolce and Danone, Benvenuto among others.

Arcor participates in various renowned International fairs like, ABAD, EXPOAGAS, and ISM in Latin America and Europe (International Fair, 2009).

The compatability between Arcor and Britannia

Britnnia and Arcor share quite a number of similarities. Few of them are listed below:

Number one brand in the respective home countries in the Confectionery segment
Both the companies make generous use of high end technology to minimize cost and optimize productivity
Synonymous with trust, quality, health and family values

Aid from the Government

Britannia may also expect aid from National Investment Development Agency called ProsperAr (ProspeAr, 2009).

Based on various industries and geographical locations, ProsperAr provide well – timed and pertinent information
Spot possible strategic innovation and investment

Growing potential of Nutrifood segment

Argentine market displays a huge potential and is noteworthy considering the supply in the segment of growing demand for nutrifood (Food and Beverage Industry in Argentina, 2009).

Plan Recommendation

Entry Strategy

Joint Venture with Arcor Group seems to be the most viable option for Britannia to enter in to the Argentine market.

Reasons for Joint Venture:

Britannia displays a consistent trend in undergoing a Joint Venture in all its overseas ventures, be it Strategic Food International Company LLC in Saudi Arabia, or Al Sallan Food Industries Company SAOG in Oman, or the Fonterra Group of New Zealand. Joint Venture strategy is adopted by Britannia as a Real Option in the form of Wait and See. Going by the standard norm, the Joint Venture will be in the profit sharing ratio of 60:40 (Arcor:Britannia). However, Britannia will mainly be responsible for transferring the recipe and technological expertise to Arcor.

It is to be noted that all the above mentioned corporations are considered to be domestic leaders in their respective categories. Significantly, BIL has bought all of them in a short span of time (Das Sharma Punyabrata, Personal Communication, 2009.).

The particular entry strategy hence exhibits BIL’s strength and it is assumed that the firm will eventually follow similar path in acquiring Arcor.

The Joint Venture is a specific purpose vehicle for an initial period of 2 years subject to extention post review at the end of 2 years. There is an in-built clause that Britannia can acquire the business by buying the shares of Arcor at a mutually agreed price at any time.

[A probable sample copy of the Treaty is attached herewith] [Refer Appendix 14]

Britannia intends to manufacture the brands Tiger, Good Day, Marie Gold, Treat Fruit and 50:50 in Argentina with Arcor Group

Segmentation:

Demographic Segmentation

According to the latest report for the year 2009 by CIA, the estimated population of Argentina is around 40,913,584. The population is segmented on the basis of following variables: (CIA, 2009)

Age:

0 - 14 years : 25.6% (male 5,369,477/female 5,122,260)

15 - 64 years : 63.5% (male 12,961,725/female 13,029,265)

65 years and over : 10.8% (male 1,819,057/female 2,611,800) (2009 EST.)

So our major target market will be among the people between the age group of (0 - 14) & (15 - 64).

Income:

Urban population : 92% of total population (2008)

Rate of urbanization : 1.2% rate of change annually (2005-10 EST.)

We find that almost 92% of the Argentine population is residing in the urban areas comprising mainly of the upper and middle class people. This shows that a significant part of our target market lies in these areas.

Geographic Segmentation

The country is sharing the border with five other countries and enjoys the excellent connectivity through the ocean coastline on the Atlantic. The major portion of the population lies in Buenos Aires which is the capital city of Argentina. (Government of Argentina, 2008)

Targeting:

Tiger: Mass category

Good Day: Both Mass and Premium category

Marie Gold: Both Mass and Premium category

Treat Fruit: Mass category

50:50: Majorly at the Mass and Premium segment

Positioning:

All the five brands will be positioned as ‘biscuits’ in Arcor’s portfolio which is devoid of one. The fundamental difference between the two will incur in a unique positioning.

Tiger: Health

Good Day: Health and Delight

Marie Gold: Healthy breakfast biscuit

Treat Fruit: Absolute indulgence

50:50: Anytime snack

Marketing Strategy:

Product

Tiger: Known for its high glucose content, the product will be widely accepted by the mass.

