Fairchild Water Technologies, Inc.

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Its home water purifier is called Zero B or Zero bacteria. It is estimated that their total marketing expenditure would be around Rs.3 million and it accounts for less than 2% of Ion Exchange’s total sales.

Singer: is the most recent competitor to enter the Indian water purifier market with a very superior product called Aquarius. It is now an Indian owned company. Singer India Limited was one of the companies that Fairchild technologies were considering as suitable partner to manufacture their Delight purifier. However, Singer now has its own brand in the market called the Aquarius.

Other Competitors: Some of the other brands in the water purifying market are priced in the range of Rs.4000-Rs.6000. Most of these products are localized in regional areas. At least 100 Indian companies manufacture and market candle filters but no manufacturer has attempted to satisfy a national market. If we take all the unit sales of these competitor products plus Zero-B and Singer, it would account for 60,000 units in 2000. The remaining 190,000 units would come from Aquaguard and Puresip. Keeping in mind the criteria that are important to the target market in water purifying products, I have done a competitor analysis to compare the three on the following criteria.

• Sediment removal

• Bacteria and virus removal

• Capacity in terms of flow rate

• Safety and foot print space

• Purchase price

• Ease of installation

• Servicing of the product

• Style and appearance

In addition, I have also compared them on promotion strategy, competitive advantage and customer reviews. I have found that Aquaguard is the most heavily advertised product at this time and consequently a big name in the field of water filters and purifiers. The product itself is weakest in terms of style, flow rates and even appearance. However it has tremendous brand equity. Zero B is a better water filter than Aquaguard and Puresip but it’s not advertised very much and many consumers are not aware of the product. However the news is that Ion Exchange is in the midst of starting door-to-door sales of the product as well and is also planning an advertising campaign designed to educate customers about its product. Singer’s new product Aquarius is in process of being launched soon and Aquarius by far will be the best water purifier system in the Indian market compared to what is currently out there. It has state of the art technology and is very efficient. Besides Singer is a very reputable brand in India so attracting customers will be easy for Singer. Please see Appendix 1 for a detailed tabular comparison of the competitor’s products.

Market Entry Analysis and evaluation of alternatives

There are three options to consider for Fairchild industries to enter the Indian market. It could consider a joint working arrangement, a joint venture company, or an acquisition. In a joint working arrangement, Fairchild would supply the key purifier components to an Indian company, which would then manufacture and market the assembled product. License agreement could last about five years with an option to renew for another three. The licensee would remit the licensing fees to Fairchild on a per unit basis over the entire term.

Under a joint venture agreement, Fairchild would partner with an existing Indian company expressly for the purpose of manufacturing and marketing purifiers. Both the parties would split the profits as per the agreement and all costs and overheads would be split between the two companies as per their agreement.

In case of an acquisition, Fairchild will purchase an existing Indian company whose operations would be expanded to include the water purifier. The profits from the acquisition would belong to Fairchild. Since a lot of detail is not available for an acquisition scenario it has not been evaluated. The pros and cons of the other options are discussed in detail as follows. For all calculations the conversion rate is 1USD= 46.5INR (Wikipedia.org)

Joint working agreement: The main advantages of this mode of entry in the Indian market are that minimal financial investment is required. Fairchild can see the financial gains in a small portion of the target market. They will have control over the production of the units. Since the licensee is a local company, Fairchild can gain some advantage from the knowledge of the licensee. The major drawbacks of this working arrangement are that licensee will have full control of the operations of the company. Fairchild would only receive a royalty fee and have less control over how they want to position the product. In doing a break-even analysis, 10,075 units would be needed to break-even in the two regions, four regions and national market.

Joint Venture arrangement: If entry were made in the form of a joint venture, financial investment and annual fixed costs would be much higher however; both companies could split costs and investment. I have analyzed the case with a 50-50 split of costs between Fairchild and the joint venture company. The contribution margins are based on a lot of assumptions including pricing strategy. If Fairchild goes with a skimming price strategy and sells units through a dealer they will price the unit at Rs.5900 to the consumers. The advantages would be that the company could break-even with lesser units – 7942 in the two regions, 13,327 in the four regions and 55,635 nationally (Exhibit 2). If they sell the units through a direct sales force under a skimming strategy, they will need to sell 74,902 units in the two regions. This will also give them an idea of how the product is received by the market. Both companies could split costs and profits. This is better than just getting royalties. There would be better control over operation, product distribution and promotion strategies. Fairchild can also benefit from the knowledge of the partner company. The cons of a skimming pricing strategy would be that a larger initial investment would be required. The prices would be higher than the competitors and the company may fail to attract consumers. In a penetration pricing strategy, the price would be kept lower at Rs. 4400 however, more units will have to be sold 17,208 in the two regions, 28,875 in the four regions and 12,0542 nationally (Exhibit 4). The success or failure in a joint venture is dependent on the relationship with the Indian partner.

SWOT- Strengths, Weaknesses, Opportunities and Threats

Internal analysis