Good Day: With a rich resource and Argentines’ penchant for cashew, the product will be launched in Argentina, however, with required modification.

Marie Gold: Health is a major issue with the Argentine’s. Marie Gold being known as a product infused with healthy ingredients is presumed to be a hit in the Argentine market.

Treat Fruit: Delicious with different flavors will act as the perfect indulgence for the Argentine foodie.

Keeping in mind the Argentine liking, the product needs to be modified manufactured in Blueberry, Strawberry and Cranberry variants, ideally in that order of preference.

50-50: It is the leader in its category having one-third of market share. This youthful brand provides exciting taste to the consumer. Different variants can be added to it later according to Argentine taste.

Price

With the invention of the Nano package, Britannia has redefined its pricing strategy and has been successful in skimming the market. The Rs. 2, Rs. 3, Rs. 4, Rs. 5 is an instant hit in the Rural as well as the Urban segment, however for different reasons.

The price will be calculated on the basis of the Exchange Rate. The Exchange Rate as on 12.6.09 is 1.00 INR=0.07933 ARS. ( Xe, The currency Site)

However, Argentina being a new market experience for Britannia and unaware of the ethnicity, culture, labour pool, vendor negotiation, supply chain and various other factors, it is prudent to leave the pricing to Arcor Group, as being the local leader, they are presumed to have incisive and in-depth knowledge of the market. [Refer Appendix 15]

Place

Arcor is extensive with regard to its production and distribution in Argentina and neighbouring country. There are 30 manufacturing units and 13 distribution units in Argentina alone.

Greater Buenos Aires and Buenos Aires (Taste and Preferences, 2009) constitutes 37.1% and 21% respectively of the biscuit and cookie manufacturing facilities followed by Santa Fe (16%)Buenos Aires City (14.5%), Córdoba (4.8%) and other provinces (6.5%).

Hence production is to be done at the firm’s these locales in order to capitalize on the premium site thereby cutting substantial transportation cost.

Promotion

Study shows that Press, Television and Internet are some of the most consumed media habits. Hence both Modern Trade and General Trade activities are to be carried out through these channels making people aware of the amalgamation of Britannia with Arcor and the introduction of an entirely new category of biscuit in the firm. Promotion activities for Nano packs will be introduced by Britannia in the form of sample distribution.

Packaging: Modification has been done with regard to the packaging of the Good Day to conform the Argentine culture.[Refer Appendix]

Entry Timing:

The timing is apt keeping in mind the current growth in the market. The firm can leverage on its recent joint venture experiences.

Organization Structure:

The structure of the new organization should mirror the structures of both the partners, besides facilitating operation. A likeable one is as follows:

CEO (HQ)

International Division (HQ)

Country Head / President (Argentina)

Marketing Finance Human Resource R&D

and

QCM

Distribution

Human Resource Structure

The newly formed organization will follow a Polycentric approach while staffing (Wall & Rees, 2004) only while appointing the Country Head / President. Hence, in order to align him with the Britannia’s operations, he needs to undergo a special exercise on the company’s vision, mission, and goals, legal and cultural policies.

However, for the other departments, a geocentric approach will be advisable.

This will ascertain optimization on ROI and simultaneously will reduce cost.

Training on culture, language and practical know-how would be imparted to those from the home country. Compensation will be based on national difference, foreign service premium, allowances and taxes.

Labour Policies:

The labour - relations regulations in Argentina is presently under close scrutiny to lessen labour expenses (Labour Policy, 2009). Some of the top new laws recently passed are Law No. 24557, which includes prevention of and compensation for labour - related accidents. Law No. 24241 or the Retirement Benefits System, and Employment Law No. 24013 promote employment by creating four types of fixed - term employment contract. Other reformations in the health - care system are fitted under Decree No. 1141/96, and the introduction of 60 AMPO Ceiling regarding computation of employees and employers' contributions.

Conclusion

As a result of the Joint Venture, Britannia will be able to participate in the International Sweets and Biscuits Fair (ISM), held annually in Germany. The participation would ensure Britannia of an exposure of the highly profitable European biscuit market (Our History,2009)

Besides, the absence of biscuits among the various categories like Candies, Cookies, Ice Creams, Chocolates and Other Food Products in Arcor is outlandish considering the huge potential of the said market in Argentina. Britannia with its proven expertise in the segment would add value to Arcor and also to itself. The technological exchange is also considered highly beneficial.

Britannia’s trend with the previous companies shows that the firm holds bright prospect to buy-out Arcor Group as well. Having the Wait and See option as a major clause for 2 years, the company will also be at its liberty to exit without legal hassles, in case revenues account to insignificant ROI.

Thus, in retrospect, after having examined various parameters for Britannia ranging from the government, social, economical, organizational, labour policies, we have reached a conclusion and derived an encouraging Marketing Plan suggesting the firm to enter the thriving Argentine biscuit market.

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Trusted Brands, (2009), Britannia Financials, Retrieved June 2009 from

U.S Department of State, (2008), Government, Retrieved June 2009 from

WTO, (2009), Trade Policy, Retrieved June 2009 from

Wall Stuart and Rees Bronwen, (2004), Human Resource Management, International Business, 2nd Edition, Pearson Education Inc.

World Bank, (2005), National Plan, Retrieved June 2009 from

Xe, Currency sire (2009), Retrieved from,

http://www.xe.com/ucc/covert.cgi

Appendix

The segments chip in moderately similar fortune in the range of Rs. 25 billion each.

Mass (34%) – low priced, Rs. 40 / Kg (approx.)
Popular (37%) – medium priced, Rs. 50 / Kg (approx.)
Premium (29%) – high priced, Rs. 60 / per (approx.)

The following exhibits the market share of Britannia and Parle in the three segments (Go INDIA,2009):

Britannia has a Joint Venture with the New Zealand based major Fonterra Group in 2002 after having entered into the dairy segment in 1997(Go INDIA, 2009). Though a prospective parallel business, with cheese production accounting for 35% of the market share (Makeover of Britannia, 2001), Britannia lays less emphasis on this segment.

Owing to have maintained ‘nutritiousness’ (Go INDIA, 2009) the firm is successful in the segment, contributes one third to the total revenue and enjoys loyalty.

With 40% market share, Britannia is a runaway success in the non – glucose category, leaving behind Parle (17%) and ITC (8%).

The nouveau typography ensured futuristic, flexible, modern and informal (Makeover of Britannia, 2001). Britannia stressed on ‘brand clustering’, thereby offering the assurance through the umbrella brand whilst it gained economies of scale by enforcing the uniqueness of the sub – brands.

One among five brands to be featured among the top ten for consecutive five years in

The Most Trusted Brand of the Year by Brand Equity

Ranked 1st by a study conducted by A&M in 2000 beating Néstle and Cadbury

(Makeover of Britannia, 2001)

Ranked 7th whilst Parle ranked 17th in the list of The Most Trusted Brand of the Year

in 2007 (Brand Equity, The Economic Times, 2007)

Ranked 2nd in the Food Brands category ahead of Parle (3rd) and ITC (8th) in 2008

(Brand Equity, the Economic Times, 2008)

Ranked 27th by Business Today, Special as the Fastest Growing Large Companies of India in June, 2008 ( Britannia, History)
Invited by Clinton Global Initiative to fight malnutrition, a part of its CSR approach

(Go INDIA, 2009)

He is believed to be one of the most effective and powerful Presidents in the Argentine history. Though considered strictly a Democracy, President Kirchner took firm steps to revive the social, economical and political crisis that numbed Argentina during 2001 – 2002 (History, 2009). However, following a humble refusal after re – election in 2007, President Kirchner nominated the then Senate and his wife Ms. Kirchner to assume the role.

This clearly demonstrates the dominance of the Kirchner’s in Argentina and the couple being referred as ‘the Clintons of the South’ is (BBC News Leader, n.d.) highly justified.

The country is somewhat plagued in varied sectors like, (CIA, Government, 2009) pharmaceutical; manufacturing; small, medium and large landowner’s association, union of employed and unemployed workers; labour organizations; Roman Catholic Church, business organizations; Piquetero groups and students.

AfDB, G-15, G-20, G-24, G-77, IADB, IAEA, IBRD, IFAD, IFC, IMF, IMO, Interpol, NSG, OAS, OPANAL, UN, UNASUR, UNESCO, UNWTO, WFTU, WHO, WIPO, WMO, WTO, ZC.

The country witnessed a period of instability with presidents Adolfo Rodriguez SAA and Eduardo Duhalde resigning their post successively in 2001 and 2002, shortly after resuming office. The real GDP fell sharp and clocked at 18%, lower than 1998. 60% of Argentines lived below the poverty level.

The country scores high on oil and electricity production at 7,90,800 bbl/day (est. 2007) and 109.4 billion kWh (est. 2006) respectively. The industrial production growth is modest at 6.5% (est. 2008). Argentina may well hope to revive its domestic credit of Rs. $72.55 billion (31 December 2007) in lieu of its publicly traded shares at $86.68 billion (31 December 2007). The commercial banks offer a substantial Prime Lending Rate of 28% (28 November 2008).

Firms do show interest in investing in Argentina with FDI accounting to $69.1 billion (est. 2008). However that shows a bleak hope of paying a hefty external debt of $135.5 billion (est. 2008), especially with an exchange rate of 3.1636 Argentine Pesos (ARS) against a US dollar (CIA, Economy, 2009).

Traveller’s Cheque is not accepted in Argentina and it is imperative to carry a photo identity proof whilst using credit cards (Money and Valuables, 2008).

The high quality of the human and natural resources makes the Argentine market highly attractive to foreign investment.

The Food and Beverage industry has gone massive overhaul in technology up gradation being one of the oldest manufacturing industry in the country.

Consistent and diversified economy (World Bank, World Trade Indicators, 2008)

Integration between regional and global economy (Globally and regionally integrated economy, 2009)
Proficient and gifted work pool
High return on investment
Plentiful natural resources
Pulsating culture
High standard of living
Government aid in foreign investment
Contemporary infrastructure and impeccable communication system

Reasons behind negating:

Direct Investment (Argentina, Country report, Aug 01, 2008)

Significant shortage of energy
High wages and pension
Projected high inflation
Civilian’s acceptance of president is highly volatile
Inconsistent trade policies, not in compliance with TRIMS(Trade Related Investment Measures )

Export

Free floating currency exchange system
High tax ranging from 35 to 44%(Argentina, Country report, Aug 01, 2008)
Frequent road blocks and strikes in major areas
Delayed just-in-time shipments due to slow custom processing (Country report, WTO 2008)

Licensing /Franchising

Require quite intensive training to familiarize the franchisees.
Quality control will be an area of concern.
Would offer limited returns.
Would build up a future competitor
Would also restrict the market development in future.

Turn key Project

This strategy is considered mainly for B2B market. However, Britannia in Argentina is considered for the B2C market. Hence, the policy does not hold true.

The objectives being maximum current profit and eventually product quality leadership, the current price needs to be in consistent with the Experience Curve. The company should be in favour of adopting going – rate pricing (Kotler, 2007).

Modified Packaging

JOINT VENTURE AGREEMENT ARCOR GROUP

BRITANNIA INDUSTRIES LTD

This Joint Venture Agreement is effective from 12.06.2009

BETWEEN: Britannia, a corporation organized and existed under the Indian law with its head office located at: 5/1/A, Hungerford Street, Kolkata-700017, West Bengal.

AND: Arcor group, a corporation organized and existed under the Argentina law with its head office located at: Bv, Chacabuco, 1160 (X5000IIY) - Córdoba Argentina.

This Agreement is entered by Britannia and Arcor Group, herein after collectively referred to as “joint Venture” for the purpose of introducing a business group in Argentina.

ARTICLE I: GENERAL PROVISIONS.

1.01 Business Purpose: The business of the Joint Venture shall be as follows: [Manufacture of Britannia biscuits in Argentina]

1.02 Term of the Agreement: This Joint Venture shall commence on the date above mentioned and shall be continued in existence until terminated, liquidated, or dissolved by law or as hereinafter provided.

ARTICLE II: GENERAL DEFINITIONS.

The following includes the general definitions of terms mentioned in this Agreement:

2.01 Affiliate.: An Affiliate of an entity is a person that, indirectly or directly through one or more mediators, controls, is controlled by or is under common control of such entity.

2.02 Capital Contribution(s): The capital contribution to the Joint Venture actually made by both the parties, including property, cash and any additional capital contributions made.

2.03 Profits and Losses: Any income or loss of the Partnership for federal income tax purposes determined by the Partnership's fiscal year, including Partnership income, gain, loss or deduction will be shared

ARTICLE III: OBLIGATIONS OF THE JOINT VENTURERS.

Arcor Group is responsible for all operations and decisions of the Joint Venture and will be compensated for providing various services.

ARTICLE IV: ALLOCATIONS.

3.01 Profits and Losses: Commencing on the date hereof and ending on the termination of the business of the Joint Venture, all profits, losses and other allocations to the Joint Venture shall be allocated at the end of each fiscal year:

ARTICLE V: RIGHTS AND DUTIES OF THE JOINT VENTURERS

4.01 Business of the Joint Venture: Arcor Group shall have exclusive authority and discretion in the management and control of the business of the Joint Venture for the purposes herein stated and shall make decisions affecting the business of the Joint Venture. At such, any action taken shall constitute the act of, and serve to bind, the Joint Venture. Official from Britannia shall manage and control the affairs of the Joint Venture to the best of its ability and shall use his best efforts to carry out the business of the Joint Venture.

ARTICLE VI: AGREEMENTS WITH THIRD PARTIES.

5.01 Other Business of the Parties to this Agreement: The parties to this Agreement and their respective Affiliates may have interests in businesses other than the Joint Venture business. The Joint Venture shall not have the right to the income or proceeds derived from such other business interests and, even if they are competitive with the Partnership business, such business interests shall not be deemed wrongful or improper.

ARTICLE VII: PAYMENT OF EXPENSES.

60% (preferably) Expenses of the Joint Venture shall be paid by Arcor group and shall be reimbursed by the Joint Venture.

ARTICLE VIII: INDEMNIFICATION OF THE JOINT VENTURERS

The parties to this Agreement shall have no liability to the other for any loss suffered which arises out of any action or inaction if, in good faith, it is determined that such course of conduct was in the best interests of the Joint Venture and such course of conduct did not constitute negligence or misconduct. The parties to this Agreement shall each be indemnified by the other against losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by it in connection with the Joint Venture.

ARTICLE IX: DISSOLUTION.

6.01 Events of the Joint Ventures: The Joint Venture shall be dissolved upon the happening of any of the following events:

(a) The adjudication of bankruptcy, filing of a petition pursuant to a Chapter of the Federal Bankruptcy Act, withdrawal, removal or insolvency of either of the parties.

(b) The sale or other disposition, not including an exchange of all, or substantially all, of the Joint Venture assets.

ARTICLE X: MISCELLANEOUS PROVISIONS.

7.01 Books and Records: The Joint Venture shall keep adequate books and records at its place of business, setting forth a true and accurate account of all business transactions arising out of and in connection with the conduct of the Joint Venture.

7.02 Validity: In the event that any provision of this Agreement shall be held to be invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this Agreement.

7.03 Integrated Agreement: This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no agreements, understandings, restrictions or warranties among the parties other than those set forth herein provided for.

7.04 Headings: The headings, titles and subtitles used in this Agreement are for ease of reference only and shall not control or affect the meaning or construction of any provision hereof.

7.05 Applicable Law and Venue: This Agreement shall be construed and enforced under the laws of Argentina and India.

7.06 Other Instruments: The parties hereto covenant and agree that they will execute each such other and further instruments and documents as are or may become reasonably necessary or convenient to effectuate and carry out the purposes of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. Signed, sealed and delivered in the presence of:

Vinita Bali Luis Pagani

Managing Director President

Britannia Industries LTD Arcor Group